© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to Q1 FY '24 Earnings Conference Call of Triveni Engineering & Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you.
Thank you. Good day, everyone, and a warm welcome to all of you participating in the Triveni Engineering & Industries Q1 FY '21 Earnings Conference Call. We have with us today Mr. Tarun Sawhney, Vice Chairman and Managing Director; Mr. Suresh Taneja, Group CFO; Mr. Sameer Sinha, CEO Sugar Business Group; as well as other members of the senior management team.
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 everyone earlier. I would like also to emphasize that while this call is open to all invitees, it may not be broadcasted or reproduced in any form or manner. We will commence the call with opening remarks from the management following an interactive question-and-answer session. May I now hand it over to Mr. Tarun Sawhney. Over to you, sir.
Thank you, Rishab. Good afternoon, ladies and gentlemen, and welcome to the Q1 Fiscal '24 Earnings Conference Call for Triveni Engineering & Industries Limited. We're pleased with the performance of the company during the quarter ended 30th -- June 30, '23. While there has been general low trends of recovery in the just concluded sugar season '22-'23. The company has, however, outperformed the state of Uttar Pradesh during that same period with a decline of only 23 basis points from a C-heavy basic recovery, which bodes rather well when we compare ourselves to our peers. Our Engineering business -- businesses actually during the same period continued to perform well with healthy order books and inquiry pipelines. We continue to diversify our revenue base with alcohol and engineering, contributing to 60% of our total segment results. Looking at some of the highlights. In sugar and the alcohol distillery business, we achieved a blended sugar realization of INR 37,254 per metric tonne which is an increase of 5.6% over the corresponding period of the previous year, and this was supported by high export realizations and relatively firmer domestic realizations. We achieved the highest ever quarterly alcohol production of 5.04 crore liters, an increase of 19% over the corresponding previous period due to additional capacities and expansions that were commissioned. The increase in net turnover of the alcohol business was by 21% during Q1 fiscal '24, driven by higher capacities. Within the Engineering business, both businesses achieved a combined increase in turnover of just under 25%, bolstered by the Power Transmission Business which reported robust revenue and profitability growth. The order booking for the Power Transmission Business grew 21.3% year-on-year with an order book of INR 271.6 crores, up 11.6% year-on-year. The outstanding order book, of course, with the combined Engineering business stood at INR 1,613 crores. Looking at the consolidated financials, our net turnover declined by 2.3%, primarily driven by lower turnover of the sugar business which was directly attributed to lower quotas during the quarter, and the Alcohol and aggregate engineering turnovers improved, as I had mentioned over the previous corresponding period. The sugar turnover declined by 15.2% in over to -- as compared to the previous period after considering exports. And this was because of a decline of 20.7% (sic) [ 21.7% ] in domestic sales volume due to lower domestic quota allocations. We had, as you will recollect, we have completed the majority of our export quotas in the previous quarter, and therefore, the benefits for export over there were achieved in that quarter. In addition, we did not convert any juice and therefore, there was some preferential quota allocations. Looking forward, over the course of this quarter and the next quarter, we will find that the -- there will be a balancing of all of this, and we will return to previously forecast levels of quotas this quarter and looking forward. The profit before tax increased during this period by 2.6% to INR 91 crores. Total debt on a stand-alone basis for the company on June 30 stood at INR 918.5 crores compared to INR 825 crores on the 31st of March. On a consolidated basis, our total debt was INR 1,011 crores on June 30, compared to INR 913 crores on March 31, '23 and INR 1,617.5 crores on June 30, '22. The overall cost of funds stood at 6.7% in Q1. I would also like to mention that the earnings per share increased by 12% to INR 3.09 per share. I'd like to spend the next few minutes talking in a little more detail about the various business segments. And turning to the sugar business, as I mentioned earlier, the reported lower turnover was due to lower domestic dispatches. The contribution of sugar sold in Q1 was higher by INR 880 per tonne over the previous quarter in view of the higher realization. So during the quarter, we achieved exports of 14,500 tonnes out of our total quarter of 205,000 approximate tonnes, of which the majority was achieved in fiscal '23. Export realizations were at a considerable premium to domestic prices and we actually performed rather well in terms of our pricing ability and our lateral pricing practice seeking actually -- turned out quite well for the company in terms of our asset realizations for exports. The sugar inventory at June 30 stood at 43.44 lakh quintals controls valued at INR 33.6 per kilo. The cogeneration operations during the same period achieved revenues of INR 12.65 crores. And our realization of prices just as of yesterday, for refined sugar, we're receiving prices of INR 3,700 to INR 3,720 a quintal. And sulphitation sugar is approximately INR 3,650 to INR 3,670 a quintal. Looking at the performance of the sugar business. On a year-on-year period, we achieved a crush in fiscal '23 of 1.58 million tonnes of sugarcane versus 1.8 million tonnes. But if you look at the sugar season, we actually achieved a crush of 9.3 million tonnes of sugarcane during sugar season '22-'23, which was 10.8% higher than the previous corresponding year. In terms of total sugar, as you know, the recoveries were slightly lower. However, the sugar production in tonnes was 900 -- in excess of 950,000 tonnes of sugar, which was substantially higher, 7.5% higher than the previous sugar season. Looking at the industry scenario for the season '22-'23, the all India production is estimated to be 32.3 million tonnes for this super year. As of the end of June '23, Uttar Pradesh has produced 10.5 million tonnes of sugar compared to 10.2 million tonnes at the same time last year, while Maharashtra's production has declined from 13.7 million tonnes to 10.5 million tonnes by the end of June due to lower sugarcane yields and of course, inclement weather. In Karnataka, 3 mills have restarted with their operations for the special season, and the state has collectively produced about 5.5 million tonnes of sugar compared to 5.83 million tonnes of sugar produced during the same period last year. ISMA has estimated that all India sugarcane -- sugar production, my apologies, will be 32.8 million tonnes after considering a diversion of approximately 4 million tonnes of sugar equivalent into ethanol. With an opening balance on the first of October '22 of 7 million tonnes, production of 32.8% domestic sales of 27.5 million tonnes and 6 -- approximately 6-odd million tonnes of sugar exports on closing stock is estimated to be about 6 million tonnes of super, which is rather good, it is just an excess of 2 months of consumption. And that -- those are the levels that should be directly maintained in the country. On an international basis, there's been actually quite a lot of activity. The global sugar balance sheet is pointing to a surplus for '22-'23, which is contrary to what we have discussed on our last earnings call. There has been a bumper sugarcane crop and production in Brazil. For '23-'24 season commencing April [indiscernible] Brazil is expected to have the strongest agricultural yield in many years and an availability of 612 million tonnes and sugar production of 38.8 million tonnes, a 15% increase over the previous season. In Thailand, another important market to consider. We expect a subdued production. International estimates look at a 10% year-on-year drop in the '23-'24 sugarcane crush for Thailand to about 85 million tonnes of sugarcane looking at sugar production of under 10 million tonnes, just under 10 million tonnes, a fairly sharp decrease. And this is primarily due to the linear effect, which has led to drought in many regions. And slightly later start to the rainy season in Thailand. All considered, international sugar prices have remained remarkably soft. The New York No. 11 Raw Sugar Futures Contract broke the [indiscernible] threshold earlier in the year. However, it is reported as mixed trend later and especially in the quarter. Prices have hovered around [ $0.25 ] per pound in this quarter with the lowest price noticed towards the end of the July contracts. The No. 11, forward looking -- forward month is trading around $0.248, which is still remarkably firm. And white sugar contracts are also No. 5, is also at record highs. Prices have recovered and are approximately about $700 per tonne. Again, given the excess sugar availability in the forward few quarters, these robust prices indicate the kind of sentiment in the sugar sector, which is very, very buoyant. Turning to the alcohol business. Our additional capacities commissioned in fiscal '23 have resulted in the highest ever production in a quarter. Despite having record alcohol production and orders in hand, the alcohol sales in the quarter were lower than we anticipated, and this was primarily due to offtake issues at the end of the OMCs at certain depots. However, I'm happy to report that these are temporary challenges and the situation has improved vastly since then, and we're back on track, hopefully, to even make up for lost ground in that in Q1 of this year. During the quarter, the sale of alcohol produced from sugarcane-based feedstocks form 64%, while grain was the balance of 36%. It's important to highlight that during the previous corresponding quarter, there were no grain operations. Accordingly, the overall profit margin was slightly lower in the current quarter as compared to the same period of last year and this is with the margin associated with grain operations, which is lower in the heavy molasses operation margins. Ethanol constituted 91% of alcohol sales for the quarter after review. I look at the industry scenario of the 559 crore liters were finalized by the OMCs as of a requirement of 600 crore liters contracts were actually formed of 553 crore liters, against 351 crore liters have been lifted by OMCs up to July 9, and we're looking at an average blending of 11.75% until July 9. So that's extremely good considering the target is 12%. We're right on track. Of the total contracted quantity, as I had mentioned, sugarcane-based feedstocks collectively contribute 71% with B-heavy, of course, being the highest. And the balance is contributed by surplus rice of 26% and damaged food grain of 4%. Presently, the Food Corporation of India has suspended supplies of surplus rice for the production of ethanol. Looking at the engineering businesses. Let's pick up the Power Transmission Business first, where we had a quite a remarkable quarter where profitability and turnover increased quite dramatically. Profitability increased by almost 110% and turnover increased by 77.8%. Very strong export performance in the supply of API gearboxes to the Americas and Europe and compressor gears and gearboxes to Europe and Thailand. Profitability margins also improved quite dramatically to 34% in Q1 versus 28.8% in the previous corresponding quarter. And this was due to lower raw material costs and an optimization of SG&A. Both areas that we have worked very, very hard on coming out of the COVID experience. The growth in order book during the quarter is driven by growth in critical sectors such as steel, oil and gas and steam turbine compressor and pumps at the OEM segment. The outstanding order book is, as mentioned, stands at INR 271.63 crores. To the Water business, the revenues declined marginally due to a delay in execution in certain projects. So the business is actively targeting foreign projects, wherever it possesses the prequalification and funding and where funding is in short, through multilateral and reputed agencies. This is very important. It is a strategic shift where we were looking just at domestic markets and regional markets. Now we've broad based ourselves in looking at a vast -- a much larger canvas, and we hope that we will be able to come back to you with greater successes in international markets. As you are well aware, we have 2 projects in the international markets already that are under execution, in the Maldives and in Bangladesh. The closing order book stood at INR 1,341 crores and which includes some of the contracts, which are over a longer period of time. Turning very briefly to the outlook of the businesses in sugar. We have continued -- we continue to focus very seriously on yield improvement initiatives by our farmers, adopting the best agriculture practices through continuous engagement and demonstration, et cetera, and also varietal replacement. This has been -- of course, we will be looking at increasing crushing capacities in sync with our sugarcane availability. The company is also in the process of increasing its refined sugar production, which stood at 60% for the last year, to 70% with the change in manufacturing process at our sugar unit at Milak Narayanpur. The activities that I've previously spoken about 3 months ago pertaining to modernization, debottlenecking and efficiency improvement are all underway, which will enhance both the bottom line, most significantly as well as the top line. The condition of the sugarcane crop and rainfall has been satisfactory in our catchment area of all 7 of our sugar mills. And we are hopeful that there will be good climatic conditions for the subsequent period. And this is critical. The next 3 months are critical. We do want a little bit of rain, but not too much. We certainly want to drive September. That is very crucial for operations to start at the end of October, which is what we're forecasting for the next year. In the Alcohol business, we've been a strong supporter of the government's ethanol blending program. It is -- we've bolstered our capabilities quite substantially, of course, raise capacities from 320 KLPD to 660 KLPD last year. And we -- and of course, you are well aware that we are on our way to achieving 1110 KLPD in the future. The Power Transmission Business, there's very high demand that we're witnessing over the last few months, I would say. I think there's been a resurgence in demand globally across the sector that I was talking about. The product segment domestically is really looking at growth in the steel, cement, waste heat recovery and oil and gas. Internationally, of course, you have growth in these sectors among -- and a few others. Interestingly, we're seeing substantial growth in all of our OEM customer base, steam turbines, gas turbines, pumps and compressors, domestically and internationally. Again, this bodes very well for the future. And our focus is very much on market share gains where we are looking at the international market as our canvas. In the Defense segment, the business expects increased order booking from key segments of turbine packaging, gearboxes, special application pumps. And we have several RFPs that are coming up to the stage of conclusion over the next few months. And so hopefully, I will have very good news potentially by the next time that we speak or maybe in the next quarter, but hopefully by the next time that we speak. In the Water business, the demand for reliable water and wastewater treatment solutions is on the rise in India and in international markets. And apart from participating in domestic projects, we are expanding our global footprint, establishing strategic global partnerships and fostering mutually beneficial relationships with key stakeholders. So at Triveni, we find ourselves strategically positioned in order to capitalize on all the growth opportunities across all of our verticals. And I'd be very happy to answer any of the questions that you have. Thank you.
[Operator Instructions] We have our first question from the line of Rajesh Majumdar from B&K Securities.
So I had a few questions. Firstly, on the ethanol supply part, we have heard about some slowdown in offtake by the OMCs and your mix also in 1Q is suggesting that you've been able to sell mostly grain-based ethanol and a little bit B-heavy. So is there any change in that in this quarter? And will the B-heavy mix change in the coming quarter or the next 1 or 2 quarters? That's the first question.
Let me ask Mr. Sinha to answer that.
Going forward, all the decantation issues have largely been resolved. You must understand that it was not a generic problem. It was unfortunately that as a coincidence, quite a few of our depots were impacted. We were supplying a large quantum to Gujarat where Biporjoy washed away a large portion of the logistics and therefore, the offtake for petrol came down, and therefore, the offtake for ethanol. And similarly, Mathura refinery had some issues, both in terms of approvals and pipeline renovations and maintenance issues. And similar was the case with 1 or 2 other depots and that was the reason for this temporary blip. The situation has significantly improved over the period of time. And going forward, we'll also be supplying -- however, it will largely be in terms of a similar product mix. However, going forward, we are also evaluating the feedstock challenge coming in from FCI stoppage of surplus rice. So we are dynamically evaluating the situation. We have got enough stocks of not only grain, but also of molasses. So therefore, over a period of time, depending on which way we go, we' enhance our -- or change our product mix to give us the most optimal results. And also, we must note that we are at the end of July and our mills are supposed to start in October, and therefore, to that extent, it's not a very -- a long period of time, which may impact us going forward.
In fact let me just sort of encapsulate this by saying that we do not see any interruption to operations.
Okay. And a related question, sir, we've been hearing about some claimers on reduction of usage of broken rice by the government. So will that be impacting our production going forward? That's why I asked a question on the mix because we've been hearing a lot of...
Can you repeat that question, please?
So we've been hearing about some notification or some announcement by the government to stop using broken rice for ethanol this particular year because of the impact of El Nino or something.
That's incorrect. The -- and there is no notification to that effect. However, FCI has stopped allocating surplus rice for the production of ethanol. As a matter of fact, they've stopped allocating surplus rice for anything, which includes for the product of ethanol. Broken rice which is available through the open market is still available. It is at a higher price right now. But as you know, the government has banned the export of non-basmati rice. And we will -- we've already started seeing softness in broken rice and the rice markets across the nation. And we anticipate that given the next few days, we will be able to at least start getting much better prices for broken rice.
So you're guiding that the grain-based margins can actually improve in this quarter?
No, that's not what I'm saying. The broken rice is available at a higher price than FCI rice. FCI rice has stopped. We will have to then look at what is available and at what price points. What my colleague had just mentioned is we have the sufficient quantity even now of B-heavy molasses that can be allocated for production of ethanol in the next few months until the next season starts. So we are relooking at what is the mix of our input. And then that, of course, will have an impact on margins. I do anticipate that given the move that GOI has taken, there will be short-term and medium-term repercussions in terms of pricing. So I do anticipate that the government will relocate pricing -- given where the price points of all these inputs are of all the raw materials for the ethanol manufacturing. And I expect that some of the announcements will start very soon. And then, of course, we will look at many more as we approach the next ethanol year. So I don't think it is -- I mean, it is -- this is the given scenario, but I think the government is acutely aware of the challenges that is being faced by the industry and is -- will hopefully act in a very, very rapid manner.
Right, sir. And sir, my other question was, do we -- can we get an idea of the capital employed in the businesses like transmission and the municipal business separately? And the capital allocation in these businesses for the company? And how much of the debt of the company is coming from the municipal business?
If you look at the capital employed, our results duly provide all this information in terms of segment assets and segment liabilities.
Yes, I wanted the breakup between the, yes, Power Transmission and the Municipal business.
It's very much there. It's very much there. If you look at the breakup over there, the breakup is given for Sugar, Distillery, Power Transmission, Water and others.
Yes. And the debt in the Municipal business, sir.
Debt in the business is not much. It is in the region of about INR 50 crores, INR 60 crores as of now. I'm basically talking about the Water business. Now coming back to your specific question on Power Transmission, we have total segment assets of INR 206 crores, and we have segment liabilities of INR 62 crores. So in other words, the capital employed is about INR 150 crores for that business.
Right. So you are saying that...
Mr. Majumdar, I request you to join back the queue, sir, as there are other participants waiting. We have our next question from the line of Shailesh Kanani from Centrum Broking.
[indiscernible] recent performance given that it was a challenging quarter. So my first question is with respect to FCI rice suspension. So how does it influence our future CapEx plans? And how do we read this? And do we have a revised guidance of ethanol with respect to this? And also the mix, if it will change, if upward revision in the ethanol price what you just alluded to, doesn't happen. So how does that shape up?
So you've asked a question that is pretty much on everybody's minds. I mean given this very quick reaction in terms of FCI trends, how does -- what is the future of the program. And I am frankly speaking, the distillery business for Triveni. I have to say 3 things on this matter: the first thing is that I have always been advocating for multi-feed distilleries. So the availability of molasses or sugarcane-based raw material, the availability of grain and other grains, et cetera, is going to vary over a period of time. And therefore, the establishment of multi-feed distilleries is the only true answer. As you know, we have pioneered this approach for the industry. There are many others that are doing the same now. And we will continue to. And as you know, the 450 KLPD that we're setting up are both multi-feed plants. Now that is point one. Point two is, what is the specific impact of the recent policy changes and nonavailability of FCI rice. I think it's too early to tell, very frankly speaking. It's too early to tell for 2 reasons: number one, we're expecting an increase -- an interim increase in pricing for ethanol. It is seriously being looked at from what I understand. I don't quite know what the quantums are. Only when we know we're in the business, which is heavily determined by market prices. So if the relative prices of other feedstocks changes, the dynamics will change. So what I would like to leave you with is that this is not a -- this is a little pebble in the way. But we will surpass it, and we are still on track. And we've done 11.75% ethanol blending thus far. We're on track on having a significantly higher level of percentage of blending this year versus last year. I do think that everybody will have to be nimble and change their strategies. We too will do that. It's very difficult for me to share with you what that will be today because I don't know what the change in price will be, which is what I'm anticipating. Once I know that, I'll be in a better position. But we should feel comforted with the fact that we at Triveni have multi-feed distilleries. So we have that operational flexibility to be able to shift from one to the other.
Sir, just a follow-up on that. I understand for existing facilities, we are kind of backward integrated with molasses and the feedstock. But I was just thinking about the expansion, which we are going from 660 to 1100. On that visibility, are we going to delay because of this? I just wanted to understand that.
No. The Rani Nangal facility is very much on track. As I had mentioned even on the last call that we're attending for the Rani Nangal facility to be operational in Q4 of this fiscal year. That remains unchanged. As far as the new facility at Sabitgarh is concerned, it's going to come up after a short time after that. That still very much remains on track. Having said that, if there is any change to that project, it will be dependent on the next level of pricing announcements, which I expect imminently. So I think we will be in a better position to judge what we do with the second project. But right now, it remains on track.
So is it fair to assume that our earlier guidance of ethanol sales remain as of now the same, right?
As of now, the guidance has been absolutely the same.
Okay, that's helpful, So sir, my second question was with respect to TDD division, which is performing extremely well, right? So are there any one-off during the quarter because first quarter is normally to subdue, but this time around the numbers are actually -- and if you can share some light about the CapEx plan and what kind of asset turns we can see going ahead in, say, medium or long term for the division?
Okay. So I can't offer you as such any data because we're investing very heavily in the business, and that's going to change from our historical numbers. I don't have that calculation to share with you today. But I can share with you that your observation is absolutely on point. Typically, Q1 for us has always been a light quarter. And this year, we've had 78% increase in turnover, 110% increase in profitability has happened because of 2 reasons: the first fundamental reason is of our overall revenues for the quarter, 30% is from export. So this a huge jump in export revenues in Q1, which is typically always lower. With that expanded canvas and we're seeing a massive amount of activity in API as well as in API segments, which is oil and gas segments in North America and Western Europe. And we're also seeing [indiscernible] work happening in Europe, as I mentioned, and in Asia as well we have seen a huge number of domestic and international customers that supply into that market increasing their demand. It bodes very, very well. Our order booking has -- I expect it to rise quite a lot -- Q1 is always a light quarter for both of them. So to see both revenues and order booking jump is what we had expected, very frankly speaking, and we've finally been able to convert it into performance. I think while I don't talk about expectations, et cetera, we are very well positioned in those markets. You have to understand that globally, the customers that we're selling to all our operations in India, and we all sell to them, and we have very high market shares with the same customers. Now it's about translating that relationship into a global one. And while it might take -- it's something that is a short- to medium-term target, we're seeing the dividends of that already.
Turning to the CapEx. We have approximately INR 100 crores that the Board has sanctioned in terms of expansion of our existing facility and the development of -- and the acquisition and development of the defense manufacturing facility also in Mysuru, very close to the original manufacturing facility in Metagalli. That is very well on the way. Orders have all been placed for the machinery and our work is on at the site as well. We're anticipating that some part of that INR 100 crores will be commissioned and made operational in this fiscal year, and the balance will be done by Q2 of the next fiscal year. So we're very much on track. And I think we were ahead of the gun. We recognized that there were longer-term deliveries for some of these very complex, very highly sought-after CNC machines has come from Germany and other European countries, large -- multimillion euro machines. And those -- we predicted it. Therefore, we placed the orders, and so now we're well positioned. In terms of execution, we are very much on track.
Sir, just last question from my side. Sir, there is a note in the results that there's a new joint venture, maybe, Triveni Sports Private Limited. Just wanted to understand the purpose and capital allocation there. And also, if you can just want to highlight, I think the Board meeting, in a sense, on the longer side [indiscernible] if you want to highlight anything specific on the Board meeting. That's all from my side.
I'm sorry, I did not understand the last half of your question.
So my second half of the question, sir, I just noticed that a Board meeting for the results for more than 5 hours. So if anything specific you would like to highlight, which was discussed.
In our case, in the Board meeting, apart from the results, et cetera, all -- we have multiple businesses over there. A lot of businesses, all the business, performance of the business, outlook, et cetera, everything is discussed in the Board meeting. So obviously, it takes much longer time. You would appreciate that it's not just a sugar company. It has got other engineering businesses as well. So that's 1 of the reasons why it should take more time.
And with respect to the new company, the -- it's a 50-50 venture between Triveni Engineering & Industries Limited. And the other 50% is owned by Triveni Turbine. We have created this company because it reflects an opportunity that was placed in us to be part of the Mahindra Global Chess League. I'm happy to report that we actually won the tournament. We will be receiving the price money, et cetera, that will come with that. I don't have the exact numbers with us now. The purpose really is to be able to foster this involvement in this very interesting area, which leads and lends its properties towards our businesses, of excellence, of great individuality, of great team play, et cetera. So the properties of the business -- of the sport rather, lend itself towards the Triveni brand very, very much. So -- and we feel that it is an important association and one that we would like to foster. In terms of the total capital deployment of Triveni Engineering, right now [ it's something like ] INR 2.5 crores.
We'll move on to the next question from the line of Nitin Kumar Awasthi from InCred Equities.
Sir, Triveni being 1 of the rare companies which is also into grain ENA manufacturing. I would just want to understand 2 things in that business: one, what was the broken rice you're purchasing before the FCI ban? What is the price at which you are purchasing and what has it changed to now?
So coming back to the issue of the purchase price of DFG. We had purchased it at a price of about around INR 20 and kept it in stock for us. And we have the flexibility also to produce ethanol from the same facility, and we were largely into ethanol at that point of time. Coming back -- but -- and we will be going out as we did mention that the DFG prices had gone up, but we expect with the ban on exports that the prices will soften -- and we'll also look at that alternative for producing both ethanol and ENA. So the price for broken rice right now in Uttar Pradesh and North India is about INR 24 per kilo. And there's certainly a softness. This was the price before the ban. We've seen a softness and we've seen a reluctance of a lot of quantity to come to the market, which will have to come to the market. That optics has to happen. It will certainly happen at lower rates. Does that answer your question?
Yes, sir. That does answer my question. The second part of the question is ENA being a market-linked commodity, which is not basically -- prices are not determined or business interference from the government. Is there been an uptick? Or are you seeing an uptick in the grain ENA prices? At least that part our margins are same.
Our sales of ENA are largely for our own consumption in our country liquor business. However, the prices which we did mention the last time, were at around INR 63 to INR 65 -- in some cases, the transactions have gone up to INR 67, so that there could be a pass-through in terms of the pricing in terms of the increase in the DFG prices getting passed on to the [indiscernible].
Understood, sir. Sir, last question, if I may. There's been a talk of a maize policy because of which this FCI move might have come in play. Have you heard anything of any of that, sir, that the maize policy in play, which might come in and basically shift the focus of the industry from rice to maize?
[indiscernible] the government has been very vocal in saying that maize is a very viable raw material for the production of ethanol. One has to remember that, a, right now is not the maize season, firstly. Number two, the variety of maize that is grown in the country will need to change if we're looking at an energy maize change when you're looking at maize. So those 2 things, it's a medium-term issue to tackle. It is not a short term. It will definitely be dependent on price. You will have to offer an attractive price for the industry to go out and develop that supply chain and for farmers to be encouraged to grow this. The 1 thing that you should note is that India produces a large quantum of maize. Only 10% of it is for human consumption. The balance portion of 9 billion tonnes, 10-odd billion tonnes goes towards feedstock, animal feed. And so at the end of the day, even if we're using the policy behind the government spot, I would imagine, is that even if you're using maize to produce ethanol, the affluent is DDGS, which is animal feed. So you're actually -- you're accompanying 2 problems, but there is a pricing issue. And I think it's not a big policy as such. It will just be determined by a declaration of price, which I'm anticipating.
We have a next question from the line of Rajiv Agrawal from Sterling Capital.
I just have a question on your defense business. So you're planning -- you are planning to set up a -- dedicated multimodal facility for defense products. So what would be the quantum of investment in this business? And out of -- my second related question is that out of the order book of INR 271 crores, how much of it is from the Defense business?
So of the INR 100 crores that we invested in TDD, the investment in the new defense facility is INR 40 crores. And this will be executed by this time next year. It will be operational by this time next year. With respect to our order booking, part of it is executable this year, part of -- it's part of our longer-term order booking, and it's approximately INR 80 crores, approximately. I don't have the exact number with me right now.
Out of INR 271 crores, INR 80 crores is from Defense business?
That is correct.
We have a next question from the line of Nikhil Jain from Galaxy International.
I have 2 questions. First, so in this quarter, our distillery volumes have actually gone up very significantly, but the margins have correspondingly not gone up. So -- any specific reason for that? So if you can just highlight?
Yes, I'll give you the -- this is -- I spoke about it in my opening comments. It's not an apples-to-apples comparison. In the quarter under review, we had 64% of our production from molasses and 36% from grain. Grain has lower margins. In the previous corresponding quarter was 100% for B-heavy and therefore it was at the B-heavy margin rate. That is the difference in the margin primarily, primarily.
Okay. So grain is more remunerative in that sense if you get it at...
Grain is less remunerative.
Less remunerative. Okay. So is there any specific reason for us to actually go for grain then -- is there a shortage of molasses? Or let's say you just want to ensure duality?
So, this is again what I was talking by setting up multi-feed distillery. So the price of ethanol derived from juice goes up. We have the capacities to be able to divert to do that. In the interim, while the prices aren't at a level that we're happy with, we can certainly use grain because the returns from grain are still also very good. The 5-year project payback approximately with grain, which is really still not bad at all. So it may be different from B-heavy molasses, but that doesn't mean that it isn't -- it doesn't mean the investment hurdles for the company.
Okay. Okay. And my second question is that is there any thoughts on demerging the Engineering business?
I'm sorry.
Demerging.
No, the Board has not taken up the issue of demerging.
We have our next question from the line of Varun Gajaria from Omkara Capital.
Am I audible?
Yes, you are.
Okay. Great. So just have 2 questions. The question is -- first part, how do you see the revenue and Defense, especially from the Defense segment trending for the next 2, 3 years? -- what the outlook there? And what is the relative asset turnover that you're expecting on the INR 40 crore investment that you're making in the Defense?
So we typically don't give any forward-looking statements on any of our businesses. I can only tell you that the opportunity is quite large. Our inquiry book is many, many times the size of our order book today. However, with Defense, the 1 thing that I must mention is that -- the closure of orders, so the award of orders is not in our hands. So it is very much like our Water business. Things can get delayed and typically things do get delayed. So it's a game of patience. But the market is absolutely enormous. As a consequence -- because I'm not giving any forward-looking statements, I can't really tell you what our asset terms are going to be in that business going forward. But we do have investment hurdles within the company. We look at returns, post-tax returns of at least 15% to 16% for any decision and we're certainly ahead of that range for this particular business as well.
So typically we're 50% to 60% on an order right?
No. I said we -- our investment hurdles are 15% to 16% post tax.
Okay. 15% to 16%. Okay. And on the grain and molasses mix with the new [indiscernible] coming in the picture, how is the mix be going forward -- like, what is [indiscernible]?
That's a very good question. But the answer to that question is not something that I can offer today because for future supplies, the mix will be dependent on what the future prices are. So I'm anticipating that there will be 2 increases in prices: one in the near term and one by the start of the new ethanol year, before the start of new ethanol year, which will probably be in September or so. Based on that, we will be able to give you a better idea of exactly what that mix will be. And today's point, there's no point fostering and [indiscernible] because we know it's going to change, and that will affect our strategy of mix. But the -- as I mentioned to the previous caller, the advantage that we have is we have multi-feed distilleries that allow us that flexibility. We also have multiproduct where we can produce both ENA as well as ethanol to some extent, which allows us flexibility on the output side as well.
Right. Great. And especially in our Power Transmission segment, are there any short-term orders that you also undertake? Because in the past, it's been assumed that the revenue in the coming -- in the next year, in the succeeding year is marginally, let's say, a little bit higher than what your order book was, I mean, if I mention or something that?
I'm sorry, I cannot follow your question.
Okay. So just had a small question that are there any short-term orders that you also undertake in the Power Transmission segment because...
We do. Typically, our orders are 6 to 7 months approximately, and our repair and service orders could be as short as 2 months.
Right. Because in the past, we've been seeing that the order book and the order book in the preceding year -- and the revenues in the preceding year, there's a little bit of over -- there's a little bit of mismatch, so which is why I query on this.
Understood.
Okay. So it's a mix of short-term and long-term orders right?
It is Absolutely. Absolutely.
[Operator Instructions] We have a question from the line of [ Parag Somani ] from [ IKA India ].
Hello, can you hear me?
Yes, we can.
I just had 1 question. This is regarding the ethanol supply to OMCs. So as you mentioned in your investor highlights that 553 crores of ethanol has been contracted by OMCs. So can you share the quantum of contracts seen by Triveni? And out of that, how much we have supplied until Q1 '23 and -- Q1 '24 and the quantum that we'll be supplying for the next 2 quarters until December?
So we have about 17 crores or 17.5 crores from OMCs, and we have supplied about 11 crores so far and -- over there. And the rest will -- we'll meet all our obligations to OMCs under this ethanol supply year.
Okay. And just a follow-up on that. I believe our ethanol capacity is much more larger than the capacity than the numbers you have mentioned. So do we see is there any scope where we can supply beyond the contracted capacity out of contract supplies that we can do or we can bring more contracts?
No, no. We're operating at very, very high levels of production efficiencies. So at this particular point in time, we have 660 KLPD and we're operating that at near 100% levels of operations. So there isn't any much more scope to expand it. And this ESY goes for 11 months' period, you must realize that. And we have already given our guidance earlier, I mean, in terms of what we supplied in the last financial year, and we were supposed to be supplying in the upcoming financial year, FY '24.
Okay. So that means we have contracted capacity for the complete production capacity of...
Absolutely, absolutely.
We have our next question from the line of [ K. Mohan ], an individual investor.
[indiscernible]
I'm sorry, sir, you're not audible. Please use your handset mode.
Yes, I'm using the handset. One second, 1 second. Can you hear me?
Very faintly. So you have to speak a little louder.
One second. Can you hear me now?
Yes.
Can you hear me now?
Yes, we can. Mr. K. Mohan, we can hear you. Since there is no response, we are moving on to the next question from the line of Amarnath Bhakat from Ministry of Finance of Oman.
Am I audible?
Yes, you are.
I have 2 set of questions. Number one, new sports business coming under this umbrella of Triveni. Just trying to understand the rationale of involving this company and allocating capital to a completely unrelated business of sports. Can you please give a little more light on what was the rationale behind going there?
Absolutely. And I just answered the question just a few minutes ago. The capital that's been allocated is INR 2.5 crores thus far to Triveni Sports Private Limited. And it is for a team in the Mahindra Global Chess league which -- it's a commitment for several years. The first tournament finished in Dubai. It was attended by all the top leading women and men grandmasters around the world. And the Triveni team actually won the trophy. Now the reason and rationale for associating to this is really lend in the properties that is involved in the sport of chess is very much associated with the properties that we associate with at Triveni Engineering, of excellence, of individual leadership, of team leadership, our diligence and our strategy. Those properties are very much part and parcel of the mantra that we have at Triveni Engineering, and it is part of our brand recognition and future marketing method. So there was a great deal of thought that was given into entering and into making this decision, and that is the reason.
So is there any plan to allocate more capital or going big in this particular strategy of the company?
No, nothing terribly significant.
Okay. And second thing, this was the discussion many times even before. Triveni Engineering is a mixing of this commodity business, which is very cyclical in nature and other side of the business, which is very prominent and outlook is extremely good in respect of that Power Transmission and Engineering side of the business. To value a loss for the shareholders, is there any plan on the table either now or somewhere to think for this demand because this really doesn't work well for a complete commodity company and 1 side is cyclical business, 1 side is a structurally good business with a long-term visibility as of today, to mix together. And we, as a shareholder, get confused, if you want, which type of the business to invest. If I want the power business, I have to take care of the cyclical loss of other business as well, where most of the thing is not in the control of our management, in fact. Something government, something international product, something internal [ bleeding ], has changed time to time based on what the government decides. So just trying to understand, is there any plan, any thought process in the management to demerge these 2 entities or 2 sides of the business.
I think first, let me start by saying that your point is noted as we've made a note of it. And of course, your views is something that we will have to reflect on. But in terms of demerger of any of our businesses in any form is something that has to be discussed at the board level before I can discuss it with shareholders or with the investing public. At this point in time, the Board has not discussed any plans of demerger. The last time this subject was discussed was several years ago, 5 or 6, 7 years ago. And at that particular point in time, the Board had in its determination said that it is not a matter of if they will be demerged, not a matter of when they'll be demerged, depending on their relative sizes, depending on the market conditions and a whole boost of other factors. So that disclosure was made many years ago, and it still remains in force today. But I can tell you we had a Board meeting yesterday. The subject of demerger was not discussed at that meeting.
My last part of the question with respect to the...
Mr. Bhakat, I request you to join back the queue, sir, as there are other participants waiting. We have our next question from the line of Tejas Sonawane from Dolat Capital.
Firstly, we're witnessing very high rainfall in northern parts of India. So do we foresee any kind of impact on getting production in the state of UP going ahead?
The rainfall so far has been very, very good. And this is the prime growth period of the planted crop and of the entire crop rather. And therefore, we expect that this will be very beneficial. However, there -- it has to be within certain limits. And so far, it has been within those limits. In case there have -- the intensity increases significantly going forward, only then there will be issues of water being discharged and some submergence of areas, but which has not happened, our crop is very good. And so is the reports from the state of UP.
Okay. Understood. Secondly, the government has recently announced an increase in FRP pricing. So what is your sense on your overall SAP announcement which could come through for the next season?
I'm sorry, you have to repeat that question, I couldn't hear you.
Am I audible now?
Yes.
Yes. So the government has recently announced an increase in the FRP on sugarcane. So any sense of the announcement of the SAP side as well for the upcoming season?
It's a good question because we have a general election coming up next year, et cetera. But the -- I think you can only rely on past data. In the last 7 years, the Uttar Pradesh government has been extremely considered in its announcements of SAP. And I will lead you to all the data over the last 7 years. It has keenly looked at all market participants, the farmers, the industries, the consumers, in making that determination. And frankly speaking, if there is an increase, I can confidently say that it will be one that will be taken in the most considered manner and it will not be any arbitrary increase that people have said that it has happened in that industry. So at this particular point in time, it's very difficult to say if there will be an increase or how much that increase will be if there is an increase. I think the better time will be around about November of this year when that determination will be made. However, I would reemphasize that I have great confidence in the Uttar Pradesh government in making the right decision.
Okay. That was very helpful. So 1 last thing, you mentioned that we are seeing some offtake issues from the OMC. So could you please elaborate on the kind of issues we are witnessing from the OMC side in terms of the offtake of economy.
No. In our case, it was not generic issues. These were specific issues, which I mentioned just a little while back. and they're related to 3 sets of regions: one was in Gujarat, which was hit by Biporjoy and all our -- the orders which had to be fulfilled -- and we had quite a few depots in Gujarat from [ Hazira northwards ]. And we found that there was virtually no decantation of fruit juice. Similarly, in Mathura refinery, they had issues of pipelines and of certain approvals, which were required. -- and that got resolved early July or a very, very late June, you would say. And third were a couple of, again, depots in Punjab which we're getting supplies from 1 of the BPCL refineries, which had an issue with their -- with the pipeline, et cetera. So these coincidentally all happened together. They were bunched together in our case. But now they have all been resolved. And we are not talking of any generic issues impacting the offtake by the OMCs. Of course, there are certain teething issues, which remain, but they keep on getting resolved in our mutual interaction with the OMCs.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.
Thank you. Ladies and gentlemen, thank you very much for joining us for Q1 fiscal '24 earnings review of Triveni Engineering & Industries Limited. As a mentioned, I think we had a very exciting 3 months. The sugar business, we have to look forward to the weather and the growth period. And of course, by the time we speak mix, the factories may very well have started. So quite exciting on that front. On the ethanol front, I think the greatest excitement is going to be around pricing and the strategies that arrives around the pricing. Within Power Transmission, it's going to be really about global focus and the development of deeper relationships with global customers. And lastly, Water, again, with a renewed and larger landscape, I think we're in a better position until we will have more positive news to share with you a few months from now. Thank you very much, and have a good afternoon. Goodbye.
Thank you. On behalf of Triveni Engineering & Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.