TD Power Systems Limited (TDPOWERSYS) Q4 FY23 Earnings Concall Transcript

TD Power Systems Limited (NSE:TDPOWERSYS) Q4 FY23 Earnings Concall dated May. 11, 2023.

Corporate Participants:

Nikhil Kumar — Managing Director

Vishwanath Hangari — Head, Engineering

M.N Varalakshmi — Chief Financial Officer

Srivatsa n — company Secretary

Vinay Hegde — Head, Sales & Marketing

Unidentified Speaker —

Analysts:

Niteen Dharmawat — Aurum Capital — Analyst

Andrey Purushottam — Cogito Advisors — Analyst

Himanshu Upadhyay — O3PMS — Analyst

Rohit Balakrishnan — Pms — Analyst

Dhwanil Desai — Turtle Capital — Analyst

Ankit Gupta — Bamboo Capital — Analyst

Deepesh Agarwal — UTI AMC — Analyst

Unidentified Participant — — Analyst

Alisha Mahawla — Envision Capital — Analyst

Shyam Maheshwari — Aditya Birla Mutual Fund — Analyst

V.P. Rajesh — Banyan Capital Advisors — Analyst

Riya Mehta — Aequitas — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the TD Power Systems Limited Q4 FY ’23 Earnings Conference Call of. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.

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. [Operator Instructions] Please note that this conference is being recorded.

Now, I now hand the conference over to Mr. Nikhil Kumar, Managing Director from TD Power. Thank you, and over to you, sir.

Nikhil Kumar — Managing Director

Thank you. Good morning, everybody. Thank you once again for joining us today on our earnings call. I trust all of you would have received our results and investor presentation.

Now, I want to discuss with you TDPS’s financial performance for the year ended 31st March, 2023. Standalone, our full year total income on a standalone basis was INR8.43 billion versus INR7.6 billion in the same period in the previous year, an increase of 15%. Profit after tax and comprehensive income was INR884 million versus a profit of INR532 million in the same period in the previous year, an increase of 66%.

We reported highest PAT on a standalone basis for the full quarter and full year since the inception of our company. Full year manufacturing revenues was INR8.16 billion versus INR7.04 billion. EBITDA margins for the full year were 16.58%, including our operational income. Exports and deemed exports contributed to 58% of the generative business.

The manufacturing order book, including operations stands at INR13.8 billion, out of which INR5.61 billion in the generative business, INR8.8 billion is the railway business, which is executable in five years and INR0.11 billion for the Turkey business. Export and deemed export excluding the railway business is 52%.

Order inflow. Our order inflow has been very strong and resilient, and we’re very, very pleased to report an increase of 38% in the order inflow compared to the previous year. Order inflows for TDPS for the last year was INR87 billion compared to INR6.05 million of the previous year. Full year order inflow including Turkey business as follows; TDPS India was INR8.37 billion — 30.08, total is INR8.45 million versus the previous year INR6.4 million.

Order inflow from direct and deemed exports is INR4.43 billion, which is an increase of 20% over the previous year. Full year projects business revenue was INR335 million versus INR173 million same period last year. But we would the company is no longer in the projects business, and hence forward, all order book by Japan branch will be classified into the manufacturing segment, which consists mainly of generator sales, selling space service note-related shops.

As a matter of clarification, the sale of INR203 million total of INR235 million described above is mainly the generator business, service and spare. Outer book from the projects business stands at INR106 million, which is not classified as generator business from this point onwards.

On a consolidated basis, our full year total income including exceptional income is INR8.93 billion versus EUR8.22 billion in the same period in the previous year, increase of 9%. Profit after tax, including comprehensive and exceptional income is INR945 million, including a write-back in DFPS, a subsidiary of INR6.28 million and profit from the same period of INR7.16 million versus a profit of INR614 million in the same period in the previous year.

In the previous year, we had a write-back in our subsidiary company in DFPS of INR46 million. Our consol order book is INR13.91 billion. We continue to have a strong cash position of INR1.89 billion, the company has also been operating cash flow of INR886 million during the year on a consolidated basis. A major part of it has been used to pay back the working capital loans and balance our payment of dividends and creditors compared to INR109 million in the previous year. The company is now debt-free, both long term and short term. Anyway, the company did not have any long-term debt previously. We plan to invest around INR25 crores in this current year on automation, productivity improvement and software for our design department.

Order book market situation and guidance, in wind generator we are seeing a huge jump in the order book in this segment on a year-on-year basis of about 55%. Orders have increased both from domestic market as well as export marketing across the board. Domestic market is seeing a big revival in capex, and we’ve seen demand broadly across all sectors.

In the export market, we’re seeing the same factors playing out as we have been describing in the past few quarters. Macro sectors continue to drive the business both to renewables, energy, garbage burning plants, etc. Increased demand for electricity from electric automobiles and in the future, domestic heating, which will have to be changed to electricity will provide long-term sustained demand of new power plants in this segment.

Gas engines, we continue to have robust orders in both our engine customers and this would ensure sustained demand in this segment for the current financial year. Recently, we won a big order to supply 20 generators to Ireland from one of our Indian customers. Gas line, this segment has a big potential for growth for DPS, and we’re actively willing for more projects on whenever the approved.

Now hydro. Hydro also we’re seeing a massive growth in the business in this year compared to last year. You will see a growth of about 60% to 70% of our business in this year compared to the previous year. The main markets are Nepal, Vietnam and countries in Europe. Once again, the push over the renewables in driving the business in hydro.

Motors, we are pleased to announce the first order from Power Corporation. We have also received first audit for submersible motors, which is a new product for TDPS. The multiple motors are used extensively in municipality, and water supply systems. We are also very pleased to order — to announce a large order from major engineering or 5 to14 megawatt pre-connectors to be delivered in Q2 or Q3 this year. With this supplier, we will establish ourselves strongly in this segment and open up the market portfolio business.

Railway, next month, the six-month trial of our motors will be completed with the Indian Railways. We hope everything will function well until the end of next month. There are still a few more tests to be completed after the six months period is completed. And then we have to complete a significant amount of documentation. We expect to finish everything by Q3, and next year, you can see a good ramp up in this business.

As I said repeatedly, — business about INR100 crore business in the next two years. New projects from Indian Railway, generating eagerly for the results and hopefully, our partner customers will be successful to win a few of the upcoming tenders from Indian Railways.

Turkey, we are also happy to announce that Turkish government has revised the incentive for local unit generators and made it very attractive for end users to buy major turkey generators. This means the market will open up once again. It may take some time after the election, the market will open up and Turkey is the power shortage country. I expect this year to be retiring here to be very subtle in terms of sales but we will see a pickup of order bookings and from next year onwards will see the execution picking up much again.

Now, I’ll finally come to the market conditions to the guidance as we have been guiding in our previous earnings call, we are projecting growth of at least 20% in the current year, upside potential to reach around INR100 crores in the manufacturing business.

As of now, we see manufacturing sales in the region of INR970 crores definite and INR1,000 crores target, and the reality could be somewhere in between. We will see an improvement in EBITDA margins based on operational leverage.

In H1, we plan to have around 47% of our sales around INR470 crores, out of which INR210 crores will be in Q1 and INR260 crores would be in Q2. This is because we have a large number of machines — sorry, we have a number of large machines to be delivered in Q2 and these will be in production in Q1.

As I mentioned earlier, we have a five big motors of 40 megawatts, which to be delivered in Q2 and some in Q3, and those will be in production. They’re already in production and therefore, our sales will be slightly lower in Q1, but it pick up dramatically in Q2 onwards.

This brings me to the end of my initial remarks. I’ll now be happy to address any queries — questions that you may have. Thank you.

Questions and Answers:

Operator

We have a first question from the line of Niteen Dharmawat from Aurum Capital. Please go ahead.

Niteen Dharmawat — Aurum Capital — Analyst

Yeah. Thank you for the opportunity. Am I audible?

Vishwanath Hangari — Head, Engineering

Yes, sir.

Niteen Dharmawat — Aurum Capital — Analyst

Okay. Sir, my first question is about the raw material price trends. Some time ago, we had significant raw material pressure, and then there was some price correction that has happened. So I wanted to take your view on the current raw material price trend? And is it going to help us or we are having some challenges over there?

Vishwanath Hangari — Head, Engineering

We have already booked and bought a majority of our major raw materials for the current financial year. You have seen that the prices of Steam, for example, have been going up recently once again. And the company has taken a decision to buy the material for rest of the year to avoid exposure to further price increase.

So as far as our purchases are concerned and our margin protection is concerned, we have taken necessary steps to ensure that we will not be affected by any significant raw material prices in this current financial year.

Niteen Dharmawat — Aurum Capital — Analyst

Perfect. You mentioned about the 20% growth, I suppose in the manufacturing business. So what is the consolidated growth that we are planning for the year?

Vishwanath Hangari — Head, Engineering

Varalakshmi, it would be around 20% in, right?

M.N Varalakshmi — Chief Financial Officer

Yes, yes. It’s the same sir.

Niteen Dharmawat — Aurum Capital — Analyst

Okay. It is a 20% for the overall business also, right?

M.N Varalakshmi — Chief Financial Officer

Yes. three

Vishwanath Hangari — Head, Engineering

Yeah.

Niteen Dharmawat — Aurum Capital — Analyst

Is the EBITDA that we are targeting for the overall business?

M.N Varalakshmi — Chief Financial Officer

No. We have mentioned

Vishwanath Hangari — Head, Engineering

We had — there is, don’t be an increase in the EBITDA margin. We are — we will give the exact guidance in the next quarter, but we’re seeing some increase.

Niteen Dharmawat — Aurum Capital — Analyst

The current EBITDA margin, will it be sustainable in the current financial year as well?

Vishwanath Hangari — Head, Engineering

Asset is going to increase, right? So

Niteen Dharmawat — Aurum Capital — Analyst

Yeah. Okay. Got it. My final question is, what is the volume growth that we are expecting in financial year 2014?

Vishwanath Hangari — Head, Engineering

Around 20%.

Niteen Dharmawat — Aurum Capital — Analyst

Around 20%, Okay. Got it. Thank you so much, and wishing you best.

Vishwanath Hangari — Head, Engineering

Thank you.

M.N Varalakshmi — Chief Financial Officer

Thank you.

Operator

We have our next question from the line of Andrey Purushottam from Cogito Advisors. Please go ahead.

Andrey Purushottam — Cogito Advisors — Analyst

Congratulations for a good set of numbers, sir. This is a bit of a follow-up question from the previous one. If you look at the results last year, your gross profit margins have increased considerably, but your other costs, employee, other expenses, etc, have increased slightly as compared — as a percentage of sales, I think from 16.8 to 17.2 if I am not mistaken.

Now, this suggests that you have not taken advantage of operating leverage in this year, but going forward, with your guidance of greater EBITDA margins I suggest that, I’m presuming you’re going to have continued gross profit margin improvement, can we also see some operating leverage particularly, just wanted to hear your thoughts on this.

Vishwanath Hangari — Head, Engineering

Varalakshmi, can you take this question, please?

M.N Varalakshmi — Chief Financial Officer

Yeah. Sure. There has been an improvement in the gross contribution, because of the pass on of the cost to the customers. And operating costs are increasing because we need to give some increases in the salary and all.

Andrey Purushottam — Cogito Advisors — Analyst

So going forward, — going forward, will these costs, the employee costs and other expenses move slower than the increase in revenue?

Srivatsa n — company Secretary

They may not increase in same proportion as the sales will increase, but there will be some increase. If the sales are increasing by 20%, the operating expenses increased by 12%, 13%.

Andrey Purushottam — Cogito Advisors — Analyst

Okay. This is Sangita, Andrey’s partner. I have a follow-up question that you guided for the 20% volume value growth for FY 2024. Now given where the cycle is, do you think this kind of growth can be sustained in the medium term say three to five years.

Nikhil Kumar — Managing Director

No, that’s a good question. And I don’t want to — I don’t want to be overly optimistic in saying that this kind of growth will be sustainable. So — but as far as our company is concerned — we have strategy to sustain the growth based on diversification of products and diversification of market. So today, we see other increases taking place by 38% and 48%. That kind of a sustainable — that kind of reduced growth may not be a — may flatten to about 20%, 25% this is my expectation.

But a large part of this increase in those is also taking place because we have diversified our product range, and we’re working in different markets with new customers across the world. So we can expect on a very conservative basis, I’m saying we can expect something like 17.5% compounded growth could definitely take place. Of course, the company is having a target to keep the growth rate around between 20% to 25%. But in terms of given commitment, we have always said that we’ve been a commitment around 17.5% compounding growth.

Andrey Purushottam — Cogito Advisors — Analyst

17.5% compounded growth over, say, three years? Okay. yes. Okay. Okay. And could you..

Nikhil Kumar — Managing Director

Upside potential is there because they’re giving a conservative commitment based on what we can actually do.

Andrey Purushottam — Cogito Advisors — Analyst

Right, right. And could you give a flavor as to what is prompting different plans across different geographies to buy their products from you? Is it part of the Europe plus or China plus one or what is it? And is that likely to then convert into a structural trend?

Nikhil Kumar — Managing Director

No, we are not — this China Plus One its not something that — we are not affected by China plus one. China plus one business is when you have large companies setting up shop in India versus setting up shop in China and then manufacturing getting contract manufacturing done or setting up their own plants, so they can manufacture and then export to various parts of world. That is a China plus one.

We are talking about — in our company, we have built our own brand name, and we’re selling our products, and we have been doing this for the past 10 years. It’s not something that we started yesterday. We started in past two years once this Ukraine war has started. One China customer one has become a big item.

We have been in the export market for the past 10 years intensively growing our business building of our own brand name and creating references across the world. And so our story is a totally different story. There is a huge market for electric generators in general. And TDPS is probably one of — probably only companies coming from a low-cost country and competing against established European majors or life in major in their home market.

We still have a long way to go. We have a very low market share, and we are constantly trying to improve our penetration in the market and grow our business internationally. So I see — plus the macro factors that I talked about in terms of increased electricity demand, I see that there’s a good potential for growth for us in the future also.

Operator

We have a next question from the line of Himanshu Upadhyay from O3PMS. Please go ahead.

Himanshu Upadhyay — O3PMS — Analyst

Yes. Hi. Congratulations on good set of numbers. Am I audible?

Nikhil Kumar — Managing Director

Yes, Himanshu, how are you?

Himanshu Upadhyay — O3PMS — Analyst

Yes. So my first question was, we have guided for revenue something like INR1,000 crores, okay? And if you look at the order book, it is INR590 crores besides railway. Railway, if we do, let’s say, even INR150, it reaches INR700 to INR750. So do you think a significant — means we have a significant pipeline, which is not let’s say, order to us, but a significant place where we are tender or we are participating and we are very optimistic on that. Or it is your some understanding with OEMs who are there means the cycle is much shorter. Can you elaborate on that?

Nikhil Kumar — Managing Director

Yes. We have a delivery cycle of between three months to 12 months. So if you look at our past track record, we do — it depends on it depends on the year, but we do — between INR200 crores, INR300 crores of book and bill within the current year, depending on the year. So we are very confident that this balance of INR50 crores will be is made up —

Himanshu Upadhyay — O3PMS — Analyst

And the one thing.

Nikhil Kumar — Managing Director

We have not declared the April results and also we have had a very strong order book in April. The order booking continues to be very, very strong in May. Of course we’re not declared those numbers. But I can just tell the market that it’s been very strong and it’s in line with the kind of guidance that I’m protecting to the market at this point of time.

Himanshu Upadhyay — O3PMS — Analyst

Okay. And one more thing. See, the motors business, currently, we are winning project-level businesses, okay? But is there any thought process that we also start getting OEM businesses, so let’s say, a large pump company for which we can be a supplier or a compressor company or let’s say, whatever means the applications are very wide for large. So is there any opportunity that we can directly be supplier to a large OEM or for whom motor may not be the core product? And what is the opportunity size in such a business? Because earlier even in generators, we were not with so many OEMs, okay? But eventually, we tagged along with some of the OEMs, and it gave us good business, okay. So what is the part for motors business or large synchronous motors to move from here on?

Nikhil Kumar — Managing Director

I don’t think that we’re going to be — because all these motors finally will go towards –will be coupled to a firm or will be coupled to a compressor, it is anyway linked to an OEM business. Some of these businesses we sell to the OEMs, some of them we sell directly to the end user, depending on whether the customer wants to split the order is it orders. We are focusing not on — we are focusing on these particular applications, and we’re focusing on a particular size — not size, but motor a larger in size.

And we are focusing on water, which are about four, five-megawatt engine side. And — so we have been quite specific as to what we’re going after, and we’re not going after the motor business below that the sizes because it is a very highly competitive and highly populated markets below these sizes. So we will continue to work on this strategy to work on larger size motors and in niche markets where we have good chance to display our capabilities and get better prices.

Himanshu Upadhyay — O3PMS — Analyst

One last question on this only. You see in generators sir, what would be our revenue from OEMs, let’s say, engine manufacturer or, let’s say, gas engine manufacturer or a diesel engine manufacturer, currently versus some five or seven years back. So how big is that proportion of business? And is it much shorter cycle than the project businesses what we may do on the generators space directly?

Nikhil Kumar — Managing Director

No, I don’t understand your question completely, but I — the generator business is mainly an OEM business and continues to be an OEM business. In terms of percentages, there’s no change in what it was five, seven years ago and what it is today.

Himanshu Upadhyay — O3PMS — Analyst

So what I was asking was

Nikhil Kumar — Managing Director

To the OEM, to the end user.

Himanshu Upadhyay — O3PMS — Analyst

Okay. Okay. Okay. So thank you from my side. I will join back in queue for further questions.

Operator

Thank you. We have a next question from the line of Rohit from ithought pms. Please go ahead.

Rohit Balakrishnan — Pms — Analyst

Hello, Am I audible?

Operator

Yes.

Nikhil Kumar — Managing Director

Yes, yes.

Rohit Balakrishnan — Pms — Analyst

Yes, Hi, Nikhil. Congratulation on very good quarter. So Nikhil, couple of questions. Recently, I was reading that geo program is actually a very hot space right now in the US and what’s happening in Europe is somewhat similarly also happening in the US. I remember you had mentioned a few quarters about also trying to build up that segment, which will probably largely in Turkey. So just wanted to see anything you will be closing something in that market as well and if that market also can be a decent opportunity for us?

Operator

I apologies, Mr. Rohit. Can you use your handset, please? It is not audible?

Rohit Balakrishnan — Pms — Analyst

Sure. Hello. I will just repeat my question

Nikhil Kumar — Managing Director

I could hear what he said is fine, go onward, Rohit.

Rohit Balakrishnan — Pms — Analyst

Okay. So I just want to hear your view that if geothermal also could be a big vertical beyond Turkey. And so that was my first question, actually.

Nikhil Kumar — Managing Director

Yes, the geothermal market, as we see it, is about 500 to 600 megawatts per year right now, could be 800 megawatts per year. And we are actively bidding with the OEM customers and getting some order Rohit. We’re not a major player in this market as yet in terms of being — having a significant market share, a lot of pace for us to grow. But we are working with all the top OEMs in the world and we will get more business either way we got business from Japan, we got business from Turkey, we got from Central America, we got some business also now recently we’ve got geothermal order from Germany. So we’re getting great through orders. It’s going to take a little bit more time for us to establish ourselves to get a big market share within this segment on a worldwide basis. But constantly plugging.

Rohit Balakrishnan — Pms — Analyst

Got it. That’s very positive you have Nikhil. Also Nikhil you mentioned about other new products, motor, right? If you can just talk a bit about

Nikhil Kumar — Managing Director

Sorry, I couldn;t hear you. Motors, I mean, obviously summer season, within the that they’re supposed to pump out and it’s a very special application. We are actually working on the larger size motors where there is no domestic manufacturer today. And most of the motors are imported, so we are excited to be in this segment. All the municipalities require these across India will require these motors for wastewater treatment, sewage handling also for fresh water pumping. So we are — it’s a big market, but the first order, and let’s see how it grows, but we are excited will be in this space.

Rohit Balakrishnan — Pms — Analyst

Perfect. I mean, would you want to sort of talk a bit about what’s the size of the market you want to sort of go on

Nikhil Kumar — Managing Director

No. At this point of time, we are — let’s — because once I say this is so many crores, the next question is how much share do you plan to get from it. So I’ll take this question a little bit later, once we deliver our set of motors.

Rohit Balakrishnan — Pms — Analyst

Sure. And my last question was Nikhil, I mean, would also like value on your balance sheet because actually we’ve grown very well this year and our inventory has used and also like run very good show on the overall cash flow. So congratulation to you and your team. And so are you — w are spending INR25 crores, you said, and we have a significant amount of cash. So any thoughts on how do you want to sort of use cash going forward in this year,as we are also projecting good growth for this year and also for the next couple of years.

Nikhil Kumar — Managing Director

Yes, Rohit, we eventually will have to put a third plant — and whether we have to start to work that there was partially like buy something land and start the work that there was partially like this year or next year, it depends on how the market grows if we’re going to see the 35%, 40% order in for sustainable for the next two, three years, and we had to put the plant faster than what we had earlier plan. So we are getting there and then depending on how big we want the new plan to be. So we are keeping the money aside right now for the new plant.

Rohit Balakrishnan — Pms — Analyst

Sure. It makes sense. Thank you very much, and all the very best to you in the future.

Nikhil Kumar — Managing Director

Yes.

Operator

Thank you. We have a next question from the line of Dhwanil Desai from Turtle Capital. Please go ahead.

Dhwanil Desai — Turtle Capital — Analyst

Hi, Nikhil. Good morning.

Nikhil Kumar — Managing Director

Good morning.

Dhwanil Desai — Turtle Capital — Analyst

So the first question is, so this combustible motor thing. So in terms of customer, do we directly supply to the municipality or is it like on a to the

Nikhil Kumar — Managing Director

Right. We supply to the pump manufacturer.

Dhwanil Desai — Turtle Capital — Analyst

To the pump manufacturer. Okay. So your receivables are with the pump manufacturer. Is that how it works?

Nikhil Kumar — Managing Director

Yes. Yes.

Dhwanil Desai — Turtle Capital — Analyst

Okay. Okay. Okay. And typically, who do we compete with? I mean, who are the major players in this segment?

Nikhil Kumar — Managing Director

Yes, I said most of the larger motors are imported and imported from Europe or from Korea.

Dhwanil Desai — Turtle Capital — Analyst

Okay. So no major Indian players in this market? Okay. Second thing, I think you said that we got this order from Megha I assume it is for synchronous motors. So can you elaborate? Yes. So can you elaborate on that? I mean, is this — I assume that this is more of a project-to-project business and it’s difficult to estimate the market size keeps on varying every year. But how do you see this? Are there many more projects in the pipeline on the bidding space, some color on that?

Nikhil Kumar — Managing Director

Dhwanil, This is a short-cycle order from Megha. It’s — we have to deliver these motors again within the next quarter. So it’s for us also because it gives us a chance to put the 40 megawatt machine — large machines into the market and establish our credentials and apply record.

So we are taking the challenge to do it and we are doing it. The market is — the pipeline is incredibly large. There are a huge number of products coming up could be hundreds of crores, of course, as you said, on a year-by-year basis, you could see differences in the total amount of business. But right now, the pipeline is extremely huge. And business coming from most inquiries are coming from Telangana, Andhra Pradesh, Tamil Nadu and Karnataka and Madhya Pradesh. So — we expect this to be really for us, and we take we don’t set the — once we put the 40-megawatt motors into operation, I think we’ll establish ourselves firmly as a very serious in the market.

Dhwanil Desai — Turtle Capital — Analyst

Yes. So this is mainly for some hydro project.

Nikhil Kumar — Managing Director

That’s the life of the pumping business to irrigation pumping projects.

Dhwanil Desai — Turtle Capital — Analyst

Okay. And last question on the NPK one that we got so any — so are we kind of in terms of purification capability, etc, are we only planning to address the domestic power market? Or are we also aiming to tap the international marketing it?

Nikhil Kumar — Managing Director

No, we are not planning to go outside India for this year. We are — there’s a lot of business within India for nuclear power application and go to stick to. And I don’t know whether it’s even possible for us to supply to look at our plan internationally given all the restrictions and regulations. So at the moment, we are focusing entirely on the Indian business.

Dhwanil Desai — Turtle Capital — Analyst

Thank you. That’s it. And all the best.

Operator

Thank you. We have a next question from the line of Ankit Gupta from Bamboo Capital. Please go ahead.

Ankit Gupta — Bamboo Capital — Analyst

Thanks for the opportunity. Congratulations to you, Nikhil and the entire team of TD Power Systems. I remember transformation in terms of the way we have diversified our business for the past few years has come and table. So Nikhil on the domestic side, if you can talk about you’ve seen a very strong inflow in terms of orders for this quarter. Like this has — and last year when you used to talk about the commentary in order inflow, you used to be more bullish on the export orders. But the last quarter, we’ve seen very strong commentary and even in your TV interview, you talked about very strong order pipeline from the domestic business. So, if you can talk about what is happening on the domestic side? And how do you see order inflows on the domestic side over the next year or two?

Nikhil Kumar — Managing Director

Yes. Vinay, are you on the call? Can you answer this question? Vinay is the Head of our Global Sales Marketing.

Operator

Mr. Hegde, are you on the line?

Vinay Hegde — Head, Sales & Marketing

Hello.

Operator

Mr. Hegde, I’m sorry, we’re not able to hear you.

Vinay Hegde — Head, Sales & Marketing

Can you hear me now?

Operator

Yes, sir.

Nikhil Kumar — Managing Director

Yes.

Vinay Hegde — Head, Sales & Marketing

Okay. So domestic market, as I said, this is still a bullish market and we are getting very good market orders on the — mainly on the renewable segment, biomass power plants, other arming power plants. Recently, we got a single order of solid machines of 8 megawatt for a biomass plant from India customers. And also, there is a government jointco refinery company from which our OEM has already got — 3 into 48 — sorry 2 in to 48 megawatts and 3 into 37 megawatts, very big order. So there is a real boom in the market still going on and domestic market requirement is really as good as the export market for us. We are expecting a very good business in the domestic market from our two major OEMs.

Ankit Gupta — Bamboo Capital — Analyst

So you expect the pipeline to remain a point over the next years at least.

Nikhil Kumar — Managing Director

Yes. I think the capex side has just started in India. We are just — it’s not — we are we had the early stages of this capex cycle and the potential for our country to grow from where we had $3.5 trillion economy to $5 trillion and $10 trillion economy, what we’re planning in the next decade or so. It’s entirely feasible that we will have massive expansion, natural buildup of infrastructure and earlier we talked a little bit about China plus 1. Yes, of course, DBS is not a big beneficiary kind of refund, but China plus 1 is a real thing which is happening in the market and a number of — a lot of people are putting up manufacturing facilities going outsourcing out of India. So, there would be a big demand for putting up the infrastructure including a big demand for electricity. So I’m a big — I am very, very bullish about the domestic market. Of course, the export market opportunity for the DBS is also huge, it’s not that that’s going to grow and we have spent the past decade in building up the market to not going to take an eye out of it. But we are — in the domestic market, this is our home market, and we have a leading position in this market. So we are going to be a beneficiary of this market when the market grows the way it’s growing right now. I really strongly feel that we are at the beginning of a very large long cycle in India.

Ankit Gupta — Bamboo Capital — Analyst

Sure. On — my second question was on the new product side. You talked about synchronous motors. But what about the new segments like railways where we entered directly as well as our association with the large OEM partner. I think the new tender has now been pushed back to this year. So, if you can talk about railway stand-alone railway business from our OEM partner, as well as the refurbishment business, both on wind as well as the refurbishment of our own generators.

Nikhil Kumar — Managing Director

So I think I already spoke in my opening commentary about the resi business, maybe you missed it. As I said, the trial period for these models which has a nontelcomotive and the period-month period will be over at the end of June. So hopefully, if we have no incidents until for the next 1.5 months, then after that, it is a significant amount of documentation. There’s still a few more tests to be done. I feel that this will go on up to Q3 or so. And then we should have the official approval, we have bidding for the projects on a level one category or level two category supplier. We plan to make this business into INR100 crore business in two years. We are taking it going step by step. It will ramp up. We see some — we will see some effects of this next year and definitely the year after that. So we’re going to ramp up this business. The Indian railways are producing more and more locomotives with a big demand. So I don’t see a problem from a demand point of view. On the new project in Indian Railways, I said, yes, we are waiting for the results. Some of the tenders are being postponed. So what to do, we have to wait and see to win.

Ankit Gupta — Bamboo Capital — Analyst

Sure. And on the refurbishment side, how things shape

Nikhil Kumar — Managing Director

Refurbishment side, things are going as per plan. We are going to get our targets, what we have said 6%, 7% of sales. So we will do that this year. And I have nothing to report, I think things are going fine.

Ankit Gupta — Bamboo Capital — Analyst

Got you. You were also planning to disclose the market about one or two products that you were working on. So anything —

Nikhil Kumar — Managing Director

I guess that we have introduced the synchronous motor.

Ankit Gupta — Bamboo Capital — Analyst

Okay. Okay. Okay. Okay. So that is part of that. Okay. Thank you and wish you all the best.

Nikhil Kumar — Managing Director

Thank you.

Operator

Thank you. We have our next question from the line of Deepesh Agarwal from UTI AMC. Please go ahead.

Deepesh Agarwal — UTI AMC — Analyst

Yeah. Good afternoon, team. And congrats for good number. First is a bookkeeping question. Can you help us understand what is the size of our order book on the motor side?

Nikhil Kumar — Managing Director

Varalakshmi, do you have a number with you?

M.N Varalakshmi — Chief Financial Officer

A minute, sir.

Nikhil Kumar — Managing Director

It’s around — I think it’s around INR100 crores. including

Deepesh Agarwal — UTI AMC — Analyst

INR100 crores. Okay. Okay. And last year, the same number would be

Nikhil Kumar — Managing Director

Last year it was not — I don’t remember the number right now top of my head.

Deepesh Agarwal — UTI AMC — Analyst

Understood. And what would be the railway revenue for the year?

Nikhil Kumar — Managing Director

Sorry, what be?

Deepesh Agarwal — UTI AMC — Analyst

Our traction motor revenue for the year?

Nikhil Kumar — Managing Director

It would be INR130 crores.

Deepesh Agarwal — UTI AMC — Analyst

INR130 crores. Okay, okay. And the other question is actually in one of you mentioned that you may look to expand the capacity, but if my understanding is correct, your revenue potential from existing asset to the extent of INR1,500-odd?

Nikhil Kumar — Managing Director

I think it will be around 1,300 crore, INR1,400 crores. And those will depend on the mix and where those products are — what kind of products we’re getting. So we’re going to grow at this rate, as I just mentioned that we have to set aside the market money for new plant and we have to think about the new plant and a faster rate to what we’ve thinking earlier. So that’s the thing that is just thinking at this point of time that things are going at this way, then we will put the new plant earlier.

Deepesh Agarwal — UTI AMC — Analyst

Okay. And any thoughts if we go for an expansion, what would be the kind of parse — would it be greenfield, brownfield and what will be our world investment in time line?

Nikhil Kumar — Managing Director

It will be around INR150 crores.

Deepesh Agarwal — UTI AMC — Analyst

Okay. Okay. The last question is on the margin. There is a sharp improvement in the margin in line or guidance you — what is the trajectory you pursue going ahead on the margin trend?

Nikhil Kumar — Managing Director

So we will see the margins improving incrementally as we improve the capacity utilization. When we see — when we have the put the first plant, the margins would call back a little bit maybe to 16% level when we — in those first years of putting the new plant and then one to two new plant model will go back to 17% 18% level would not be expecting. So I think the margins will be in the range, you can see 16.5% to 17.5% level EBITDA margin.

Deepesh Agarwal — UTI AMC — Analyst

Sure. Sure. Thank you and all the best.

Operator

We have our next question from the line of Apurva from Phillip Capital. Please go ahead.

Unidentified Participant — — Analyst

Yes. Sir, thank you very much for the opportunity. Sir, firstly, on the clarification, so is it possible for you to bifurcate manufacturing is to generator in the motor segments?

Nikhil Kumar — Managing Director

Yes, that is possible.

Unidentified Participant — — Analyst

So can you help me with the number for the current year and for next year when we are guiding for maybe INR970 crores to INR1,050 crores of manufacturing revenue.

Nikhil Kumar — Managing Director

We don;t do that when we — we don’t want to — there’s a lot of variability if this takes place during the year. And we need to have the flexibility of using some business which may have come, does not come, something else comes and takes its place. So, we prefer to keep the flexibility within the management and reported manufacturing business as a loss, of course, we can give some general guidance numbers next quarter. But at this point of time, I am hesitant to put a number out right now.

Unidentified Participant — — Analyst

Sir, I do understand, but the point here is still like the motor is a relatively new business for us compared to generators. And as of now, what we can understand is currently, Traxon motor is the major revenue contributor when it comes to the motor segment. So, what is first the synchronous and index and what could be your growth guidance? So what factors you are building in for 20%, 25% growth rate. So that would just — we want to understand.

Nikhil Kumar — Managing Director

Yes, that’s a good point. I totally understand. I will put the numbers — continue the numbers out next quarter. But as I already mentioned to an earlier question, we have around INR100 crores of pending orders for the motor side. So that should give a reasonable indication of which way they’re heading.

Unidentified Participant — — Analyst

Great, sir. So, we’ll look out for that number in next quarter. And sir, my next question is on the hydro, it’s a clarification. Sir, I think in your opening remarks, you said your hydro would grow maybe 60% to 70% in the current year. So, is that my understanding right?

Nikhil Kumar — Managing Director

Yes, that is right.

Unidentified Participant — — Analyst

So sir, what was that number in FY 2023? Because historically, it has — the number is 20% to 25% of our total revenue comes from the hydro. So, you are seeing 60% to 70% growth on that basis, correct?

Nikhil Kumar — Managing Director

Yes, we don’t give the segment-wise breakup to that extent.

Unidentified Participant — — Analyst

Sir, we do give in our annual report, so we don’t have the FY 2023 annual report. But if you look at historical numbers, — so maybe 20, 25 percentage of our revenue comes from hydro, that what we can understand from the annual report. That’s why I’m just clarifying.

Nikhil Kumar — Managing Director

So, you want me to give an absolute number?

Unidentified Participant — — Analyst

Yes, sir, if it is possible for FY 2023?

Nikhil Kumar — Managing Director

I don’t have the number with me right now, but it is — okay. So it will be some in the region of INR170 crores, INR180 crores hydro.

Unidentified Participant — — Analyst

Got it, sir. Thank you very much, and all the best Thank you.

Operator

Thank you. We have our next question from the line of Alisha Mahawla from Envision Capital. Please go ahead.

Alisha Mahawla — Envision Capital — Analyst

Hi, sir. Good afternoon. Thank you for the opportunity. Firstly, just a clarification, the guidance that we give on manufacturing or manufacturing revenue for INR24,000 crores, they’re saying this is generators plus motor?

Nikhil Kumar — Managing Director

Yes, this is total, Alisha.

Alisha Mahawla — Envision Capital — Analyst

Sure understood. On the margin side, last two quarters, gross margins have been slightly higher in the 30%, 31% that you already said was sustainable relative to 33% plus. Do you see any moderation on the gross margin side going forward?

Nikhil Kumar — Managing Director

I think there won’t be a moderation. I think — so I think if you — so quarter-to-quarter, it could be — it could vary a little bit, but we — you can see it’s definitely going to be 32%, and the management is trying to do better than that.

Alisha Mahawla — Envision Capital — Analyst

Okay. So the 32% we did for the full year looks sustainable and operating usage will help us in under understood. Okay. And just one last question, while I hope we’re not exclusively calling out anything on the motor side, but even the margins would be in line support the competition is slightly better?

Nikhil Kumar — Managing Director

Overall, yes.

Alisha Mahawla — Envision Capital — Analyst

In line with other company. On the 17% — in the 17% EBITDA margin that we’re talking about is including other vehicle.

Unidentified Speaker —

Including other operational–

Nikhil Kumar — Managing Director

Operational income. We’re not talking about the treasury income.

Alisha Mahawla — Envision Capital — Analyst

Okay. Got it. Yes, great. Thank you.

Operator

Thank you.

Nikhil Kumar — Managing Director

So, the operational terms, what we have included the major factor would be the foreign exchange gain, which has come as a result of our forward-looking decisions that we took last year.

And if you remember, last year, the euro was had gone as low as INR77, INR78 to the rupee. And we had forward bookings done in the original at INR90. So we — doing the time when the euro was very weak. We had significant foreign exchange gains. This year, it will be different because the euro is already around INR90, and we are forward bookings are also around the same level. So this year, what’s going to happen is that it will be reflected in the sales itself because it’ll be involved in at the euro at INR89 INR90 and not at INR78 as what we did last year. So the income will show up on the invoice value. And we won’t have a huge foreign exchange gains in this current year as we had in the previous year. That’s a little bit long explanation, but I think it’s necessary to put this out.

Operator

Thank you. We have a next question from the line of Shyam Maheshwari from Aditya Birla Mutual Fund. Please go ahead.

Shyam Maheshwari — Aditya Birla Mutual Fund — Analyst

Yes. Thank you for the opportunity and congratulations to team on a good set of numbers. I have one question, and it’s mostly on understanding the business. So when we sell our generators or the motors that we are trying to sell down, do we sell them directly to the OEMs? Or do we also have some sales coming from distributors or channel partner?

Operator

Ladies and gentlemen, we’ve lost the connection from Mr. Nikhil Kumar we request you to connected please. Mr. Nikhil Kumar. Please go ahead, sir.

Nikhil Kumar — Managing Director

Yes, I think I got disconnected on that on the call.

Shyam Maheshwari — Aditya Birla Mutual Fund — Analyst

Should I repeat my question?

Operator

Yes, please?

Nikhil Kumar — Managing Director

Yes, please

Shyam Maheshwari — Aditya Birla Mutual Fund — Analyst

Yes, sir. So I just wanted to understand about our sales strategy. So do we directly sell our products to the OEMs? Or do we also have sales coming from the channel partners or distributors?

Nikhil Kumar — Managing Director

So our sales are — when we sell our generators in the market it ends up being used in a large industrial complex or ITC let’s say, that it is an international customer who is putting up a 15-megawatt power one plant. So — the sales will take place, the customer will buy a steam turbine generator segment. So we will specify which steams turbine which generator he wants. The normal engineering consultants involved, and it also normally a EPC contractor involved. They also have to be convinced that the generator make, what they are offering to the customer is acceptable to them.

So for that, as a generator manufacturer, we have to get the OEMs approval, EPC contractor approvals and consultant approval and also end user approvals. So these are the multiple levels of approval. And this is our sales process, where we have to go out there in the market and we get these approvals before we can win a project. We have to be on the approval list. And that is the fundamental part of our sales strategy approval from the goods internationally. Domestically, we have a very high market share, and we have a huge installed base. So we don’t have to try to be on an good vendor list. We grow when the market grows.

Shyam Maheshwari — Aditya Birla Mutual Fund — Analyst

Understood, sir. Sir, just a follow-up on that. So as you mentioned, we are trying to expand into other geographies, particularly Europe in terms of hydro turbines. So are you facing any stigma being a local Indian manufacturer there? Or are there any challenges that you see in a forthcoming in the future when you’re trying to increase our base there?

Nikhil Kumar — Managing Director

I think earlier on this call, I have mentioned that we have been working on the international market for the past 10 years or 12 years. And yes, we have faced the challenges of establishing an Indian made generators in the international market. We have work to overcome that challenge, and we have installed more than 700 machines in the order price now, for example. There’s still — many parts of the market there’s still, they still don’t automatically accept the Indian made generator, and we still have to work towards getting acceptance in many, many places.

On the other hand, we are also expected in many places. So we do — we’ve seen our business also improved quite a lot in areas that we are, because we have been approved in many, many areas. It’s if we still have a low market share, we have a long way to go. We’re constantly working on improving our business internationally. So that’s where we are today.

Shyam Maheshwari — Aditya Birla Mutual Fund — Analyst

Understood, sir. Thanks a lot for answering my question.

Operator

Thank you. We have a next question from the line of V.P. Rajesh from Banyan Capital Advisors. Please go ahead.

V.P. Rajesh — Banyan Capital Advisors — Analyst

Congratulations Nikhil. This is a fantastic year. My first question was regarding Turkey.

Operator

Mr. Rajesh, can you use your handset mode, please?

V.P. Rajesh — Banyan Capital Advisors — Analyst

Is it better now?

Operator

Yes.

Nikhil Kumar — Managing Director

Yeah, yeah. But Rajesh I can hear you, go ahead.

V.P. Rajesh — Banyan Capital Advisors — Analyst

Okay, great. So my first question, Nikhil, was regarding Turkey. In your guidance of this INR1,000-plus crores in manufacturing, how much are you assuming — the business will come back?

Nikhil Kumar — Managing Director

In the Turkey it will be negligible this year.

V.P. Rajesh — Banyan Capital Advisors — Analyst

Okay. So that’s more like.

Nikhil Kumar — Managing Director

Around, it could be around INR10 crores.

V.P. Rajesh — Banyan Capital Advisors — Analyst

Okay. And then the second question is regarding the projects business. So I mean, it does add to our revenues, but on the EBITDA side, its not really performing with the expectation. So how do you think about that?

Nikhil Kumar — Managing Director

Projects business, if we talk about the pure project business, we do about INR5, INR6 crores per year, which is consisting of spare parts, some overhauling and we’re just taking care of the existing supply that we’ve made in the past 20 years, we’re not doing any new projects. And we have a few people who run this business and it’s profitable and we will continue to do that.

V.P. Rajesh — Banyan Capital Advisors — Analyst

All right. Thank you. Other questions have been answered, so thanks.

Operator

Thank you. We have our next question from the line of Riya Mehta from Aequitas. Please go ahead.

Riya Mehta — Aequitas — Analyst

Hello. Congratulations on great set of numbers. My first question is in regard to the railway business. So currently, I think INR805 crore order book we have, so I just want to the breakup of the business that are in partnership with Alstom and independent railway business so far?

Nikhil Kumar — Managing Director

No. So the railway business is divided into two parts.. One is the direct business that we have, okay? One is we already have an existing order INR800-plus crores of Aston over the next five years. That’s an existing contract which will run for the next five years.

Then we are trying to get approval with the Indian Railway to supply motors to them for a locomotors, the Indian Railway themselves produce that we are in the approval stage and asset we will need the first tier approval. Let me take a little bit more time, and then we would start directly supplying to the Indian Railway. The third part of it is new projects where the Indian Railways are putting our tenders for somebody else to make the locomotors like 9,000 horse power or 12,000 horse power locomotors what is where the traction motor may or may not be outsourced, like in the case of payments to 9,000. It’s not sure what they want to do, but the meat it themselves. So these are the three major parts of the market as far as they’re concerned. And what — so we have what we have right now, and then we are working aggressively on what we can control, which is a business that the Indian Railway. And the third part of it, the new projects, we don’t know what’s going to happen out of our control is our partner customer wins, then we have a good chance of winning some of that business. They don’t win, then we don’t get it. So that’s how it’s going to play out.

Riya Mehta — Aequitas — Analyst

Okay. So majorly for right, not on Q3 FY 2024 till we don’t get the approvals in place. It will be more driven by the existing order book, which we have

Nikhil Kumar — Managing Director

This year only is mainly driven by the existing onto for sure.

Riya Mehta — Aequitas — Analyst

Okay. Got it. My second question is in regards to what the — so basically, for the NW you said that we have around INR900 crores to INR1,000 crores of order and profit is coming or so of which segments do you see that coming from like a more broader definition apart from the manufacturing?

Nikhil Kumar — Managing Director

Segment-wise pickup, we don’t give.

Riya Mehta — Aequitas — Analyst

Okay. If you could just give me directionally also the visibility and L1s how is it — like how much motors are generated and how Ecoport?

Nikhil Kumar — Managing Director

I will give the pickup of motor next quarter, as I committed earlier in the call. It’s important that I understood that we need to see where the growth is coming from. I will give the numbers next quarter. But said that the number is right now somewhere around INR100 crores of business pending order for motors. But I can’t give the expected order inflow breakup segment wise. I can’t do that.

Riya Mehta — Aequitas — Analyst

Okay.

Nikhil Kumar — Managing Director

It’s giving away too much of competitor information also.

Riya Mehta — Aequitas — Analyst

Okay. Got it. Got it. And in terms of cash flow utilization, our operating cash flow has increased almost INR88 crores this year and saying the INR25 crores of capex we mark for automation, etc. So what would be doing with the cash flow and what capital allocation strategies are we planning to go for?

Nikhil Kumar — Managing Director

I mentioned that the — we will certify money for a new plant. And I’ve mentioned that things are going and things are going at the space, then the third plant is going to come earlier than what I expected. We wait a couple of quarters, but the setting is has the money for that. And things are going to continue to run at this stage, like 30%, 40%, then of course, we need to have a new plant much earlier than what much earlier than what I’ve been talking about in the past over one and 1.5 years. We just want to be ready for it. And we want to be able to respond immediately. And so, they will not let the situation you running sort of capacity. So we’re preparing ourselves with the eventuality that we have to work much faster on this compared to what we were thinking a little bit earlier.

Riya Mehta — Aequitas — Analyst

And sir setting of the new plan, we would take how much time? And by when do we expect?

Vishwanath Hangari — Head, Engineering

It will take nine months, but nine months to a year, and I mentioned it could be INR150 crores investments.

Riya Mehta — Aequitas — Analyst

Right. And are we were expecting this to come or start in FY 2025? Correct me if I’m wrong.

Vishwanath Hangari — Head, Engineering

Sorry, can you repeat that question?

Riya Mehta — Aequitas — Analyst

Sir, earlier — please correct me, if I’m wrong, earlier, we were planning that we would set up a new factory by FY 2025 it will start by then. So let me

Vishwanath Hangari — Head, Engineering

Yeah, I’m not getting a date when they are going to start right now also. I’m just saying that, we’re going to satisfy the money for an eventuality that we have to put a factory earlier that what I expected. That’s all I’m saying, at this point of time. And the question was about capital allocation.

Riya Mehta — Aequitas — Analyst

Right.

Vishwanath Hangari — Head, Engineering

And the answer is that money is going to be satisfied for setting on the new plants. So again, I am not a not putting the date for it right now.

Riya Mehta — Aequitas — Analyst

And in terms we — the National Election is coming up next year, generally, we see that there is a lag of activities happening around that period. Do you foresee something like that happening next year?

Vishwanath Hangari — Head, Engineering

I don’t think that the story capex story is going to be derailed. I don’t think so, but I mean the political situation in the country is important to have a long-term — Sonia just early its been talking about. If we talk about what are the factors I can derail our story. Of course, the political side of it can derail in the story. So it’s important that we — for the country, I’m saying that the story continues.

Riya Mehta — Aequitas — Analyst

Okay. Thank you. That’s it for me sir.

Vishwanath Hangari — Head, Engineering

Yeah.

Operator

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand over the call to Mr. Nikhil Kumar, for closing comments, over to you, sir.

Nikhil Kumar — Managing Director

Yeah. Thank you very much for a very engaging commentary and discussions today. I look forward to being in touch with all of you and seeing you all in one investor conference or the other or some time in the near future. Thank you very much.

Operator

[Operator Closing Remarks]