Triveni Engineering & Industries Limited (NSE: TRIVENI) Q3 2025 Earnings Call dated Feb. 05, 2025
Corporate Participants:
Tarun Sawhney — Vice Chairman and Managing Director
Sameer Sinha — Chief Executive Officer, Sugar Business Group
Analysts:
Rishab Barar — Senior Consultant
Sudarshan Padmanabhan — Analyst
Sanjay Manyal — Analyst
Shailesh Kanani — Analyst
Bharat Shah — Analyst
Somnath Saha — Analyst
Resham Jain — Analyst
Maulik Chaudhari — Analyst
Udit Gupta — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Triveni Engineering and Industries Limited Q3 and 9M FY ’25 Earnings Conference Call.
As a reminder, all participant lines will remain in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchstone telephone. 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, sir.
Rishab Barar — Senior Consultant
Thank you. Good day, everyone, and a warm welcome to all of you participating in the Triveni Engineering and Industries Q3 and nine months FY ’25 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 of 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 of this effect has been included in the invite which was shared with everyone earlier. I would also like 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.
Tarun Sawhney — Vice Chairman and Managing Director
Thank you, Rishab. Good afternoon, ladies and gentlemen, and welcome to the Q3 nine months fiscal ’25 earnings conference call for Triveni Engineering and Industries Limited.
The consolidated financial numbers for the nine-month period, the revenues from operations stood at INR4,060 crores, an increase of 3.6% and the PAT stood at INR51.1 crores. Looking at the key highlights, the overall profitability of the company during the nine months ended December 31, ’24 was subdued, and this was mainly due to the lower margins in the sugar and alcohol businesses. In our sugar business, while sugar prices in Q3 fiscal ’25 were subdued, they have firmed up substantially recently based on lower estimates of net production of approximately 27 million tons of sugar in sugar season ’24, ’25 and the timely announcement of exports. A trend of initial lower recoveries in the state of Uttar Pradesh has been observed for the sugar season ’24-’25, but the crop estimates in Western Uttar Pradesh remain unchanged from our previous call.
There have been several positive policy measures that have been announced. Firstly, and in no order of sequencing, the government has announced an export of 1 million tons of sugar for sugar season 24/25,, including our subsidiary, has received an allocation just shy of 32,000 tons for sugar exports. The Department of Food and Public Distribution has issued directions for-sale of rice in the open-market through the open-market sales scheme for ’24-’25 where the reserve price of rice sold to distilleries for ethanol production has been fixed at INR2,250 per quintal, therefore improving the availability of feedstocks at slightly better prices. The Cabinet Committee of Economic Affairs has approved a revision of ethanol procurement price for oil marketing companies derived from sea-heavy molasses for the ethanol supplier of ’24-’25 from 56.28 rupees to INR57.97 rupees per liter.
Turning to our engineering business, the order book for our power transmission and water business have registered a strong growth in Q3 fiscal ’25 and of course, the nine months of fiscal ’25. The combined closing order book stands at INR2,356 crores for the engineering business, an increase of a handsome 52.5% on a year-on basis, signifying an all-time high for the company.
The Board meeting of the Directors concluded yesterday had an important announcement of an incremental capex of INR60 crores for the enhancement of capacity in the power transmission business. This would take the gears capacity to INR700 crores by September ’26. The existing capacity just for abundant clarification as of today is approximately INR400 odd crores and the project for enhancement of the gears capacity is for INR500 crores and it’s underway and should be completed in the next few months.
I also wanted to provide an update on the scheme. As you’re all aware, this is in conjunction with value unlocking that the Board of Directors has felt very important and this is also the first investor call following our announcement on the 10th of December ’24 where the Board approved this composite scheme of arrangement proposing firstly, an amalgamation of Sir Shadi Lal Enterprises with Triveni Engineering and Industries Limited. SSEL, Sir Shadi Lal is a subsidiary of Triveni Engineering, where Triveni owns a 61.77% stake. And second, the transfer and vesting of the Power Transmission Business, PTB, undertaking of Triveni Engineering to Triveni Power Transmission Limited, TPTL of Triveni Power Transmission Limited is a wholly-owned subsidiary of TEIL presently.
Looking at the balance sheet, on a consolidated basis, the net-debt after considering surplus funds is INR960 crores as on December 30, ’24, and it includes INR126 crores pertaining to the subsidiary Lal. The overall cost of funds stands at 5.6% during Q3 fiscal ’25, which is marginally higher than 5.3% in the corresponding period.
I’d now like to turn for a segment-wise business review. And starting firstly with the sugar business, in the ongoing season 24/25, the company has crushed 3.4 million tons of sugar cane until December 31st, registering a growth of approximately 3%. This includes the crush for Sir Shadi Lal Enterprises as well. And by yesterday, as of yesterday, the crush of the company is by and large the same as the crush as it was the last sugar season, which is very, very encouraging. And the future actually looks quite promising as far as the overall crush of the company. And I’ll just spend a minute on that.
In our last conversation, we had spoken about our estimates being slightly higher for this year. I’m happy to say that on a consolidated basis, we expect our total sugar crush to be higher by approximately 15%. Of course, this includes the acquisition of. But even on a standalone basis, it’s a very healthy growth in terms of the overall cane crush for the company. And we hope to improve our performance as we proceed through the course of this season. It’s important to highlight that sugar season 24/25 had a delayed start relative to sugar season ’23-’24 for the company and therefore, the crush and date numbers are not quite the same. The initial recovery tends for the ongoing sugar season are on the lower side due to inclement weather, the inherent degeneration of the 238 variety of sugar cane. However, we are intensifying our efforts to reduce the proportion of sugar cane to variety to 38 from the 50%, 55 odd percent to approximately 30%, perhaps 35% for the next season. [Technical Issues]
Operator
Ladies and gentlemen, we have lost the line of the management. Please stay connected while I rejoin the management. Ladies and gentlemen, we have the management connected. Sir, please proceed.
Tarun Sawhney — Vice Chairman and Managing Director
My apologies, ladies and gentlemen, for that interruption, the call has suddenly dropped. I’m going to back-track a couple of minutes and start-off with the crush estimates and you forgive it, the repetition, if any. We anticipate a 15% increase in cane crush this year on a consolidated basis. However, even on a standalone basis, as I had mentioned, I stand by what we had said in the previous quarter that we do expect an increase in crush. One must remember that sugar season 24/25 had a delayed start when compared to the previous sugar season for the company and therefore, the crush and date numbers are not entirely comparable. The initial recovery trends for this sugar season are on the lower side due to inclement weather and the degeneration of the 238 variety.
One must also remember that when you start the season you crush, the ratoon crop, which is the plant crop of the previous season, which was very seriously impacted in a few factories by disease. However, we have intensified our FX and plan to reduce the quantum of 238 from about 50% 55% this year to approximately 30-odd percent between 30% and 35% in the next year. I would also like to point out that we have a negative 0.6% difference in recovery as of today. However, that difference is narrowing with the arrival of healthy plant cane across all the sugar factories and we certainly intend on catching-up as much as possible. I don’t think a complete catch-up would be possible. However, there will be a positive strides made to catch-up the difference that exists today.
So, sugar revenues for the quarter declined by 9.5% due to lower sugar sales volumes and lower realization price in Q3 fiscal ’25. The sentiment — the segment margins were lower due to lower contribution margins as subdued sugar realizations could not fully offset the higher-cost of sugar produced in the preceding season — season of ’23-’24. The lower initial recoveries in the ongoing season of ’24-’25 resulted in an inventory write-down in view of the higher production cost. It is expected to moderate, of course, in the remaining period of the season. A higher charge of off-season expense in the nine months fiscal ’25 by INR20.5 crores and this was due to the early closure in the previous season.
The results of the subsidiaries of were impacted due to lower production in sugar season and extensive repairs that were carried out by SSCL during the previous — during the last sugar offseason. However, I’m delighted to inform everybody that the plant is running, sugar factory is running at full capacity, including in the quarter under review. Thank you. The sugar inventory as of the 31st of December ’24 was INR29.46 lakh quintals valued at INR38.8 rupees per kilo. The current realization price ex-factory for refined sugar with is approximately 41.8 rupees per kilo. And for sulcitation sugar, it’s approximately INR41 per kilo. And I’d like to just point out the change that has happened and I talked about some of the government measures that have been very important, including a lowering of the estimated sugar in the country.
So if you looked at the month of December, the realization price for our blend — our blended realization, frankly speaking, was INR38 — just a shade above INR38. For January, our realization price was just a shade under INR40 a kilo and today we’re looking already at about 50% higher than those levels on a blended basis. So a very nice trend in sugar prices and given the fact that the total quantum of sugar being produced this year, coupled with the sugar exports will lead to a lower closing stock of inventory. And therefore, I think that we are now — we’ve made a step jump-in terms of our average sugar price and the expectation is certainly higher and frankly speaking some of our estimates as well, which is very, very positive.
Looking at the more detailed industry scenario, I’ve talked about the million tons of exports that equates to 31,880 tonnes of sugar export for Engineering engineering and as a whole, and with the balance sheet improving because of less net sugar in the country, we anticipate a closing stock just above 6 million metric tons by 30th of September of this calendar year. This is after considering the diversion of 4 million metric tons into ethanol. And I think that, of course, will lend itself quite well to maintaining sugar prices and it’s also sufficient sugar. I should point out that any number above 5.5 million, odd million metric tons for us does not cause any cause of concern. So we have a good million metric tons in-hand within the country before we — before any alarm belts sound.
On a global basis, the international markets have been reasonably volatile and there is a deficit that is assumed for the sugar season ’24, ’25. However, the deficit has decreased by about 0.5 million metric tons since our last conversation. The lower production estimates in key export countries is to blame where think which includes Brazil and Thailand. International sugar prices recently hit a low of $0.17 per pound-for raw for raw sugar and London number five prices dropped to $466 per metric ton on the 21st of January. However, they have price they have increased since then. The expectation of a site’s global supply has led to this rally which went up to almost about $520 — almost $520 per metric ton for whites.
Turning to the alcohol business, the revenues grew by 4.5% in Q3 fiscal ’25 and just 87.9% in the nine-month period. However, realizations driven — this is mainly due to improved realizations driven by higher proportion of grain operations. However, the profitability of the alcohol business was lower. A lower sales volume on the high-margin ethanol produced from molasses in Q3 and due to the shortage of molasses-based feedstocks resulting from a policy decision of GOY restricting our sugar to B-heavy molasses in the previous sugar year are the primary causes for this event. The alcohol from molasses-based feedstocks formed approximately 48% for Q3 and for the quarter under review and approximately 49% for the nine months on previous.
Apart from lower contribution, it has also led to a non-recovery of some fixed expenses during this period as remained closed due to shortage of feedstocks. The high-margin FCI risk, as you will remember, was substituted by maize in July 2023, consequent to a policy decision and therefore, it was substituted with a higher proportion of low-margin operations in the overall green and therefore the and therefore the overall — impacting the overall ethanol operations. The consolidated loss of INR2.8 crores for the quarter pertains to the distillery and of our subsidiary, Sir Shadi Lal.
For the ethanol supplier 24/25, the oil marketing companies have executed contracts for approximately 930 crore liters compared to the supplied quantities of 672 crore liters in the previous ethanol supplier, representing a massive 38% year-on-year increase. The proportion of ethanol from grain-based feedstocks in the current tender is 64% of which may is 52%, which is substantial, frankly speaking, and points towards a interesting and changing dynamic in the ethanol blending program as we see it. We achieved lending percentage for ’24-’25 as of the 20 — as of 31st of December stood at 16.5%, while the blending percentage for the month of December was much higher, it was 18.2% and I think there are parts of the country where we will be touching 20% trending in this supplier. Uttar Pradesh could be a clear example of such a state.
Turning to our engineering businesses, I will very quickly cover both the power transmission business, the revenue growth in Q3 was a little bit lower-than-expected, about 3.3%. And this was due to two reasons. I’ve spoken and written about the shifting of certain large orders into this Q4, but also because we had one of our important profile grinding machines, which was under repair. So we have three very sophisticated profile grinding machines and one of them, the oldest one was under repair. And as a result — and this is a planned repair and as a result, we not to compromise on quality, we did push-out some of the deliveries. So everything is pretty much on-track. The revenue growth for the nine months was higher, of course, at 13%.
During Q3 fiscal ’25, the defense business received a second order for 42 propulsion gearboxes of any indigenous Technology for fast patrol vessels from Docs and Limited NDL. The order booking grew at 23% during the quarter and with perhaps a little bit of slowdown in the domestic market, but a huge increase as far as export markets are concerned and a lot of activity happening in export markets. The order book for nine months grew at 32.9%, almost 33% to INR320 crores, driven by both product and aftermarket segments. But overall, the business has witnessed strong growth in exports, driven by increased engagement with customers and new qualifications orders that we’ve received across product lines. The outstanding order book reached an all-time high of INR377 crores on the 31st of December, which included long-duration orders of about INR136 crores.
The water business declined due to a delay in receipt of new orders and some so execution in certain projects. However, the profitability of the water business improved in Q3 and nine months fiscal ’25 by 67% and 25% respectively, due to the reversal of certain provisions that have been made in earlier years upon receipt of favorable awards. The order booking grew substantially both in Q3 and nine months of the previous corresponding period and as of the 31st of December ’24, the order booking for the water business stood at a handsome INR1979 crores, which included INR1,122 crores towards O&M contracts, which are executed over a slightly longer period of time.
If I just spend briefly just a few minutes on the outlook for our various businesses. As far as sugar is concerned, the industry and we are keenly awaiting a revision in the MSP, although the MSP conversation is for an increase in the INR30 brackets and frankly speaking, if they’re selling sugar at maybe INR42 for refined sugar today and the future for this year looks — looks reasonably buoyant, but we don’t see any, any big declines to these prices going-forward as we get into the larger consumption months. So an increase in MSP while it’s welcome, I think we would certainly the industry would like to see a higher increase in MSP and to be considered by the central government. This is particularly because over the last few years and since 2019, both FRP and SAP have risen during this period.
While we welcome the price increase for ethanol derived from sea-heavy molasses, there is much more that needs to be done in terms of ethanol price from potentially be heavy as well as from grain operations and in order to make grain operations viable for existing for today and for the future and we are hopeful that the MOPNG and central government will look upon this and suitable especially for ethanol derived from grain.
Our power transmission business outlook continues and unabated and this is due to major investments in infrastructure. Domestically, we’re seeing investments in steel, cement, oil and gas, other key process industries, which are likely to fuel growth for us as well. In addition to the overall economic growth, there has been market-share gains and venturing into new product applications. And this will be a key driver for growth for the future for the PTB business. So the international markets, as I had mentioned earlier, continue to offer high-potential and we are just scratching the surface as far as the aftermarket business is concerned for global markets. And so that will be an area of high profitability and growth and substantial growth for the future.
The Government of India’s continuing trust on, Bharat and Make in India opens up plethora of opportunities for indigenization and we’re certainly going to be a beneficiary, not just for the gearboxes, but also for defense equipment where the company has expanded sufficiently. The business expects increased order booking from key segments that we’re in, which we put into gas turbines, propulsion gear gearboxes, shafting, application, special application pumps, et-cetera where we have received complete qualifications and there are RFPs that have been already placed in setting up of the dedicated multimodal facility for our defense products will also help the business in gaining key confidence with customers and expand our overall service offering.
And lastly, as far as our water business is concerned, there are new opportunities emerging in recycle and reuse and zero liquid discharge businesses on an EPC as well as on a HAM model basis. And whatever industries are available as offtakers for buying sewage. This model is expected to emerge significantly and prominently in the thermal power sector. The company is also evaluating various international opportunities and intends to participate in several tenders in-the-water and wastewater treatment sector, mostly wherever we possess our pre-qualifications and preferably on our own. And of course, this only when funding is assured for multilateral and refugees agencies.
So, thank you very much, ladies and gentlemen. I’d like to now open on the floor for questions.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question comes from the line of Sudarshan Padmanabhan from JM Financial. Please go-ahead.
Sudarshan Padmanabhan
Yeah. Sir, my question is to understand a little bit more on the ethanol spreads. I mean the distillery business has seen a fair amount of profitability getting impacted. Now that the prices of FCI procurement of rice has been announced and they have also announced the ethanol. Two things. One is, do you think that the prices are you good enough for you to see better spreads?
And number two, if you can give some color on the ethanol volumes going-forward, I mean, in terms of whether the 20% blending is going to happen, how it translates into better volume? And also in terms of our strategy, you know how we are planning to position ourselves in terms of whether they are going to use more of AD or since we are multimodal manufacturing, whether it makes more sense to move-out of just the manufacturer?
Tarun Sawhney
Okay. I think you’ve asked one question in about six parts. So I’m going to try and offer you the best possible answer. First and foremost, I think the past is not really a reflection of what one anticipates for the future. So yes, we’ve seen an increase in ethanol from sea heavy molasses. The company, almost all of our facilities are running on sea heavy as of today, save one. And so we’re going to see, of course, expanded margins for ethanol manufactured from sea heavy, not just because it’s sea heavy, but also because there has been an increase in price. So there is a benefit on both fronts.
Next, as far as maize is concerned, yes, there is a quantity of maize that will be used by, not just us, but also for supply by others, I anticipate that with the next crop a few months away and that crop anticipated to be a rather large crop, we will see better and much more attractive prices for meals as well. That’s one. The second thing is, of course, the availability of FCI rice at a slightly higher-rate will also put pressure on maze pricing. So I think there’s a dual impact as far as-is concerned.
Now the FCI tender, as you are well aware, sorry, not the FCI tender, the ethanol tender, as you’re well aware for ethanol derived manufactured from FCI rise was closed today. We, of course also participated. So you’re going to see some substitution, frankly speaking, happening with ethanol made from FCI rice at a slightly higher price point from where we were — where we were previously. And at that price point, you are making more margin than you are with grain with maze at this at this particular point. So I think that from our perspective, certainly, you will see a broadening of margins as we go-forward, okay? It’s not like it can’t be instantly today because we have some grade that is still coming in that has been procured. But going-forward, I certainly think over the next few quarters, you will see an expansion in margins.
Now turning to the industry perspective, because you asked a very important question, but listen with the — the industry anticipated a much higher increase after two years in ethanol from the sugar stream, both for juice for B-heavy and for C molasses and we also anticipated an increase in ethanol from grain of which only one of these sub-items has happened, the increase of C-heavy and that is a — that is negative as far as the industry is concerned. Yes, I am really concerned with the impact that it will have on this year’s FML lending program. The industry is very nimble, a lot of capacity is already in-place. And so with minor rectifications, the government can then provide further impetus to the industry. But given where we are today, I fear that some of the standalone manufacturers on grain will be facing a very, very acute pinch given where prices are and the increase in other costs for manufacturing of ethanol. I hope that answers your question.
Sudarshan Padmanabhan
Yes, sir. It was quite more comprehensive. Sir, my second question before I join back the queue is on the sugar environment. I think after the government…
Tarun Sawhney
I’m so sorry, you’re — I’m sorry you’re a little unclear. Can you please repeat your question?
Sudarshan Padmanabhan
Yeah. Sir, mine is on the sugar outlook. Can you hear me now?
Tarun Sawhney
Yes, I can. Please go-ahead. On the sugar outlook…
Sudarshan Padmanabhan
Yeah. On the sugar outlook, after I think the government announced the export, you have seen a spike in the prices. And in the context of two things, one is with the exports happening and also the demand and supply being more favorable to us, the prices have increased. And second is in the context of exports itself giving better spreads, how do you see the next the coming season as far as sugar is concerned, also taking into concern that last year we had the red drop? And when do you expect the MSP to come to because SAP has happened, but MSP is not being touched by the again?
Tarun Sawhney
Okay. Another excellent question in six or seven parts. So as far as MSP is concerned, I think that your guess is as good as mine. We at the industry have — and at have been writing in letters. I know that UPSMA, ISMA, all agencies in the sugar sector have been writing to DSPD, to the central government requesting for an increase in MSP. I was under the impression that during the month of January itself, this would be taken-up. However, as we all know, we’re in the middle of February and with the start of February and it hasn’t happened thus far.
I was mentioning this in my opening comments, even if an increase in MSP happens, while it is very, very welcome, unless it’s a substantial increase in MSP, the impact on the market is going to be only mobile and the prices will be impacted by other — by other events and not just because of MSP, which does offer a lot of confidence. But I think the numbers that were being considered of INR36, INR37, INR37.50, something like that is a very maximum. Those are still much lower than what the prevailing prices are at this given point in time.
And now turning to the question of sugar production, which you talked about. I had mentioned that despite having a late start of the sugar season, as far as crush is concerned, as of yesterday, we’re on park with our crush in the previous year. In addition, the overall crush of the company is going to be higher by 15% on a consolidated basis and even on a standalone basis, which is quite substantial year-on-year growth and very much in-line with what I had mentioned earlier. So we’re quite on-track as far as that is concerned.
However, the blip is recovery. So recovery started-off very poor, I have to say. However, it has caught up quite substantially. You can see in the gap year-on-year at this point in time is about 0.6% and lowering. Will we be able to cover-up completely? No, we will not. But as the healthy plant came comes in at all the eight factories, the catch-up will certainly happen from this gap. So those are very, very positive trends. Now, where does that leave us? It leaves us with more sugar as a company. For a nation as a whole, we expect about 27 million metric tons of production net and we expect the closing stock to be just above 6 million metric tons, which is also absolutely fine as far as the nation is concerned.
And all of that, coupled with the 1 million tonnes of exports will lead to attractive pricing. It already has from the month of December, our average price is up by INR2, 5 per kilo. That’s a pretty reasonable and welcome jump. It is a long due jump also, I have to tell you. I think we’ve moved my personal view is to a different plateau. So I don’t see prices coming down very substantially. I don’t — and I think we’re at a new trajectory after two years. Last-time we had this jump was about two years ago and we’re at a new trajectory also because of the balance sheet position across the country. And so as we get into the summer months of high consumption, I think these prices will be, of course, range-bound as they always are, but we’ve moved to a higher — higher range level because of the market fundamentals, right. I hope that answers your question.
Sudarshan Padmanabhan
Sure, sir. Thanks a lot. I’ll join back.
Operator
Thank you. The next question comes from the line of Sanjay Manyal from DAM Capital. Please go-ahead.
Sanjay Manyal
Hi, sir. Just a few questions on recovery part. You said it’s almost 60 basis-point down gross recoveries. Are you — what is the estimated at what end it will settle after the crushing season and the cost of production, which is at 38.8 and I’m assuming here that the entire inventories of the current-season only, but it means by what rupee it can come down, whether it will settle at 36 or 37 means what is your broader estimate?
Tarun Sawhney
So, Sanjay, I — you know that we don’t give advanced estimates and we’re already in the first week of February and there’s a long-tail of this — it’s not even the tail, we’re halfway through the season. There’s a substantial part of the season that is still underway. Plant cane has now started coming in-full force across all the factories and it looks very, very encouraging.
Now what I can share with you is a little bit of the past. So the gap that is 0.6% today or 60 basis-points as you put it was 82 basis-points of about 45 days ago. So that gap has narrowed quite substantially. How much it will narrow in the future? I wouldn’t want to guess. The trends look like the gap will narrow more. I don’t think it will go to zero, as I mentioned during the course of this call. The impact on the cost of production, of course, will be substantial. The cost of production of sugar that is being produced and will be produced will be at much lower rate for a variety of reasons, including the fact that recovery is up.
Sameer Sinha
Yeah, historically, if you look at the trend, you find that the recovery in Q4 onwards is much better than Q3. Obviously, it will help in terms of moderating the cost of production.
Sanjay Manyal
Right. And then sir, what is your — why this recovery is down? Is it still an impact of red rot or can we say the newer variety which we have introduced, those are not as high a recovery as CEO used to do or maybe any other reason?
Tarun Sawhney
Sanjay, the first part of the season is crushing the Ratoon crop. The ratoon crop is planted in the previous year. And last year we have — for the first time, we had a huge impact of red rock at select factories. So the plant came was converted into ratoon came, not all of it, some of it was uprooted, but a large portion of unhealthy crop came in this ratoon. So we started this season with ratoon from the previous year and therefore that it was kind of expected that it would be better. One didn’t have estimates of what the recovery would be, but now, of course, no. So it is a consequence of that.
As far as new varieties are concerned, are they as miraculous as 238? I would say not exactly 100%, but they are very good replacements of 238 offering stability, offering good help to farmers. And at no point will I say that any of the new varieties that we have tried are unsuccessful that’s far.
Sanjay Manyal
Okay. And my last question is on-the-water business. You mentioned that there is a slow execution. So if you can just elaborate on that, which particular order is this where the execution is slow? And is there any working capital blocked also over there?
Tarun Sawhney
So, typically, I don’t give a single orders, but I can — since you’ve asked the question, I will say that we did — we moved a little bit slowly in Bangladesh. As you know that the country has had a little bit of tension there. There is no money blocked, I have to say, because we get paid right upfront. So there is no financial impact, but execution is a little bit slow because of the various conditions in that in that country. The rest of the business is coming along very nicely. There’s good order intake and the future looks very optimistic.
Sanjay Manyal
Sure, sir. I’ll come back-in the queue, sir. Thanks.
Operator
Thank you. The next question comes from the line of Shailesh Kanani from Centrum Broking. Please go-ahead.
Shailesh Kanani
Good afternoon, everyone, and thanks for the opportunity. Sir, just wanted to understand on our standalone crushing numbers. Correct me if I’m wrong, last season, we had around a decline of around 11 odd percent from 9.3 to around 8.3 odd. So this year we would be recouping that lost ground. I know you have given a guidance on the consol basis, but on the standalone, will we recoup that lost ground of around 11% what we had last-time?
Tarun Sawhney
No, we won’t be able to recoup the entire reduction, but we will certainly recoup a portion of that. So I’ve sort of given a guidance with a positive bias, I might add as of now, but a lot — a lot can change between now and then. So we will — we won’t — we won’t gain that entire 11% back, so we’ll gain a portion of it back.
Shailesh Kanani
Fair enough. And sir, you also said that there was some delay in start season. Can you elaborate what are the reasons — what are the reasons we had this delayed start? I understand Maharashtra had state elections and there also been delays any particular reason by?
Tarun Sawhney
You know we always start around about Diwali. If you, if you go back-in number of years, sugar factory starts on either side of Diwali. Diwali is a very important barometer. The weather changes, etc., etc. And Diwali was a little bit later this year. Also, besides the festival, we also monitor the sucrose cane through tests in the field and we were finding lower test results and therefore, we purposely delayed the start of the season until the starting recoveries would be more acceptable. And that of course, was an impact of weather and some rainfall, etc.
Shailesh Kanani
Okay. Understood. Also secondly…
Tarun Sawhney
Lastly, I would also say, and I just mentioned to the previous question and that we start-off with ratoon cane. And ratoon cane was the plant cane of the previous year, which was by and large an unhealthier plant cane. So the quantum of ratoon that had overall was also a little bit low — lower in absolute numbers than we would have ideally liked. When you have that, you don’t want to start your factories very, very early because then you start processing immature plant cane, which is very healthy. So there is an there is a balance that you have to take. So, I suspect that this season will — I mean, this season of course, will end much later than previous season ended. And that’s very positive from a variety of perspectives, including the absorption of your off-season expenses and the impact on results, et-cetera, going-forward.
Shailesh Kanani
Understood. Sir, just wanted to understand on the SAP prices as well. Has they been formed up with no change for the season before?
Tarun Sawhney
I’m sorry, what prices?
Shailesh Kanani
SAP, SAP prices for sugar cane. Has they been formed up any announcement on that front has happened?
Tarun Sawhney
No, no, there hasn’t been any announcement on the SAP price although I do believe that there is a cabinet meeting this evening at five o’clock where lots of policies, including exercise policies is going to be taken-up. But this is just a rumor that one has heard.
Shailesh Kanani
Okay. Sir, any — any indications, any understanding, we are expecting no increase, right? In general, is there any nuts from the market?
Tarun Sawhney
We’re not expecting any increase in the SAP for this year.
Shailesh Kanani
Yeah, that would be great. Sir, last question from my side. On the ethanol front, since now we have availability of FTI rise, how do we see ethanol volumes for FY ’26?
Sameer Sinha
We would be going up to in terms of alcohol production in FY ’26 close to about 25 crore liters, of which 22.5 crores to 23 crore liters would be ethanol.
Tarun Sawhney
Yeah. But as far as FCI rice is concerned, yes, I mean, we participated in the tender. So a portion of that will — and since the tender is concluded today, we’ll know what the results are imminently. We’ll be able to give you a much more accurate split, if you like, offline. We don’t have that ready right now.
Shailesh Kanani
Okay. Fair enough, sir. That’s very helpful. Thanks a lot and sir, best of luck, sir.
Tarun Sawhney
Thank you.
Operator
Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to restrict to two questions per participant and rejoin the question queue.
The next question comes from the line of Bharat Shah from ASK Investment Managers Limited. Please go-ahead.
Bharat Shah
Yeah, hi, Tarun. My question is not really about this quarter, but over a little longer sprain if you look at the composition of various businesses that we are in barring the transmission business which is relatively more robust, predictable economics and predictable outcomes over the period of time brick-by-brick being built. The — on a shorter-term basis interplay of the other businesses always produces a very mercurial kind of an outcome sometimes to delight, but other times to depress and it becomes very hard to make any predictable long-term outcome of the rest of the businesses, even though verticalities have been aided like value chain and others, they made sugars in related businesses more so to say secure.
So, in an — I am awaited operational excellence of Triveni, very disciplined financial management of the business, all that remains, but challenges and publicities of these businesses, what do you — what do you make of that and what do you think about it? Other than the transmission business, it still is a lot of flux all-the-time.
Tarun Sawhney
So, Bharat, you’ve asked an important fundamental question and which merits an answer. You’re right. Even in the — in our power transmission business, it’s a technology business. It is because we were developing new technologies. I gave an example of the marine gearbox order that we’ve got with our own indigenous technology. This is all — it’s built on a lot of hard work, a lot of R&D that is happening and expanding markets, expanding customers, etc. So you’re right, right, it’s a — it’s a function of the efforts that you put in. And of course, as long as your technology development plays goes hand-in-hand and technology improvement goes hand-in-hand, you remain best-in class. One can expect positive outcomes repeatedly quarter-on-quarter, year-on year.
As far as the other businesses are concerned and I’ll sort of bucket them. This includes our water business which unfortunately because we’re primarily looking at municipalities and government orders, large government orders, et-cetera, there is volatility. It is — it is not easily determinable. You don’t know both domestically and internationally, exactly when tenders will close and when awards will happen. So there is some flexibility over there. And which is why I’ve always said that investors in that business should look at it over a longer time horizon, not quarter-to-quarter. Look at it year-on-year, look at multiple years, look at it in terms of the capabilities that the company has, the TQs that the company has and how does it position it because water is a fundamental problem. Now assessing it as an investor is a difficult issue as I understand, but it is a fundamental problem for the nation and for the world. And companies that are addressing that problem will be few and far between that have the knowledge antiques in-place.
Turning then to our larger businesses, as far as sugar and ethanol are concerned, you are absolutely right. The regulated industries. They’re regulated from every corner of the pricing of your raw-material and the pricing of your end-product. And there are differences because we in Uttar Pradesh also have policies of the state government to contend with as far as sugar cane price is concerned, and on a national basis, of course, we have the central government adjudicating on what the sugar price should be, what the ethanol price should be, what the ethanol feedstock price should be as well. But I want you to look-back over the last six, seven years.
Yes, you are asking a question, Bharat, at a point in time where there is a little bit of pain in the industry you know where because the decisions that have been taken by the government have not been as much or as high as the industry expected, it had a negative connotation and consequence and didn’t leave a great taste in everybody’s market. But if you go back and look at the last seven years, policy-making as far as both these sectors, I’m talking about ethanol as well as sugar has been outstanding. It has been timely. It has been vastly different from the 90-year history of this industry, and it is pretty much done away with the sugar cycle.
So, I understand your hesitation in terms of painting this with a clean brush stroke, but there are — I would like you to reflect on these two or three things. Number-one, we’re nowhere near a cyclical business that we were a few years ago. By a few years ago, I’m saying a decade ago and decade-plus ago, there is far more certainty now than ever existed. Yes, the last year is the — is a very poor example of what I’m trying to say, but look at it over a longer time span. Look at it over seven, eight years, there has been reasonable amounts of policy certainty and very productive, accurate, positive decision-making that has been done by the authorities well in time that has allowed industry and investors in the industry to take advantage of government policy, right? I do believe that’s the second point, that government policy is not going to abate. We want it, frankly speaking. The industry wants it. The industry does not want the government intervention to will really go away because then you’re competing with much larger sector the ethanol sector is still a sector, but it’s a baby sector compared to the petroleum sector overall and the standing on a on a standalone basis will be of course, much more muted and therefore with one-hand of the government, with one-hand of senior people in in the BJP government supporting and the prime minister himself, of course, supporting the ethanol lending program I would say that over a medium to long-term horizon, let’s look at even just the end of this decade, there are a lot of positive things that are in-place.
What do I anticipate for the future? And if we look-back in the seven or eight-year period, we have seen that Indian sugar gross production has sort of papered at about 34 million metric tons, approximately, 34 million, 34.5 million metric tons. Now that’s the total quantum of sugar. Our consumption has increased. We may take 28 million tons. Last year it was 29 million tons. We will with our natural growth rate, we will be 30 million tonnes very, very soon. And so you will then see again we will come to a point in time where the country is making just about sufficient amount of sugar to be able to supply to the ethanol blending program and to — and for human consumption. And so our efforts have to be on productivity on new varieties, on gains on-the-ground, farm improvement, etc., to further enhance the availability of cane coming into this sector. And that itself throws open a whole host of new possible businesses, new opportunities and predictability and health of your returns as your core business. So I think that is what the future has in — has in-store.
I’m happy to take this conversation online. I can go on talking about this and free to call at any point and we can take this conversation up online. But I would like to say that you asked a question at the worst possible time in the last eight years. So, I understand why you asked it, but it is not totally reflective of how much we have accomplished as an industry.
Bharat Shah
No, there’s no doubt about that. I think we’ve come a long way is a fundamental truth. So I’m not even debating that. But I mean when we look at lot of hard work that goes behind achieving in an industry which is essentially lot of challenges and then time-to-time to see it with kind of maybe aid of resignation or despondency, it leaves you with a thought whether really all of that is worth it or what is it? So it is only from that point-of-view I’m asking.
I’m not — I, of course, compared to 90s in the policy framework in today there is a world of change and very positive one. But still if you look at when our distillery business has expanded, our sugar business has expanded, at times, you are left wondering it is an expansion of problems or really expansion of value-creation in the business, you know. So it is only from that standpoint I’m asking. So, would you — at a vantage point that you stand at, would you view the future with kind of a muted optimism or a greater belief or kind of concerns in the of resignation?
Tarun Sawhney
Okay. Excellent question. I think your observation is right. I would not disagree with your observation as of today, that the last 12 months have not as proactive as far as decision-making is concerned and even compared to the last seven or eight years as I was talking about. Yes, you’re absolutely right, right that Triveni has invested capital in expanding both our sugar as well as our ethanol businesses. We’ve clearly done it with a return profile in mind. We clearly have — have we met that return profile as far as ethanol is concerned? The answer to that is no. We have not. And our results certainly speak of it today. So, do I believe that we will move to the same higher-margin profile that we had three or four years ago? No, I do not think so either but I do believe that there will be massive improvements.
So, I would not say muted optimism if I had to if I have to put my position in just a few words I would say cautious optimism because I think that there are a lot of positives yet to be achieved. A lot of positives. And we do — this is in agriculture, right? But there are very few sectors like the sugar sector where investors can participate and private industry can participate in an organized manner. And I’m a great believer in Indian agriculture and the successes that lie ahead of us, not just now, but also five years from now, 10, 15 years from now. It is a fundamental backbone to India of the future. I honestly believe that the sugar industry offers you the best exposure to that sector without a shadow of that. It encompasses the very best of Indian agriculture, the very best possibilities of research and development for the future. But will it be smooth sailing? No it will not.
So, I completely agree with you that there is you know there are points in time where you will have you will have an unhappy feeling because of delayed policy and decision-making but from a longer-term perspective, even a medium-term perspective, I’m convinced that this sector will offer a healthy return on capital that I, my Board and in our investors certainly expect of us.
Operator
Thank you. The next question comes from the line of Somnath Saha from B&K Securities. Please go-ahead.
Somnath Saha
Hi, thank you for the opportunity. Sir, my question is on the — as the government has allowed HCI and all. So when we can expect the impact to come from and what could be the optimum mix of feedstock, if you can put some light on that?
Tarun Sawhney
Right. I — as I mentioned a little bit earlier, the FCI tenders just closed today. So we don’t know the result of that. But once we know the results, if you contact us maybe in Monday next week, we will be able to give you offline the exact split, if you’d like. At this point in time, grain plays an important role in the overall package of ethanol delivered by Triveni. FCRIs will also play a role. The details of which will be clear to us only once the tender results come out.
Somnath Saha
Okay, sir. As…
Tarun Sawhney
In terms of timing, sorry, also in terms of timing, right now, while the government has announced the price of SBI, none of it is available to the industry. It is only after the conclusion of the tender and then the lifting of it and then the processing of it that you will be able to produce ethanol from FCI. So that’s going to take a few months, a few weeks.
Somnath Saha
Okay. Okay, sir. Okay, sir. Sir, secondly, sir, if I see the realization from Shadi Lal, the blended average of sugar, that is quite low as compared to our standalone business units. Any specific reason for that, sir?
Tarun Sawhney
I’m sorry, you were inaudible. Could you repeat that question again, please?
Somnath Saha
Am I audible, sir?
Tarun Sawhney
Yes. Yes, just a little slower, please. Shadi Lal…
Somnath Saha
Yeah. My question is on, the average relation from Shadi Lal for sugar is quite low as compared to a standalone business image. Any specific reason for that, sir?
Tarun Sawhney
Oh, yes. So the Shadi Lal sugar unit firstly only produces plantation white sugar, okay? And even though we’ve made a lot of investments, the quality of sugar being produced at does not compare with, though is the wrong benchmark to have on a standalone basis because 70% of our sugar is refined, the balance 30% which is not refined is for pure institutions of very, very, very-high quality. So the Shadi Lal realization is — and of course, the quality of sugar has improved. So what we produced in December is inferior to the sugar that we have produced in January. And it will be inferior to the sugar we produce in February, we’re going to see we’re going to be building up this sugar to much higher levels of quality. But it is plantation white sugar and so plantation price will always sell at an average discount to what the overall price would be, where 70% is refined.
Operator
Thank you. The next question comes from the line of Resham Jain from DSP Asset Managers. Please go-ahead.
Resham Jain
Yeah. Hi, good afternoon, sir. So I have two questions. First one is on the power transmission and the investment which you have announced INR60 crores. Is it just related to the pure gear business or does it include the investment-related to defense as well?
Tarun Sawhney
Hello, Resham. So the investment announced by the Board yesterday, which is just a shade under INR60 crores — INR59. something crores is only for the gears business. As you may know, a lot of this equipment takes a certain time duration between 12 to 18 months-to order and some equipment stores. So we need to sort of plan ahead and substantially in advance. And so the increase in capacity, I’ve tried to be very specific is for the gears business only, not for defense.
Resham Jain
Okay. And also with respect to the earlier capex, which is ongoing, I think this year you will — whatever you land at close to INR300 crores to INR350 crores. And with the earlier capex, the objective was to go to INR500 crore and then 700. Given that the arrangement with our earlier partner is no more there and you have been doing a lot of positioning and marketing of your product in the overseas market. Any color and thoughts on scaling up this given that you might have get more clarity on exporting some of these products? Will the scale-up be — will take like five years’ time or do you think it will take three years’ time or whatever number of years?
Tarun Sawhney
So, our caveat by saying we don’t offer a guidance, but our technology, the acceptability with OEMs has been immediate and overwhelming, very positive. We are now working on the second pier of getting third-party acceptances because there are some very, very large customers primarily in the oil and gas sector where you do need their specific approvals, et-cetera. And so we’re working on that.
The second very definitive area is aftermarket, where we have just started. So those returns will come in and they won’t take time, they’ll come in immediately and they will grow from a small base at a very-high rate of growth and also, of course, afford the kind of profitability that we have seen in the domestic sector of aftermarket. I — you’ve asked in your first question about the cost expansion in capacity and the expansion in capacity, the Board has confidence that we need a need INR700 crores worth of capacity as we start-off ’26, ’27. So in the year-by the end of fiscal ’26, we need to have INR700 crores of gas capacity in-place to be able to look at the expansion of business that the Board is evaluating at that particular point in time. So we’re not looking at five years. I can’t give you the number because we don’t talk about those numbers, but it is certainly not in that type of time horizon. We won’t be investing so much money into a business that we’re going to get three five years from now.
Operator
Thank you. The next question comes from the line of Maulik Hitendra Singh Choudhary from Monarch Networth Capital. Please go-ahead. I’m sorry Maulik, your audio is too low. Could you please speak up?
Maulik Chaudhari
Yeah. Am I audible?
Tarun Sawhney
Yes, please go-ahead.
Maulik Chaudhari
Yeah, I guess I have a two questions on power transmission business. First, first is, can you please share an estimated timeline for the demerger to happen? And secondly, can you talk about the total addressable market for this segment globally?
Tarun Sawhney
Right. As far as the scheme of arrangement is concerned, we anticipate an approval from NCLT by the end of this calendar year, right? So that is the timeline that we — that we anticipate for the scheme of arrangement. And in answer to your second question, which was the overall market for just high-speed and turbo gears, globally the market is about 700 odd, 650, $700 odd million dollars.
Maulik Chaudhari
Okay, okay. And who is the biggest player in the globally?
Tarun Sawhney
The larger — the largest players are European gearbox manufacturers.
Operator
Thank you. The next question comes from the line of Udit Gupta, an investor. Please go-ahead.
Udit Gupta
Good afternoon, sir. Sir, my question is, sir, when is our defense facility coming online?
Tarun Sawhney
Right. We had projected the last-time around last conversation that we had that this facility would be operational by the summer of 2025 and it had been delayed by a couple of months. It is further delayed that some of the machines are taking a little bit longer to come in. So we’re still projecting the these facilities to be up and running during calendar year ’25.
Udit Gupta
And sir, what are the projected revenues from that facility once it comes online in 2026 or something?
Tarun Sawhney
I’m afraid we don’t offer any guidance on that.
Udit Gupta
And the capacity or something, sir, anything which you can tell us?
Tarun Sawhney
Again, you see, it’s a multimodal facility. So it — the putting a rupee value to capacity is very, very difficult way of doing a large number of discrete products that have different markets and they have different output opportunities from the same-facility.
Operator
Thank you. The next question comes from the line of Resham Jain from DSP Asset Managers. Please go-ahead.
Resham Jain
Yeah, thanks for taking my question again. So my other question was related to the demerger, which you have announced. It seems that it is — Triveni Engineering will still be holding 20% stake even after demerger. So why such structure? If the one value unlocking has to happen, it should have happened in a clean structure where Triveni would not be holding anything, otherwise the same Holdco discount will be applicable to the power transmission business once it gets demerged. Like what used to happen in turbine earlier, it will get into similar structure?
Tarun Sawhney
Right. So, Resham, two reasons, frankly speaking. I think and we can be on opposing sides of this argument over here. I think the experience with turbine was actually quite a positive one for the company. It was not a negative one. So — but that’s my personal view and I appreciate your sharing your view on this subject, which can of course be different to mine.
The second and very, very important is because we are incubating a defense business, which we have large aspirations for. In establishing PQs and the ability to be able to quote, there are balance sheet considerations even from a group perspective that are very, very important to allow us to be in contention. That was a very fundamental consideration in — in this determination by the Board of Triveni Engineering that we should not handicap a business just because we’re separating a business, the power transmission business because it’s the right time. We are separating it with the defense business, which is co-located in the same city and utilizing the same-facility and offices that exist today. And therefore, there should be nothing that should handicap the success of that business, which frankly speaking is very, very positive and will continue to deliver value for all shareholders, existing and future.
Resham Jain
Yeah, I understood. I think there is a fair reason. I didn’t thought on those lines, but yeah, this is fair. And obviously, you have greatly unlocked value in the past. So, yeah, thanks for this.
Tarun Sawhney
Great. Thank you.
Operator
Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments.
Tarun Sawhney
Thank you so much, ladies and gentlemen, for joining us for Q3 nine months results for Triveni Engineering and Industries Limited. As many of you have rightly pointed out, we’re all not happy with the speed of decision-making and the impact that has had on a variety of the businesses, sugar, water, ethanol, et-cetera. But the hope still is that we will have a very positive business environment going-forward.
I think one of the big changes and a huge impact on profitability as well as revenues is the rise in sugar price and the rise of almost 10% over three months is outstanding where we were at a new level, the step-change in price because of a change in-market fundamentals and economics. And I think that will continue. And that of course, will lead to greater health and better results for the company going-forward.
So, thank you for joining us today and I look-forward to having this conversation in 3.5 odd months’ time. Goodbye.
Operator
Thank you. On behalf of Triveni Engineering and Industries Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.