TRIVENI TURBINE LIMITED
ANNUAL REPORT 2011-2012
MANAGEMENT DISCUSSION AND ANALYSIS
In financial year 2011-12, India found itself in a conflict of managing
growth and inflation due to major challenges in the macro economy. The
Indian economy has grown by 6.5% in the year 2011-12, after having grown at
rate of 8.5% in the preceding year. The Industrial growth has slowed down
due to rising interest rates, tight liquidity, inability to raise equity
due to uncertain capital market, slowing down of foreign investments and
above all, the lack of policy actions and reforms by the Government. This
has adversely impacted the confidence of the industry and slowed
investments, mainly in infrastructure and capital goods sectors.
The global economic recovery is slowing and the global environment
continues to be a cause for concern and caution. The global economic
environment, which has been tenuous throughout the year, turned sharply
adverse in September 2011 owing to turmoil in the Eurozone, and questions
about the outlook of the U.S. economy.
Currently, India has the fifth largest electrical system in the world; with
installed electricity capacity of around 180 GW, of which 22 GW, i.e., 12.2
% is from Renewable Energy sources. The captive generating capacity
connected to grid is about 19.5 GW. There is a huge gap between demand and
supply with the all-India peak demand deficit of ~12%.
As per industry estimates the current and approved electricity capacity
addition projects in India are expected to add about 80 GW of installed
capacity in the 12th five year plan beginning April 2012 with planned
investment requirement of approx. $ 322 billion. This growth makes India
one of the fastest growing markets for electricity infrastructure
However, uncertainties in regulatory environment over coal linkages, land
acquisition, environmental clearance etc., have majorly impacted the new
investments and may also further delay the execution of projects which are
underway. Under these circumstances, for meeting the industrial power
demand, distributed power generation and captive power plants continue to
play a crucial role.
Since 2005, the energy and climate change agenda has taken centre stage in
domestic and international policy. In addition, the renewable energy
generation capacity has nearly tripled in the last five years. India's vast
untapped renewable energy sources can pave the way for a secure, more
affordable and environmentally sustainable energy future for the country.
Assuming that the electricity power generation from renewable sources like
wind and solar power is going to be substantial; it would be essential to
add renewable power generation capacities through Municipal Solid Waste,
Biomass and Waste heat recovery as they have good control capability with
the change of power output. This will help in maintaining stable operations
in the electrical system and absorb the fluctuation of reactive and active
India is rich in biomass which has the potential of generating 16,881 MW
from agro-residues and plantations, 5000 - 7000 MW from bagasse co-
generation and approx. 2700 MW energy recovery from waste. Biomass power
generation in India is an industry that attracts investments of over Rs. 6
billion every year, generating more than 5000 million units of electricity
and yearly employment of more than 10 million man-days in the rural areas.
The Government has launched National Action Plan on Climate Change in June
2008 to promote the use of renewable energy for power generation. Taking
cue from this, Ministry of New & Renewable Energy (MNRE) has planned to
initiate 'National Bioenergy Mission' in association with State
governments, Public & Private sectors and other stakeholders to promote
ecologically sustainable development of Bioenergy to address country's
energy security challenge. MNRE is targeting for the deployment of 20,000
MW of biomass power by 2022.
Geothermal and Concentrated Solar Energy
Geothermal and Solar Energy resources can be used for a wide range of power
and heat applications. India's installed geothermal energy capacity is
currently experimental and the commercial use is insignificant. India has
potential resources to harvest geothermal energy and has identified six
promising geothermal regions for the development of geothermal energy.
Similarly, though more advanced than Geothermal Energy development,
Concentrated Solar power generation has received a big boost by the launch
of the Jawaharlal Nehru National Solar Mission under the National Action
Plan on Climate Change. India is bestowed with solar irradiation ranging
from 4 to 7 kWh/ square meter/day across the country, with western and
southern regions having higher solar incidence. Under this initiative,
India plans to generate 1 GW of power by 2013. By 2020, 20 million square
meters will be covered by solar energy collectors to generate 20 GW grid
based solar power and 2 GW of off-grid solar power.
Combined Heat and Power (CHP)
This refers to the simultaneous generation of useful heat and power. In
combined heat and power, some or all of the waste heat released into the
atmosphere is captured, transformed into useful heat by deploying it in
process applications or indirectly in producing steam, hot water etc. An
optimal CHP system is designed to meet the thermal demand of the energy
user-whether at industrial, individual building or city-wide levels. By
using the heat output from the electricity production for heating or
industrial applications, CHP plants generally convert 70-75% of the fuel
source into useful energy.
Waste - to - Energy
The economic case for burning waste to generate energy becomes stronger as
the size of waste accumulations expands and presents an environmental and
management challenge. According to the estimates, the waste generated in
India is over 50 million tonnes annually.
The waste-to-energy industry is expected to benefit from the emerging
opportunities in regions such as India, China, Europe and the US. Asia-
Pacific region is expected to surpass Western Europe and emerge as the
largest market in terms of waste-to-energy investments.
Captive Power Generation
The industrial sector is the largest consumer of electrical energy in India
with many industrial establishments also owning Captive Power Plants (CPP).
The CPPs also supply the surplus power generated to the grid. CPPs are
developed to cater to the industrial demand where (a) the electricity
supplied by the utilities is short in supply or (b) the grid supply is poor
in quality & reliability and (c) the tariffs are high inter-alia due to
heavy cross subsidisation. It is estimated that 30% of the total energy
requirement of the Indian industry is currently met through in-house power
plants. The opportunities emerged after the enforcement of the Electricity
Act-2003 in the form of de-licensing of generation, implementation of open
access and setting up of common trading platform, has made the captive
power plants an attractive option for industries to meet their in-house
requirement and to maximise their profits from sale of surplus power.
Across industries, there is significant variation in captive capacity
utilisation. Metals, Heavy engineering, Chemicals, Petroleum, Paper, and
Cement industries account for 70 per cent of the total captive capacity and
85 per cent of the generation. Captive plants over the years have evolved
from the plants owned by single promoters to group captive serving as a
medium for maximising the benefit by selling its surplus power. Selling the
surplus power through the power exchanges, claiming the incentives under
Clean Development Mechanism (CDM) depending upon the technology used,
earning energy efficiency certificates, Renewable Energy Certificates are
other benefits associated with CPPs. Moreover, industrial and commercial
growth would continue to impact the overall peak demand, which creates an
opportunity for the merchant and captive power producers.
Captive plants can contribute to greater economic gains. India's concern of
electricity shortages could partly be addressed by better coordination of
such industrial power surpluses. The captive plants, whether grid-connected
or stand-alone, could contribute towards greater availability of power in
the system by increasing consumption from captive generation and drawing
less from the grid. Captive power plants have been growing at a fairly
aggressive pace in India.
Financial year 2011-12 has been a challenging year for Triveni Turbine
Limited (TTL), in terms of maintaining revenues and healthy margins due to
intense competition and decline in the overall domestic market demand. In
the sub 30 MW range, from an average annual demand of approx. 1700 MW
during 2007-11 and as against 1425 MW in financial year 2010-11, the demand
declined to about 800 MW in financial year 2011-12. Metal & Sugar Co-
generation (SCG) segment recorded a major drop of over 50% while the
decline in the industries in the Process Co-Generation (PCG) segment such
as Food/Paper/Pharma sector was over 30%. Independent Power Producers (IPP)
was the only segment which could sustain its demand in comparison to the
previous year. Comparison of market demand for various segments in
financial year 2010-11, financial year 2011-12 and the annual average for
financial years 2007-11 is depicted.
Even in this sluggish market environment, the Company could achieve
reasonable order-intake with 54% market share. The Company has an
outstanding order book, excluding the slow moving orders, of Rs. 4.95
billion as on March 31, 2012. This order book is executable in financial
The Company has a dominant share in SCG/IPP/PCG segment and looks forward
to gain prominent market share in Metal segment also. Despite the slowdown
in domestic market in terms of order booking, the overall enquiry base for
financial year 2011-12 has been similar to that of financial year 2010-11.
Financial year 2011-12 witnessed major order booking in the domestic market
from the metal processing industry with an extended scope of supply.
With the order finalisation in the domestic market turning slow due to
macro economic factors such as liquidity, higher financing cost etc., the
Company, during the year under review, went aggressive in expanding its
footprint in the international market. Its foray into newer markets
resulted in expanding its year-on-year order booking by 39%. The Company
received break-through orders from municipal solid waste to power and waste
heat recovery based power generating facilities in Europe. The Company
consolidated its presence with orders from Sugar based waste heat recovery
power plant, palm oil segment etc. The exports turnover grew by 32.2% over
the previous year and is currently at 13.9% of the total sales.
AFTER MARKET SERVICES
The Company operates in the full band of aftermarket services, which
include Erection & Commissioning, Spare parts, Refurbishment and Operation
and Maintenance. The Company could maintain a reasonable growth even in
this difficult market conditions. In the services business, customers
become more cost conscious in difficult business situations and hence,
prefer cost effective solutions to the fresh capital expenditure plans. The
Company was able to maintain its market share in spares and there has been
significant improvements in the business of refurbishment. A number of new
categories of jobs have been completed with successful foray in the Utility
range. During the year, the Company refurbished large sized utility
turbines enabling prequalification in this segment, thereby creating good
business prospects for the future. The overall business of aftermarket grew
by 7.8 % over the previous year and is currently at 16.8% of the total
TTL's state of the art manufacturing facility is fully equipped to
manufacture industrial steam turbines. It is equipped with an array of 4
axis and 5 axis Vertical Machining Centres and Horizontal Machining Centres
for blades, Mill-turn centre for rotors, CNC gantry and CNC VTL for casing
machining to high accuracies. It has fully equipped assembly-cum-test beds
for assembling the turbines from start to finish and recording the test
results on a wireless Data Acquisition and Display System. The facility
also boasts of High Speed Vacuum Balancing Machine for balancing rotors,
CNC Coordinate Measurement Machine, DG Sets for 100% power back up, EOT
cranes etc. The manufacturing facility is located in green employee
friendly surroundings. The manufacturing facility is certified for both ISO
9001 QMS & ISO 14001 EMS standards and is always ready to cater to diverse
customer needs in turbine business.
Suppliers are key to our business performance and they are treated as our
extended business partners. The Company establishes long term business
relationship by entering into Partnership Agreements with critical
suppliers. Well defined quality and delivery parameters along with
transparent pricing mechanism helps to further business dealings with the
supply chain partners. The Company follows a global procurement policy to
continually optimise the cost and mitigate purchase price risks. Product
standardisation by Value Engineering to reduce cost / lead time of product
realisation is followed. Sharing of knowledge and experience with suppliers
is an ongoing process. The Company is able to offer better deliveries than
its peers due to strong supply chain relationship. The key to this
performance has been seamless communication of its manufacturing plans,
expected order flows and volumes to the critical suppliers of long lead
items. The Company could mitigate the increase in input cost of castings,
forgings as well as piping materials by prior planning its procurement
through long term contracts.
Whilst the industry expects a rise in input cost on castings commensurate
with increase in the scrap prices and due to significant contraction in
capacity due to the power shortage in some parts of India, the Company has
put risk mitigation measures in place by developing alternative cost
effective sources and building lower costs through value engineering.
The strength in the Company's products lies in the fact that they comply to
various product standards such as API, ASME, AGMA, NEMA, IEC etc. The
Company has a network of approved suppliers and dedicated sub contractors
complying with stringent quality norms through QAPs to maintain
comprehensive quality control of turbine and its auxiliary systems. TTL
ensures CE/PED Mark Quality Certification to its product as per European
The Company also deploys new tools and techniques like Visual Management
system (SQDCM), DMAIC methodology, Kaizen, QIP, Small Group Activities,
Daily Work Management, CCRS and Root Cause Analysis in order to provide its
customers reliable and high performing turbine solutions.
In 2010, TTL introduced the 'Kaizen' movement in order to create and bring
culture of continuous innovation & improvements throughout the
organisation. The results are immediate, significant and satisfying in
productivity improvement, quality, cost and safety improvements by
eliminating waste and improving processes. TTL team bagged second place in
'National Level Kaizen Competition' under operator category.
TTL has progressed significantly in its journey towards Business Excellence
in 2011. The Company has been awarded with 2nd level recognition
'Commendation Certificate for Significant Achievement' by CII-EXIM bank
Award for Business Excellence. This award is based on Excellence Model of
European Foundation of Quality Management (EFQM) and the award process is
administrated by CII in India.
Continuous product development is one of the key requirements for the
business to maintain its competitiveness. During the year, the Company
developed 12 new product variants to serve the application requirements of
the customers as well as for continual efficiency improvement. One of the
objectives was to keep track of new technologies and tune it with the new
age auxiliary equipment, thereby adding value to our customers, through
reduction in initial capital as well as the operating expenses of the
project. The key development highlights are the design of air cooled
condensing turbines, new blade designs for high volumetric flow, high
efficiency blade path using advanced reaction stages, high back pressure
designs for Oil and Gas etc. The Company also developed around 8 new basic
models during the year.
INTELLECTUAL PROPERTY RIGHTS
Steam Turbine is highly technology oriented business, hence, the protection
of Intellectual Property (IP) is one of the critical requirements in the
long term sustainability of the business. The Company ensures involvement
of IP team right from product conceptualisation stage to the final design
stage. Stage gate processes are being implemented and complete technology
scanning of all the R&D Projects is being done by IP team. A comprehensive
security system has been put in place to safeguard valuable IPRs developed
by the Company. Various regulatory requirements have been completed with
respect to design registrations in India and Europe - consequently, 11
design registrations in India and 7 European Community Designs have been
granted and stand valid to the credit of the Company. In the U.S., 3 Design
Patents have been filed and the Company is in the process of filing patents
in South East Asian countries as well. The Company also intends to file
Patents Co-operation Treaty (PCT) applications which will be binding for
all the member countries to this treaty.
As our business focuses on customised engineered-to-order mechanical
equipment, skilled manpower is one of the key success factors. The Company
has strengthened its critical functions of R&D, Engineering & Projects
department in a challenging year for talent acquisition. This support has
provided required vigour across the organisation in meeting the set goals.
The Company implemented Appreciation-Recognition-Celebration policy during
the year with a view to develop personal bonding with its employees.
Appropriate measures and enablers were implemented to retain good talent in
the critical departments and it has yielded the desired results in
maintaining trained human resource towards building a world class
organisation. The overall attrition in the Company has been generally the
lowest compared to the engineering industry. With a view to penetrate
overseas markets comprehensively and effectively, the Company has started
recruiting local experts and professionals to begin with in South East
Asia, wherein the Company intends to have major presence.
The Learning Centre of the Company is the fulcrum for all the technical
training needs of its engineers. During the year, the emphasis was on
imparting technical training to TTL engineers and workmen, on the product.
The Learning Centre had conducted training for around 12 man days per
employee. Graduate Engineer Trainees & Diploma Engineering Trainees were
imparted with complete training from basic engineering concepts, product
inputs and field exposure. Training programme on the product was imparted
to engineers from customer-end and to suppliers for improving their
efficiency and operation and maintenance.
Learning centre in co-ordination with supply chain called upon domestic &
international Suppliers of Balance of Plant (BOP) equipment to train
engineers of TTL on updates of technologies and its benefits. Computer
Based Product Training (CBT) was developed by Learning Centre and this
platform is used by all the engineers (Fresh and lateral entry) to update
them on TTL product range and features. As a continuous improvement, up-
gradation of the learning module is under progress. Learning Centre is in
the process of building the repository of knowledge management on the
existing product range and on the new developments in tandem with R&D and
engineering. It is on track to build a technical library and create a
platform of learning to all the engineers / technical fraternity. This is
congruous to the Company's goal to serve its customer better and to make
technology and service as a differentiator.
GE TRIVENI LIMITED (GETL)
The joint venture with General Electric, established in financial year
2010-11, is progressing well on technology transfer, marketing and project
execution plan. Financial year 2011-12 was a challenging year for GETL with
respect to declining market, both domestically and internationally. It
could make its presence felt by attracting enquires in large numbers both
in India & world market. Initial marketing efforts by TTL in the domestic
market have yielded in getting the first order for GETL product range. With
the experience, marketing thrust and field reference, further booking of
orders is expected. The entire manufacturing of GETL products will be
undertaken at the manufacturing facility of TTL.
Despite the uncertain economic scenario, worldwide power generation sector
is bracing for a long term growth, driven by the presence of strong demand
drivers including increasing population and improving consumer lifestyles,
rapid industrialisation in emerging economies, particularly China and
India. Clean energy, environmental constraints, rising cost of fuel and
energy policies will play a significant role in changing the dynamics of
the thermal power industry and determining technology mix.
Asia-Pacific represents the largest regional market. The region forecasts
to record the fastest growth in electricity generation because of
increasing efforts to enhance the electrification rates. Efforts of major
markets in Latin America to diversify their fuel sources, which rely
heavily on hydropower, are expected to increase preference for thermal
power generation and other renewable sources of energy. The installed
capacity for thermal energy in the Asia-Pacific region for 2011 is
estimated at 1372.5 GW. The installed capacity is expected to grow at a
CAGR of 6.8% for the period 2012 - 2020, with the total installed capacity
expected to be around 1969.3 GW in 2020. In the recent years, the financial
crisis lowered investor confidence and significantly raised the cost of
capital. The underdeveloped and developing economies face the challenge of
power evacuation in tandem with generation. Hence within the domain of
Thermal Power Generation, the discrete Renewable energy based power
generation will contribute significantly in remote areas through
distributed and decentralised power generation.
Increasing consciousness about offsetting the environmental impact of
fossil fuels has prompted the European Commission to plan for collective
energy policies and promote energy efficiency directives. Stable energy
prices make it a right energy investment decisions, and a sound strategy to
rebuild a co-generation base. Co-generation is all set for a revival in
Europe between 2014 and 2018. Most countries across Europe are expected to
increase their co-generation capacity, mainly in the combined cycle form.
Under the combined heat and power (CHP) directive, Germany, Italy and Spain
have made considerable strides in building a policy framework to support
co-generation, while Germany has set itself a target to double co-
generation capacity by 2020. In 2011, the EU identified co-generation as
the energy application that can make the single-largest contribution to
achieving the region's greenhouse gas reductions, giving a huge thrust to
the market. The effective implementation of CHP policies and a focus on
creating favourable conditions for co-generation development are likely to
drive the market in Europe.
Exports will be a major growth driver for the business in the coming years.
Currently the Company has presence in 30 countries, with focus on South
East Asia markets of Indonesia, Malaysia and Thailand, Korea, Europe. The
Company will be developing new geographies like South America, Middle East
and Africa in near future. Going international entails serving new market
segments like Geothermal, Solar Thermal Power and a broader ambit of
The Company is geared up with appropriate product and service offerings for
most of the power generation technologies being deployed. The strategy has
been to leverage the huge installed base of the conventional renewable
energy primarily in the Sugar Bagasse power generation in India and
developing new models for the specific applications dominant in focused
geographies. During the last two years, the Company has focused and
successfully developed the European markets for waste heat recovery and
district heating segments. This will provide the requisite testimony for
the Company for further business. The Company will explore deeper into the
developed markets for its products and services and will explore
opportunities in various new segments. The Company will have an aggressive
approach in market development creating local set up to go closer to the
customer and serve them better, going forward. Initiating steps to create a
global sales organisation has been a key activity in financial year 2011-
With the government thrust being shifted to revive the growth, the investor
confidence and capex cycle may pick up momentum by second half of the
financial year 2012-13. As a natural hedge, the Company will focus more on
the international markets and will be aggressive in the service business.
The Company has significant capability for the refurbishment business
considering its collective turbine engineering experience, supported by
state-of-the-art High Speed Dynamic Balancing facility, R&D capability,
reverse engineering tools and competence. Servicing is another growth
driver for the Company. The Company will leverage its strength of huge
knowledge base on steam turbines and high speed turbo-machinery acquired
over a period of time to get more business on refurbishment.
Overall, the outlook on the business seems promising for financial year
2012-13 and the Company expects reasonable growth prospects by penetrating
deeper in the existing markets and exploring new markets and geographies.
CORPORATE SOCIAL RESPONSIBILITY
The Company is committed to create an environment that contributes to
communities and the conservation of nature, provide quality education to
the underprivileged sections of society and encourage employees to
participate in the various social initiatives of the Company. Deriving the
inspiration from its basic philosophy of a responsible corporate citizen,
the Company pursued projects in the areas of education and health.
Under its education initiative, the Company aims at providing educational
aides for student development, and other necessary support for the students
of under privileged community. The Company facilitates this objective by
working closely and assisting organisations which are into community
welfare, by providing direct support like assets, resources, educational
aides to students or indirectly through financial assistance.
Following these principles of the CSR activities, the Company had
contributed towards education expenses of 83 differently abled students.
The Company donated to Aruna Chetana and Dharithree-Ajitha Chetana which
covered the honorarium to staff, conveyance, nutritious drink to the
children, equipments for special teaching aids therapy etc.
The Company donated furniture to Prerana Resource Centre, a hostel for 120
physically challenged girls.
The Company had donated to Akshaya Patra for A Mid-Day Meal Scheme. This
takes care of the cost of mid-day meal for underprivileged students during
the year studying in government schools.
The Company distributed school bags, note books and other accessories to
all the students (from Pre-Nursery to 7th Standard) of the Government Model
Primary School, Peenya. TTL provided financial assistance to Maria Seva
Sangha, an NGO which takes care of the basic needs of poor and aged people.
The Company hired an experienced trainer from M/s. People-Pro to train
around 200 secondary school students at Government Model Primary School,
Peenya on traits like communication, personal hygiene and personality
development. 30 employees volunteered in the Big Buddy Initiative. These
employees visited the School every week to help students excel in academics
and helping them in development of their soft skills.
The Company also provided a colour printer to the Government Model Primary
School, Peenya. TTL organised a Blood Donation Camp in the Company campus
wherein around 200 units of blood was donated. On the World Environment
Day, around 500 saplings were distributed to the employees for planting
them around their residences.
Financial year 2011-12 is the first full year of turbine operations of the
Company post the demerger. The summarised results for financial year 2011-
12 and financial year 2010-11 are provided here. The performance results
for the financial year 2011-12 are not comparable with the financial year
2010-11 as the previous year's figures include turbine operations for six
(Rs. in million)
Description 2011-12 2010-11 Annuallsed
Net Turnover 6318.8 3050.5 3.6
EBITDA 1561.2 717.1 8.9
Depreciation & Amortisation 115.9 58.8 -1.4
Finance Cost 95.9 47.1 1.8
Profit Before Exceptional/ 1349.4 611.2 10.4
Non recurring items & Tax
Extraordinary Charge - 559.8
Profit Before Tax 1349.4 51.4
Tax 438.6 124.0
Profit After Tax 910.8 -72.6
The Company's strategy to focus on exports to achieve geographical
diversification of its products has paid dividends -the exports at Rs.
880.5 million were 13.9 % of the total revenues as against 10.9 % in April
- March 2011. This strategy will provide effective insulation from the
slow-down of the domestic market due to macro economic factors. Likewise,
the revenues from after-market operations at Rs. 1058.6 million account
for 16.8 % of the total revenues as against 16.0 % in April - March 2011.
Despite the challenging market conditions, the Company has been able to
preserve the margins due to cost optimisation and higher proportion of
high-margin exports and after-market spares and service. The extraordinary
charge in the previous year relates to writing-off of the goodwill
recognised pursuant to the Scheme of Arrangement (the Scheme).
Due to profitable operations, the Company has been able to absorb
accumulated losses of Rs. 330.53 million carried forward from the last
year which were mainly on account of the extraordinary charge as aforesaid.
Raw Material And Manufacturing Expenses (Rs. in million)
Description 2011-12 2010-11 Annuallsed
Raw material (net of increase/ 3827.6 1883.0 1.6
decrease in WIP and finished
Percentage to sales 60.6% 61.7%
Manufacturing expenses 155.3 87.9 -11.7
Percentage to sales 2.5% 2.9%
* includes turbine operations for a period of six months from October 1,
2010 till March 31, 2011.
The material cost as a percentage to sales is lower by 110 basis points
after offsetting inflationary trends due to higher proportion of high-
margin turbine exports and after-market revenues.
The manufacturing expenses mainly comprise of tools consumed and power &
fuel cost, which were kept under control, despite increase in fuel prices,
due to rationalsation of production process.
Personnel Cost, Administration Expenses And Depreciation
(Rs. in million)
Description 2011-12 2010-11 Annuallsed
Personnel cost 461.0 195.4 18.0
Percentage to sales 7.3% 6.4%
Administration 283.5 138.4 2.4
Percentage to sales 4.5% 4.5%
Depreciation & Amortisation 115.9 58.8 -1.4
Percentage to sales 1.8% 1.9%
* includes turbine operations for a period of six months from October 1,
2010 till March 31, 2011.
There is no significant increase in the head count. The increase in
personnel cost as a percentage of net turnover is due to annual increments
The administration expenses as a percentage of turnover is almost at the
level as that of the previous year. This has been in line with the
Company's overall cost control plan.
Depreciation and Amortisation
The depreciation of fixed assets and amortisation of intangible assets take
into account the capital additions during the year.
In accordance with the sanctioned Scheme of Arrangement, the Board of
Directors of the Company during the year had issued and allotted 2,800,000
- 8% Cumulative Preference Shares of Rs. 10/- each fully paid up to
Triveni Engineering and Industries Ltd. (TEIL) and 257,880,150 Equity
Shares of each fully paid up to the Equity Shareholders of TEIL.
Consequently, the Share Capital Suspense Accounts as appearing on March 31,
2011 have been regularised.
Reserves and Surplus
As against accumulated losses of Rs. 330.5 million as on March 31, 2011,
there is a surplus of Rs. 178.5 million after meeting dividend payments of
Rs. 251.8 million (including dividend distribution tax) and after
transferring an amount of Rs. 150 million to the General Reserve.
The total loans aggregate to Rs. 363.2 million as on March 31, 2012 as
against Rs. 875.5 million as on March 31, 2011. The break-up of the loans
is as follows.
(Rs. in million)
Description March 31, 2012 March 31, 2011
Term loans 353.8 581.5
Cash Credit 4.5 35.2
Vehicle loans 4.9 0.0
- Buyers credit 0.0 90.0
- TEIL 168.8
Total 363.2 875.5
-Long term borrowings 167.0 462.2
-Short term borrowings 4.5 125.2
-Other current Liabilities 191.7 288.1
During the year, term loans of Rs. 227.7 million have been repaid and the
instalments due for repayment in financial year 2012-13 aggregate to Rs.
191.7 million. The prepayment of loans will be considered in financial year
2012-13 subject to economics of the applicable prepayment premium.
During the year, the Company has subscribed to the equity share capital of
its subsidiary, GE Triveni Ltd., to the extent of Rs. 45 million and the
non-current trade investments correspondingly increased to Rs. 55 million.
Current investments of Rs. 100 million represent surplus funds parked in
the liquid mutual funds.
The Company's business normally operates with negative or minimal working
capital. The negative working capital at the year-end stands at Rs. 374
million. Cash & cash equivalents of Rs.118.1 million represent fixed
deposits of Rs.100 million with banks having maturities less than 3
BUSINESS RISKS AND MITIGATION
The Company's business relating to steam turbines falls under capital goods
industry which is closely linked with the country's economic activities.
Further, domestic sales form a considerable part of its total sales. Apart
from the economic growth, the Company is subject to various other business
risks. Each of the major risks and the risk mitigation followed by the
Company are described here under:
The slowdown in the economy of the country directly impacts the demand of
the capital goods / infrastructure requirements, which in turn impacts the
growth of the Company. While this risk is beyond the direct control of the
Company, under such difficult conditions, the Company endeavours to
mitigate the risks by focusing on high-margin after-market revenues, value
engineering and exploring other growing markets to preserve its turnover
and profitability. The Company has been focusing on new export markets to
enlarge its geographical reach. The strategy results in having multiple
streams of revenue to reduce dependence on any one market/sector.
Rising Interest Rates
The rising inflation and cost of capital increase the business risk of the
project developer, thereby reducing the demand for the capital goods.
However, the Company deals in and supplies its turbines in sub 30MW where
the project cost is not high and most of these projects have low pay-back
period. Under challenging times, the customers in fact opt to implement the
project at the earliest to achieve cost optimisation and profitability
The Company operates in engineered-to-order capital goods industry, wherein
product efficiency and critical product features play an important role in
determining the overall life cycle costs. The Company mitigates the
technology risk by vigilantly studying and forecasting the trend of the
customer preference and accordingly, plans its R&D activities. The Company
has a vibrant R&D department which undertakes product development and
improvements within the shortest possible lead time and at optimal costs.
The Company's emphasis to subject its engineers continually to technical
training in its in-house learning centre paves the way for building
pipeline of talent in this discipline. Further, the Company also has strong
tie-ups for R&D with international design houses and local research
institutions. The Company has an impressive track record of developing new
models and higher range of turbines which have been well received in the
The Company faces competition from the steam turbine manufacturers of
international repute in the domestic and international market. This may
compel the Company to quote aggressively impacting its margins. With a view
to mitigate these risks, the Company endeavours to provide a value
proposition to the customer offering products meeting the benchmark
efficiencies at competitive prices and shorter delivery period without
compromising on its margins. Further, the products are backed by impeccable
service. The products of the Company command enormous goodwill and numerous
repeat orders are testament to the quality of its products and the
confidence reposed by the customers.
Availability of Capital
The non-availability and high cost of capital may affect the growth plans
of the Company. The business model of the Company is technology intensive
and not capital intensive with a well developed supply chain. Further, the
business operates with minimal, and most of the times with negative working
capital. The Company is almost debt free and the free cash flow generation
is substantial which is considered adequate to meet its capital expenditure
even after distribution of dividend to the shareholders. The Company, even
in its initial period of turbine operations, has investment grade external
rating which will help it to raise funds at remunerative rates, if
TRIVENI TURBINE LIMITED
ANNUAL REPORT 2010-2011
MANAGEMENT DISCUSSION AND ANALYSIS
INDIAN POWER SECTOR:
Power, as a critical resource, would play a vital role in sustaining and
furthering India's economic growth. In order to achieve a consistent 9%
growth in the GDP, India will need around 331GW of total installed capacity
by 2016-17, according to the Economic Survey 2010-11.
Historically, the Indian power sector has witnessed an increasing gap
between demand and supply. Rapid urbanisation and industrialisation is
resulting into rising demand for electricity. Installed power generation
capacity in the country was 174 GW, as at the end of April, 2011. Out of
this, the capacity to generate power by using renewable energy sources was
Distributed Energy Generation
In order to reduce the country's dependence on conventional thermal power
and harness India's underlying potential in renewable energy, the
Government of India has been promoting clean and green power amongst other
forms of distributed power generation.
In the 2011 Union Budget, the Government of India has launched the Mission
of '10 year Green India' with the allotment of dedicated funds from its
budget for National Clean Energy initiative. The Electricity Act (2003) and
the resultant functional open-access policy has enabled captive power
generating units to supply surplus power to the grid. The catalyst for this
policy has been the consistent delay and shortfall in planned power-
generation capacity addition. The delays have primarily come from mega and
ultra-mega power plants as well as from hydro plants. The reasons are many:
acquisition of land, environmental clearances, water availability,
availability of coal, non-availability of adequate debt and equity funding.
These are issues that smaller power generating plants do not face, and
therefore such distributed power generation through captive power plants
(CPPs) and renewable source based Independent Power Projects (IPPs) are
increasingly becoming a focus area for power augmentation.
Biomass based Power Generation
In the Indian context, biomass fuel plays a crucial role in renewable
energy generation. As per the Ministry of New & Renewable Energy (MNRE)
statistics, as at the end of March 2011, the estimated potential for power
generation through bagasse and other agro residues is approximately 21.8
GW, while the actual achievement till date is only 2.6 GW.
The Government is providing various incentives for biomass power generation
through a slew of measures like Exemption/Reduction in Customs Duty, Excise
Duty, Sales Tax etc., besides allowing accelerated depreciation and an
income tax holiday. The business proposition of establishing biomass power
plants gets further strengthened by potential tradable carbon offset
credits, in the form of Renewable Energy Credits in India and Certified
Emission Reduction credits under the Kyoto Protocol.
As per an industry research firm, it is estimated that power generation by
using all forms of biomass including industrial and urban waste will reach
42 GW by 2020. It is also estimated that Indian sugar mills have the
potential of generating an additional 5 to 7 GW of power through bagasse if
the sugar mills adopt technically and economically optimal levels of co-
generation for extracting power from the bagasse produced by them.
Apart from grid-interactive power applications, Indian renewable energy
sector also caters to off-grid applications. It does so by providing energy
access through decentralised generation using locally available biomass and
by meeting the process heat as well power requirements of large number of
small and medium enterprises. Captive power investments help business
entities in reducing the opportunity cost of production loss resulting from
unreliable and inadequate grid power. MNRE is giving an increased
importance to deployment of off-grid, distributed and decentralised
Captive Power Generation
Captive power refers to generation of electricity for captive consumption,
primarily by industries. Industries, in India, are one of the largest users
of electrical energy, accounting for close to a half of country's total
electricity consumption. Multiple factors lead to the setting up of captive
power plants (CPPs). Non-availability and lack of reliable supplies from
the grid has forced many industries to set up their own captive generation
unit, while the lower cost of generation vis-a-vis the cost of power from
the grid has also prompted many industries to self-generate, especially
when process steam or heat is either needed or produced as part of the
industrial process. This economic rationale usually encourages CPPs to
supply surplus generation to either the grid or to merchant power traders.
There has been an increasing trend in the proportion of exportable surplus
of installed CPP capacity, suggesting an opportunistic motivation of
entrepreneurs to capitalise on high merchant power tariffs.
According to a report on captive power in India, the total installed
captive power capacity in India is estimated at 58.6 GW which is expected
to rise by about 12 GW in the next three years. While 70% of the CPPs are
small-sized with capacities below 10 MW, only 2.4% of the total capacity is
in the above 100 MW range. Power-intensive sectors, such as metals and
minerals (steel, aluminium, zinc, copper), account for almost one-third of
the total installed capacity. Some of the major sectors with captive power
Metals & minerals 12,991
Global Small Power Generation Potential:
It is projected that worldwide industrial energy consumption, which
constitutes 50% of the total delivered energy today, will grow from 184
quadrillion BTU in 2007 to 262 quadrillion BTU in 2035. Biomass for heat
and power production currently provides the vast majority of renewable
energy, consumed in the industrial sector and it is expected to remain one
of the largest components of the industrial sector's renewable energy mix
for the projection period.
With a focus on clean energy, Governments across the globe are implementing
promotional policies for attracting investments in the renewable energy
sector. Most of the countries have adopted more than one promotional
policy, and there is huge diversity in policies in place at national,
state/provincial, and local levels.
Biomass and geo-thermal heating markets within the renewable energy sector
are expanding steadily, particularly in the western countries. Biomass
power plants exist in over 50 countries around the world and supply a
growing share of electricity. The latest trends include use of biomass in
building-scale or community-scale combined-heat and power plants (CHP), and
use of biomass for centralised district heating systems. Several European
countries are expanding their total share of power generation from biomass
than oil. The use of biomass for district heating and CHP provides about
67% of all biomass heat sold in Europe. Among developing countries, it is
common to produce small-scale power and heat from agricultural waste such
as rice or coconut husks. The use of bagasse for power and heat production
is significant in countries that have a large base of sugar industry, such
as Argentina, Australia, Brazil, Cuba, India, Philippines and Thailand.
COMPANY'S BUSINESS PROFILE
Consequent to the Sanction of Scheme of Arrangement between Triveni
Engineering & Industries Limited (TEIL), Triveni Turbine Limited (TTL) and
their respective shareholders and creditors, the steam turbine business of
TEIL was demerged into TTL (this Company) from the appointed date of 1st
October 2010. The discussions herein also include the period during which
the steam turbine business was a segment of TEIL.
The main business of the Company is manufacturing and selling steam
turbines in accordance with the customers' specifications. To support the
steam turbines, it also manufactures and supplies spare parts and provides
various turbine related services in respect of turbines manufactured by it
as well as other makes. It strives to capture value in all activities
incidental and related to turbines. TTL prides itself in providing a value
proposition to the customers, having lasting mutually beneficial relations
with them and rendering world-class services. It uses research and
development and its state-of-the-art manufacturing facility to make its
product comparable with the best in the industry.
The Company manufactures engineered-to-order steam turbines upto 30 MW.
With 40 years of experience and over 60% of market share, TTL has gained a
global repute for its cost-effective, highly efficient and reliable
products and solutions. The Company is the first steam turbine Company in
India to be certified with ISO 9001 and ISO 14001 for its quality
standards. The Company's world-class manufacturing facility has a capacity
of manufacturing over 150 turbines per year which is under further
expansion. It has installed over 2500 turbines in more than 30 countries.
The Company designs, manufactures and delivers a wide range of customised
Condensing and Back Pressure steam turbines up to 30 MW, at high pressure
(110 at a steam pressure) and high temperature (540 deg. C superheat
temperature). The Company ensures that every turbine it manufactures is
engineered-to-order to suit customer's specifications. With continuous in-
house research & development, the Company, during the past few years, have
upgraded its turbines in terms of size (MW) as well as developed variants
relating to various pressure and temperature limits to cater to wide range
The steam turbines meet national and international benchmarks like IS, CE,
API, IEC etc. and cater to a wide range of industries including biomass and
municipal solid waste based Independent Power Plants (IPP), Captive Power
Plants (CPPs) and Co-generation plants.
The Company's focus on the after market services has proved to be a
decisive differentiator from its competitors. The Company has been
providing prompt, efficient and reliable services including a wide range of
integrated offerings like refurbishing and operation & maintenance (O&M).
Its aftermarket services are integrated under Customer Care Cell (CCC)
which currently contributes to nearly 16% of its total revenues. The
Company's strong and dedicated team of customer-care professionals provides
solutions for all after-sales requirements from erection and commissioning
(E&C) to maintenance and spare parts to efficiency improvement. It provides
proactive solutions to ensure that turbine operates smoothly and
effectively, fulfilling commitments and forging a lifelong relationship.
CCC deploys 180 employees, which is almost one-third of the total employee
strength of the Company, across 13 service centres in India and provides
24/7 customer service support in providing 99% up-time of turbo-generator
Major activities undertaken by the CCC Erection & Commissioning
The Company does the complete erection and commissioning for all the
turbines sold by it and ensures that the turbine performs as per the
requirements agreed with the customer through proper integration of the
steam turbine island into customer's plant.
The Company, over a period of time, has created an effective system to
support the spares requirement of the customers. It offers quick response
in the delivery of spares and provides OEM support as well as continually
works on value engineered parts to increase the efficiency and reliability
of steam turbine. The quality parts are manufactured in-house, delivering
CCC serves customers through a network of 13 service centres spread across
the country. Even though the Company has to respond within 48 hours
contractually, its service engineers report to the customer site within a
maximum of 24 hours. The Company's services include overhauling services,
troubleshooting and service contracts i.e. annual maintenance contracts
(AMCs). Its service division helps customers in optimizing the performance
as well as reducing their maintenance costs and downtime. All turbines
which are installed overseas are also supported from India with a response
time of 48 hours through a group of service engineers holding valid travel
The Company has developed in-house capabilities for refurbishment. It can
provide complete steam turbine refurbishing solution of any make of turbine
upto 200 MW including restoration/improvement, renovation, and re-
engineering. The expertise has been developed in-house by teams of highly
skilled engineers backed by product engineering, R&D, advanced technology
and a high-tech facility to refurbish the turbines. The refurbishing
services help the customers in attaining lower operating costs, extended
turbine life and improved reliability besides offering economically viable
Operation & Maintenance
The Company's operation and maintenance services help customers operate
their power plant efficiently and reliably, by maximizing its output and
minimizing downtime. O&M package includes optimum day-to-day plant
management, optimum plant efficiency, reduction in the cost of man
management, superior level of maintenance, local and remote monitoring and
continuous onsite training programme.
The Company provides steam turbine solutions to diverse industry segments
in applications like co-generation/Combined Heat & Power (CHP), Captive
Power Generation (CPP) and Independent Power (IPP) Generation.
Company's steam turbines are used in a variety of industries such as Sugar,
Steel, Biomass IPP, Pulp & Paper, Textiles, Chemical, Carbon Black,
Municipal Solid Waste (MSW) IPP, Oil & Gas and Food Processing Industries.
The dominant Industry segments are Process co-generation (Paper, Textiles,
Solvent Oil and Chemical] and Sugar followed by Steel and IPPs.
The Company has installed steam turbo-generators in Biomass IPPs in India,
United Kingdom, Spain, South Africa, Thailand and Malaysia. The Company has
delivered turbines for process co-generation industries such as pulp and
paper industry, textile plants, chemical, food processing industries etc.,
that co-generate consistent and reliable power and heat.
It has successfully installed turbines for municipal solid waste based IPPs
in India and abroad. The Company has designed and delivered steam turbines
for district heating projects in Europe through reputed EPC contractors.
The Company has also designed and delivered steam turbo-generators
complying with API specifications for the oil and gas industry segment.
The Company has a world-class manufacturing facility located in Bengaluru.
The facility is equipped with the state-of-the-art high precision
equipments to manufacture critical components in-house such as the turbine
blade, rotor, casing etc, and also has assembly bays to assemble and test
the turbines before it is despatched to the customers.
The facility has 5-Axis CNC Machining Center for blade machining. For
machining of the rotor shaft, it has a high precision 5-Axis CNC Mill Turn
Center. For meeting quality parameters and also for undertaking
refurbishment and re-engineering, it has the Zeiss Co-ordinate Measuring
Machines (CMM) for precision measurements of critical components and Vacuum
tunnel for high speed balancing of rotors with capabilities of over-speed
The turbine casing machining is undertaken using the most modern 5-face CNC
Gantry Machine and every turbine shipped by the Company undergoes
Mechanical Steam Run Test to ensure its mechanical integrity and safety.
Apart from the above mentioned specialised machines, it has a fleet of 4-
Axis CNC machines for blade machining, casing etc.
Apart from the hardware, the facility also uses the latest software such as
Integrated CAD/CAM for seamless manufacturing of turbine parts,
computerised wireless Advanced Data Acquisition System (ADAS) for capturing
mechanical run test data and automatic generation of test reports etc. The
facility is equipped with material handling equipments for handling the
heavy castings and forgings.
With this infrastructure, the Company ensures faster delivery of quality
turbines thereby making TTL a reliable name in the turbine industry.
Effective and efficient supply chain and project management enables the
Company to keep its cost under control. A strong supply chain and project
execution team are the key for efficient performance. It has the adequate
volumes to access the global market for sourcing cost effective materials.
Even though the Company uses its in-house manufacturing facility for all
critical components and assembly and testing of the turbines, it has
developed a strong, reliable and quality adhering sub-contracting network
to support its operations. With an optimal usage of in-house manufacturing
and sub-contracting, the Company is able to meet its delivery schedules
while maintaining its cost leadership.
The Company is committed to provide products and services of consistent
quality that exceed the expectation of domestic and international customers
and achieve competitive edge. In order to ensure the delivery of quality
turbine solutions to customers, the Company follows multiple stage quality
check and adheres to contract specific quality requirements.
The product strength lies in achieving relevant product standards such as
API, ASME, AGMA, NEMA, IEC etc. To maintain full quality control, Company
has a network of approved suppliers and dedicated sub-contractors complying
with stringent quality norms. In day-to-day activities, Company employs
tools and techniques such as Six-Sigma methodology, Kaizen, Small Group
Activities, Daily Work Management and Root Cause Analysis, etc. in order to
provide its customers with reliable and high performing turbine solutions.
To create and bring culture of continuous improvements throughout the
organisation, TTL has introduced 'Kaizen' scheme with proper reward and
recognition covering small improvements in productivity, quality, cost and
safety by eliminating waste and improving processes. This move has enabled
setting and achieving ever higher standards through employee participation.
The results are immediate, significant and satisfying. In 2011, TTL team
has presented their Kaizen in 15Tn All India Kaizen Competition at Pune,
organised by CII.
TTL has demonstrated its presence as one of the successful organisations in
India. TTL has been awarded 'Commendation for Strong Commitment to Excel'
on Journey towards Business Excellence during the last three years of
participation in CII Exim Bank Award and the scores granted are showing
upward trend since 2008. CII-EXIM bank Award for Business Excellence is
based on Excellence Model of European Foundation of Quality Management
(EFQM) and the award process is administrated by CII in India.
RESEARCH & DEVELOPMENT
The Company embarked upon a focused Research & Development (R&D) programme
nearly a decade ago. The R&D program has been led by Company's in-house
design and development teams ably supported by consultants and domain
experts. The main focus of the Company's R&D programme is to meet the
emerging needs of customers. It also has association with leading academic
institutions such as IIT Chennai and HSc, Bengaluru to strengthen its R&D
programme. The Company's association with globally acclaimed turbo-
machinery design houses based in United States of America helps in
developing best-in-class products. This has resulted in the introduction of
many new variants of high pressure and temperature applications, cost
effective and highly efficient steam turbines which meet the market
expectations. Over the past 10 years, the Company has developed and
commercialised 22 basic new models. Company uses combination of impulse and
reaction blade path to achieve optimised product parameters.
The Company has invested in the state-of-the-art design tools and software
and the in-house team is trained using these tools. Over these years of
learning is helping the Company to design internally many variants and is
currently using the external agencies for the validation and approval of
such in-house developments. R&D team utilize the latest computer aided
design and engineering software for Finite Element Analysis (FEA),
Computational Fluid Dynamics (CFD), Aero and Thermal Design, Modeling,
Rotor Dynamics and Lifeing analysis of turbo-machinery components.
Various tools used in the process are turbo-machinery blade design and CFD
tools (AGILE by Concept NREC, USA) and general purpose CFD tools CFX, FEA &
Lifeing Analysis Tools (ANSYS, Hypermesh, BladePRO by Impact Technologies,
USA), CAD modelling (PRO-E, AUTOCAD), lateral & torsional rotor dynamics
software (CRISP, TORSION, ARMD, Dyrobes). To ensure the functionality,
safety and reliability of the steam turbo-generator, R&D team uses high-
tech testing facilities for validation for design like blade frequency test
bed, Campbell analysis of blades, strain gauging, over-speed vacuum tunnel
balancing machine, mechanical steam run test, high pressure seal testing,
hydraulic simulation facility etc.
The R&D team is also engaged in value engineering to bring down the cost of
the product thereby making the product more competitive and profitable.
There is continuous product improvement program which focuses on higher
power density and reduction in the size of turbines. Various reliability
and operation improvement features such as high automation levels,
additional safety redundancy, high speed control system, quick start cycles
etc. are incorporated in the products. Semi modular product design
philosophy is employed which optimises product performance and cost due to
standardisation. Focus is both on product value enhancement and product
cost reduction so that value proposition to customer is continuously
Innovative product development concepts such as Design to cost, QFD, FMEA
techniques, DOE techniques for robustness, cost/performance optimization
are employed. TTL's R&D designs are getting patented and the in-house IPR
team is getting all the processes and designs registered under various IPR
tools within India & abroad. This will help in safeguarding TTL's in-house
technology and get the competitive edge over the other OEMs. The Company
has filed 11 (Nos.) patents and has registered 7 design patents out of 9
filed by it in India & EU countries. Totally there are 21 IP filings in
India & EU and the Company shall shortly file the IPs in US too. The IP
area covers various components enabling high efficiency energy conversion
in the turbine and reliability improvement features.
As the Company is expanding its products and servicing, it requires
technical manpower to support its growth plan. The Company realised this
well ahead of its competitors and has set up a world class Learning Centre
for meeting the future requirement of skilled and trained manpower. The
Company's training programme is focused on developing technical expertise
in the areas of design, manufacture and servicing of steam turbines besides
the managerial & leadership skills. Various specific and focused training
modules have been designed for training graduate engineering trainees.
Refresher courses and the job specific programmes are also organised at the
centre for existing employees. Since its inception, 351 training sessions
have been concluded covering 71 GETs/DETs and 513 experienced employees.
During the year under review, 35 training sessions were held resulting in
1800 of man-hour training.
The performance analysis of the turbine business is for a period of six
months, from the appointed date of demerger i.e., 1st October, 2010. During
this period, the Company recorded an all-round growth, with enhanced
performance across the parameters of sales, profitability and order
The Company continues to maintain its market share of over 60% in the steam
turbines market upto 30 MW. It has established its dominance in the sub 20
MW with a market share of more than 75%, while the market share in the 20
to 30 MW segment has grown to about 35% in three years time. The current
overall domestic market for steam turbines upto 30 MW range is estimated at
about 2000 MW and is expected to grow at 10-15% in the foreseeable future.
During the period, the net sales grew by 19.54% and profit before tax
increased by 21.30% over the corresponding period of previous year (during
which it was a division of TEIL). The order intake during the period
totalled Rs. 2.71 billion, while the outstanding order book as on 31st
March, 2011 stood at Rs.5.83 billion, representing 988 MW. It dispatched
turbines aggregating to 427 MW during the six months period.
The improved market conditions with increased demand and ensuing Capex
programmes in various industrial sectors were the key drivers for sales and
order booking during the year. Multiple orders were booked during the year
for high temperature, high pressure turbines.
The Company continued its thrust on exports and is on course to expand its
overseas market in a big way. The Company's efforts in this direction will
be augmented by opening off-shore marketing and servicing offices which
will help it in being close to its customers and thereby understand their
needs better and serve them well. The factors leading the growth in global
market for steam turbines include the revival of industries in South East
Asia, Biomass IPP growth driven by mandatory targets of EU nations for
share of energy from non-renewable source, fuel shift i.e., oil to solid,
and instances of some specific segments doing well.
During the period, the revenue mix from domestic sales and exports were 89%
and 11% respectively, which is an indication of improved global market
conditions for the customers.
Service remains the key differentiator for the Company in the industrial
turbine segment. It continued to strengthen its work-force during the year.
It also forayed into refurbishing in utility range. The share of after-
sales component in the total sales has gone up to Rs.440.2 million during
the period from Rs.410.0 million in the corresponding period of the
previous year. The increasing share of after-sales component will enable
the Company to sustain its profitability going forward.
GE TRIVENI LIMITED (GETL]
Triveni Engineering & Industries Limited (TEIL) formed a Joint Venture (JV)
with an affiliate of GE for design, manufacture, supply, sell and service
of advanced technology steam turbines in the above 30 to 100 MW for power
generation applications in India and across the globe. The JV agreement was
signed on 15th April 2010, while the JV became operational from 3rd
November 2010 after obtaining all regulatory approvals etc. The JV Company,
GE Triveni Ltd. (GETL), is headquartered in Bengaluru. Upon the demerger
becoming effective, all agreements including the investment in GETL by TEIL
has been novated to the Company (TTL) which holds 50% + one share in the
equity share capital of GETL, with both parties having equal representation
on the board. Consequently, GETL is a subsidiary of the Company. GETL will
use GE technology and the manufacturing will be outsourced to the Company
(TTL). The marketing for the JV will be undertaken by both partners with GE
handling the international market and the TTL responsible for the domestic
market. The market for these products is currently estimated at around US$
2.5 billion globally, of which the Indian market is about US$ 300 million.
GETL's operational activities have already started and key managerial
personnel have been inducted. The strong enquiry book both in domestic and
international markets has been encouraging and GETL has started quoting
against these enquiries. GETL is expected to have domestic and
international order-bookings in the next two quarters. The vision of both
partners is to make GETL a global leader in above 30 to 100 MW segment.
The Scheme of Arrangement (Scheme) between Triveni Engineering & Industries
Ltd. (TEIL), Triveni Turbine Ltd. (TTL) and their respective shareholders
and creditors was approved by the Hon'ble Allahabad High Court vide order
dated 19th April 2011 and had become effective on 21st April 2011 upon
filing of the order of the Hon'ble High Court with the Registrar of
Companies. Pursuant to the Scheme, all the assets and liabilities of the
steam turbine business of TEIL have been transferred to and vested in TTL
from the appointed date of 1st October 2010.
Accordingly, financials for the year ended 31st March 2011 include
financial results of the steam turbine business for a period of six months
from 1st October 2010 to 31st March 2011. In the previous financial year
2009-10, the Retail business, being carried on by the Company in semi
urban/rural areas, was substantially wound up and the complete winding up
has been achieved during the current financial year. Hence, the figures of
the current financial year and the previous financial year are not
With the complete winding-up of the Retail Business, all provisions/losses
in respect thereof have been accounted for and henceforth the results of
the Company will not be impacted in any manner by the erstwhile Retail
Summarized results for the FY 2010-11 and 2009-10 are provided here:
Rs. in Million
31st March 31st March
Net Turnover 3054.2 60.3
Operating Profit (EBITDA) 715.6 (53.3)
Depreciation and Amortization 58.9 3.9
Finance Cost 45.6 0.1
Profit before Tax (PBT) before 611.1 (57.3)
Extra ordinary/Exceptional Items
Extraordinary/Exceptional Items 559.8 23.5
PBT after Extra ordinary/ 51.3 (80.8)
Tax 124.0 (4.9)
Profit After Tax (72.7) (75.9)
Pursuant to and arising from the Scheme, goodwill of Rs.559.8 million was
recognized and accounted for and the entire amount has been written off
during the year. This is a one-time non-cash charge and has been
categorised as an Extraordinary Charge. After writing off the entire amount
of goodwill and booking all losses/provisions relating to the erstwhile
Retail business, the financial results for the subsequent years would only
reflect the operations of the Turbine business. The segment reporting of
the Company is provided in the Note No. 10 of Schedule 24 to the audited
accounts and the summarised segment results are provided here:
Rs. in Million
31st March 31st March
Steam Retail Total Steam Retail Total
Segment Revenue 3153.8 2.6 3156.4 - 60.3 60.3
Other Income 23.8 1.9 25.7 - 6.2 6.2
Total Revenue 3177.6 4.5 3182.1 - 66.5 66.5
Segment Results 657.0 (1.5) 655.5 - (59.0) (59.0)
The financial results of the steam turbine business are only for a period
of six months from 1st October 2010. As may be observed, there have been
minimal operations of Retail business during the current financial year and
in view of the fact that the business has been duly exited, it will not
appear as a reportable business segment from next year. Steam turbine
business has achieved margins at 20.7% of its segmental revenue.
Prior to the Scheme becoming effective, the Company was a wholly owned
subsidiary of TEIL. Pursuant to the Scheme, 257.88 million equity shares of
Rs.1/- each fully paid up have been allotted to the equity shareholders of
TEIL in the ratio of 1 (one) fully paid up equity share of Rs.1/-each of
the Company for every 1 (one) equity share of Rs.1/- each fully paid up
held by them in TEIL. Further, out of the paid up capital of 100 million
equity shares of Rs.1/-each fully paid up of the Company entirely held by
TEIL (prior to the Scheme), 28 million equity shares of Rs.1/-each stood
converted into 2.8 million, 8% cumulative redeemable preference shares of
Rs.10/- each. Consequently, the paid up share capital has increased from
Rs. 100 million to Rs.357.9 million. Since the aforesaid change in share
capital has taken place subsequent to 31st March 2011, after the approval
of the Scheme, such shares have been shown in the suspense account in the
audited financial statements.
The total loans aggregate to Rs.883.4 million as against Rs.175.4 million
as on 31st March 2010. The breakup of the loans is provided here:
Rs. in Million
31st March 31st March
Term loans 581.5 0.1
Cash Credit 35.2 -
- Buyers credit 90.0 -
- TEIL 176.7 175.3
Total 883.4 175.4
Pursuant to the Scheme, the allocation of term loans pertaining to steam
turbine business has been carried out in accordance with the provisions of
Section 2(19AA) of the Income Tax Act, 1961.
In accordance with the Scheme, investments made by TEIL in the equity share
capital of its subsidiary Company, GE Triveni Turbine Ltd., (GETL), were
transferred to TTL and hence, GETL has become a subsidiary of the Company.
As of 31st March 2011, the Company holds equity investment of Rs.10 million
As explained in the Directors' Report, there is an enormous market, both
global and domestic, for the business contemplated by GETL in the range of
above 30 to 100 MW turbines. The results of the subsidiary will be
consolidated with this Company.
As on 31st March 2010, the Company had accumulated loss of Rs.257.9 million
arising from the erstwhile Retail business. Further, during the year there
is a loss of Rs. 72.7 million as goodwill of Rs.559.8 million has been
fully written off during the year. Thus, the accumulated loss as on 31st
March 2011 stands at Rs.330.5 million. In view of the profitable nature of
steam turbine business, the Company is hopeful of liquidating all such
losses in the next year.
BUSINESS RISKS AND MITIGATION
The Company's business, manufacturing and marketing of steam turbines,
falls under capital goods industry and has a direct bearing with the
country's economic activity. Even though several factors are not within the
control of the Company, the Company strives to mitigate those externalities
in the best possible manner so as to achieve optimal and diversified
revenue stream in order to grow and improve the profitability.
Major risks Economic Slow Down
The slowdown in economy reduces the demand for capital goods/infrastructure
requirements. It may adversely impact the growth of the Company's business.
Rising Interest rate
Rising interest rates and non-availability of adequate financing generally
has direct impact on the growth and viability of creation/expansion of
Considering the industry in which the Company operates, it is imperative to
continually upgrade the products to meet the expectations of the customers
and product offerings of the competitors and failure to do so may lead to
obsolescence of the products and decline in market share.
The Company faces competition from both the domestic as well as
Risk mitigation measures
The Company has developed a framework under which the risks are reviewed on
a continuous basis and appropriate action is taken as warranted by the
situation. The Company is cognisant of the major risks and takes following
measures for mitigating the risks associated with the business:
Presently, the Company predominantly caters to the requirements of the
domestic market, with export forming only about 11% of its total turnover.
While the economic growth of the country is expected to increase by 7-8%
for the next several years, the Company is focusing to diversify its market
by introducing different models of its products and to increase the
proportion of exports in the turnover. The Company's focus on expanding its
geographical spread will insulate the business from any slackness in demand
from one region. The Company's recent joint venture with GE to offer
turbines in the above 30 to 100 MW range would also help the Company to
enhance its product range and to access global as well as domestic market.
Further, to maintain and enhance the profit margins, the Company strives to
also increase the proportion of the after-market business including the
refurbishment and re-engineering of larger size turbines. This two-pronged
strategy will help the Company to reduce its over-dependence on one market
as well as to maintain its profitability even under any difficult business
The Company manufactures products which, to a large extent, cater to the
captive and co-generation power users. During times of high interest rates
or scarce bank credit, such units are compelled to focus on efficiencies
and cost control to protect their bottom lines and are thus not averse to
make investment to reduce the operating costs and to economize the
operations. Further, the Company also offers aggressive after-market
services to the customers who are not inclined to invest in new or
expansion of existing production capacities. This helps the Company to
maintain its profitability. The opportunities for export of surplus power
at competitive prices are also another driver for the end-users in
investing in captive/ co-generation facilities in view of shorter pay-back
The Company is continuously investing in its in-house R&D programmes for
the development of new models and for enhancing the product ranges to
broaden its market and to increase its market share. The Company takes
cognizance of the competition and accordingly, benchmarks its products to
stay ahead by continuously upgrading the technology. Further, the Company,
through value engineering, endeavours to provide an outstanding value
proposition to the customers. The Company attaches greater importance to
its supply chain with a view to source the inputs of good quality raw
materials at competitive prices and with reliable delivery timelines.