Triveni Turbine Ltd Management Discussions.

Economy

The global economic growth slipped to 2.3% in 2019 after touching 3.1% in 2018, amid prolonged trade disputes, risks of financial stress, and volatility, according to the World Economic Situation and Prospects (WESP) report.

The slowdown in growth is taking place across key advanced economies, and some major emerging economies as well. Among the emerging economies, the East Asia and South Asia regions remain on a relatively strong growth trajectory, owing to robust domestic demand conditions.

Due to the economic slowdown, coupled with the impact of COVID-19 in Q4 FY 20, Indias GDP grew by 4.2% in FY 20, compared to 6.1% in FY 19.

Global Power Industry

The Power Industry has been undergoing transformation in recent years. Going forward, too, the changing energy generation mix and shift from conventional sources to renewable sources will continue. Sustainable power development, and focus on addressing concerns related to climate change through eco-friendly policies etc., are seen as key trends in the industry. The future scenario will see greater acceleration towards eco-friendly "Green Power" solutions.

Indian Power Industry

The countrys need for energy is increasing rapidly, owing to economic growth and modernisation over the past few years, taking the gross electricity consumption from 1,149 kWh per capita in FY 18 to 1,181 kWh per capita in FY 19, according to the Central Electricity Authority (CEA).

Indias total installed power generation capacity is 370 GW, as of March 2020, compared to 356 GW in March 2019. This includes 87 GW of capacity from Renewable Energy Sources, as on March 2020. Of this, 9.8 GW capacity is from Biomass power (Bagasse and Non-Bagasse), as against 8.7 GW as of March 2019, followed by 147.6 MW from Waste to Energy, compared to 138 MW in the previous fiscal, according to Ministry of New and Renewable Energy (MNRE).

According to the 19th Electric Power Survey conducted by Central Electricity Authority (CEA), the all-India installed power generation capacity is projected to grow to 619 GW by the end of FY 27.

Industry Analysis

Renewable Energy

Independent Power Producers (IPPs) play a major role in generating power for sale to the grid or to specific customers. In the Renewable Energy industry, a Feed-in tariff (FiT) or Power Purchase Agreement (PPA) provides long-term price guarantee for majority of the IPPs. Increasing focus on replacement of existing coal-fired power plants with clean fuel generation, in order to reduce carbon footprint, will further augment the renewable power generation business in the future.

The global renewable power capacity (excluding hydro) increased by 8% in 2019 to 1,347 GW, compared to 1,246 GW in 2018, according to the Renewables 2020 Global Status Report. In India, the Ministry of New and Renewable Energy (MNRE) has set a target of 175 GW of renewable power capacity by FY 22 (including 10 GW target from biomass power). As per the Central Electricity Authoritys strategy blueprint, the country is aiming for an even more ambitious target of 57% of the total electricity capacity from renewable sources by 2027. According to the 2027 blueprint, India aims to have 275 GW from renewable energy. This will increase the demand for thermal renewable energy (Biomass) based power plants in the country, and concurrently trigger greater opportunity for the installation of steam turbines in the future.

Captive Power Generation

Globally, the captive power generation for industry is expected to remain strong, owing to the increasing demand for power from emerging industrialised economies such as China, India, Africa and Middle East, which offer subsidised rate per unit cost of power generation.

In India, the widening power supply-demand, the increasing investments in the industrial sector driven by the ‘Make in India initiatives, the rising input costs (energy) and electricity prices, coupled with stringent Government regulations, are expected to drive investment in the establishment of captive power plants.

The need for continuous uninterrupted quality power supply for sustainable industrial operations, backed by improvement in coal supply, will enhance captive power additions in the country. Thus, the installed captive power generation capacity in India is expected to witness around 3% growth over the next 4 years, to touch 65 GW by March 2023.

The largest market for captive power generation in the country is the Industrial sector, mainly on account of the increasing demand for electricity from energy-intensive industries (Cement, Petroleum Refining, Chemicals, Iron and Steel etc.), which, in turn, is expected to drive the demand for steam_turbines.

Combined Heat and Power (CHP) Systems

The Combined Heat and Power (CHP)/Co-generation system generates electricity or mechanical power with lower emissions compared to conventional power generation systems. CHP systems/technologies are thus widely preferred for captive power generation for industrial applications, such as Biomass, District Heating, and in Data Centres etc., driving the demand for steam turbines across the globe.

The bulk of the demand for CHP is expected to come from markets like Asia-Pacific, South and Central America, Middle East and Africa. As per industry estimates, the global CHP market is projected to increase its installed capacity from 864_GW in 2018 to 972 GW by 2025.

Bioenergy

Bioenergy will remain the predominant source of thermal renewable energy till around 2023, though its total share is estimated to decline from 50% in 2017 to 46% in 2023, due to expansion of alternate renewable power generation technologies (such as Solar Photovoltaic and Wind). Higher acceptance of Bioenergy will increase investment for biomass power plants globally, thereby boosting the demand for steam turbines. According to an international report, in early 2019, there were nearly 4,000 active biomass power plants worldwide, with an installed electrical capacity of around 67.7 GW. This is expected to increase by 1,550 plants, to reach about 5,550 biomass power plants with a capacity of around 89.4 GW by the end of 2028.

Biomass (bagasse and non-bagasse) as fuel helps the CHP system generate power that is sustainable. Industrial use of Bioenergy, particularly from sugar and palm oil mills, is conducive to the production of power from biomass. South East Asias biomass generation capacity is expected to increase to almost 19 GW by 2040.

The Bioenergy (bagasse/non-bagasse) potential in India has been estimated at 25 GW in 2022, and the Government of India (GoI) has been consistently promoting the Biomass Power and Bagasse Co-generation programme. Indias current bagasse-based co-generation target from Sugar industry in 2022 is 10 GW. However, the overall sugarcane crushing capacity is expected to go up significantly, owing to favourable weather conditions and increased yields of sugarcane, leading to higher utilisation of bagasse-based co-generation target in the future. Co-generation from bagasse is expected to clock 16 GW in 2027 and 30 GW in 2030, thus significantly propelling the demand for steam turbines.

CHP Systems in Power Generation Application – Waste Heat

The waste heat recovered from other industrial sources/ processes, and commonly found to generate steam and electricity in Cement processing, Heavy Metal processing, Petroleum Refining Process and Chemical processing, can be further used as fuel in other processes.

Waste to Energy (WtE)

Rapidly increasing industrial waste, along with stringent EU-wide waste legislations, have been the key drivers for the growth of WtE technology in Europe – one of the largest markets for these technologies. Countries like Switzerland, Germany, Sweden, Austria and Netherlands lead installation capacity within Europe.

The Asia-Pacific market is also, however, expanding rapidly and is estimated to grow at a CAGR of 7.5% due to increasing waste generation, higher investment thrust by Government organisations in China and India, and increased technology penetration in Japan. The Indian Government is providing incentives and subsidies for use of renewable technologies, in order to generate more and more power through waste utilisation. Even though the potential for WtE power generation in the country is huge, production is still in a nascent stage with only around 147.6 MW of power generation capacity created so_far.

Residual waste from disposal of Municipal Solid Waste (MSW) is another source of input and is treated with various WtE technologies for electricity generation. However, high initial cost of investment required to build a WtE plant is one of the key factors likely to hamper future growth of this market.

According to industry sources, MSW generation in India is estimated to reach 4.5 lakh tonnes per day in 2030, from around 1.5 lakh tonnes per day in 2019. Of the countrys current MSW generation, only about 25% is processed (i.e. recycled, composted and converted into biogas or electricity). The demand for steam turbines is based on project viability criteria (in turn based on return on investment and calorific value of the waste), feed-in tariff proposed by the government, and assurance of waste collection by the municipalities etc.

The Government of India, under the Swachh Bharat Mission, has set a target of constructing 800 megawatt (MW) of WtE plants - five times the collective capacity of all the existing WtE plants.

It also proposes setting up a Waste-to-Energy Corporation of India, which would construct incineration based WtE plants through the Public Private Partnership (PPP) model. According to industry sources, there are currently 40 WtE plants at various stages of construction.

To conclude, rapid increase in electricity consumption, along with growing focus on electricity generation through thermal renewable energy sources, is expected to unleash huge opportunity for steam turbines in the future.

Indian Manufacturing Sector

Manufacturing has emerged as one of the high growth sectors in India. The ‘Make in India programme is aimed at placing the country on the world map as a manufacturing hub and bring global recognition to Indian manufacturing. India is expected to become one of the largest manufacturing countries in the world by the end of 2022.

Under the ‘Make in India initiative, the Government aims to increase the share of the manufacturing sector in the Gross Domestic Product (GDP) from 17-18% at present to 25% by 2025. Improvements in ease of doing business, coupled with continuing augmentation in infrastructure and skilled workforce, should support the spurt in manufacturing activities in the coming years.

Industry Analysis – Manufacturing Sector Outlook

The largest market for captive power generation globally is the Industrial sector. It is estimated that the 3-100 MW steam turbine market will grow by over 8% by 2024, mainly due to increase in investment to promote energy efficiency in process industries, namely Sugar, Distilleries, Pulp and Paper etc. Globally, the demand for steam turbines from Sugar co-generation, including the Distillery segment, has been growing by 6% annually.

The Indian Governments focus on clean fuel has triggered significant potential for Distilleries requiring captive power generation. With the launch of the National Biofuels Policy, as well as incentives offered by the Government (such as soft loans) for setting up of new distilleries and expansion of old distilleries, huge investments are being made by the sugar companies in Greenfield and Brownfield expansions. Investments are also being made for setting up grain-based distilleries to manufacture ethanol and supply the same to Oil Marketing Companies.

Indias National Biofuels Policy 2018 stipulates an ethanol blending target of 10% by 2022 and 20% by 2030, while biodiesel blending target has been set at 5% by 2030. The Consumer Affairs, Food and Public Distribution Ministry has given in-principle approval to 362 new distilleries in sugar mills for adding capacity of 550 crore litres. This will augur well for the steam turbine industry as the demand for captive power generation will also increase in the sector.

Globally, the demand for steam turbine from the process Co-generation segment has grown primarily due to increasing demand from Pulp and Paper, Cement and Chemicals industries_etc.

CHP Systems in Industrial Application - Process

The Pulp and Paper industry constantly focusses on improving energy efficiency, which is attained through increased use of biomass (wood waste) based power generation, and by efficient usage of steam. CHP/Co-generation in Paper industry offers another area of interest for growth of demand for steam turbines. Despite the widespread use of CHP systems in the Indian Pulp and Paper industry (especially in large and medium plants), the potential for growth in CHP still remains.

India is the 2nd largest Cement and Steel producer in the world. According to industry estimates, the cement production capacity is estimated to touch 550-600 million tonnes by 2025, and the crude steel production is expected to reach 128 metric tonnes (MT) by 2022. In Cement and Steel industry, hot exhaust gas is currently being utilised from production lines in order to reduce the operating cost. The heat from the hot steam is recovered using Heat Recovery Steam Generators (HRSG) for the generation of superheated steam that can be used in the process (co-generation) or to drive a steam turbine (combined cycle).

According to the International Council of Chemical Association (ICCA), the size of the global Chemical industry was estimated at USD 5.7 trillion in 2018-19, and is also driven by demand from its own consumption (Basic, Specialty and Knowledge chemicals), and from various end user industries (Industrial,

Agricultural and Consumer markets). The Indian Chemical industry contributes 3.4-3.5% to the global Chemical industry, and is expected to grow at the rate of 9% per annum to reach USD_ 211 billion by 2020-21 and USD_ 298 billion by 2024-25. This should lead to fresh capacity creation, both in terms of Greenfield and Brownfield.

Energy efficiency and CO2 emission reduction, thus, are playing a crucial role in driving the demand for thermal renewable based steam turbines in various process heating and power generation applications. With cheap coal prices and supportive policies for coal-fired power plants in the country, the demand for fossil fuel steam turbines is also expected to grow.

Market Analysis (5-30 MW)

Global Steam Turbine Market

The Global Steam Turbines Market came down from a level of 139 GW in calendar year (CY) 2010 to 39 GW in CY 2019 - a compounded average decline of 13%

Fossil Fuel based power generation, which was earlier the main fuel source, declined from 69% in CY 2010 to 43% in CY_2019, whereas Thermal Renewable based power generation increased from 3% in CY 2010 to 17% in CY 2019.

In terms of MW sold for the past five years, the global steam turbines market has seen the sharpest decline in the > 100 MW range, where the Compounded Average decline was to the extent of 30%. In the case of < 30 MW and > 30 – 100 MW range, the market has been steady and has registered a CAGR of 3% and 2% respectively.

Unlike in total steam turbine market, wherein Fossil Fuel still dominates, in the Sub 30 MW, the growth of Thermal Renewables has been quite consistent and strong. Fossil Fuels share has remained flat at 28%, while the dominance of Thermal Renewables is quite significant at ~ 65%.

In the five-year period (2015-19) and also in CY 2019, Triveni held a market share of 20% in the global market for 5-30 MW range.

Steam Turbines Market in India

In 2019, the Indian steam turbines market, in terms of MW, grew by 1% compared to 2018. The market held steady in 2019, supported by Fossil Fuel fired power plants, followed by Thermal Renewable based power plants (including Biomass, Waste Heat and Waste to Energy). Majority of the steam turbines requirement in 2019 was in captive power generation and energy intensive segments like Steel and Process Co-generation segments like Cement, Pulp and Paper, Chemicals and Fertiliser etc. With the Manufacturing sector on the growth trajectory and industries like Sugar, Steel, Cement and Pulp and Paper segment expected to increase production, the demand for steam turbines should remain robust in the future.

Business Review

Led by its sustained focus on adopting innovative technology, backed by seamless execution, Triveni has emerged as a trusted service provider to customers around the world. To ensure sustained growth in brand recall, the Company has consistently strengthened its position in the Industrial sector by meeting the captive power requirements of its customers in various Greenfield and Brownfield projects. Triveni continues to drive its market growth by establishing a strong global footprint and offering wide range of state-of-the-art steam turbines, coupled with an excellent aftermarket portfolio to meet the needs of its customers round the clock.

The overall order booking for the year under review declined by 7% as compared to the previous year, on account of the COVID-19 impact. However, despite the adverse impact of COVID-19 on the international market in the last quarter of the year, Trivenis export turnover, year-on-year, actually remained flat. On the order booking front, the Company had a good enquiry pipeline for finalisation in Q4 FY 20, and, but for the impact of COVID-19 for almost 6 weeks of the quarter, the international market order booking would have been significantly higher than what was eventually achieved.

The enquiry pipeline from the international market is strong from most of the new geographies. In the export market, the Renewables sector is driving demand, specifically from the Biomass and Waste-to-Energy projects. The Company currently has orders and installations from over 70 countries and will be focussing on new markets in the coming years. Some of the segments of focus are Biomass, Paper, Process and Sugar co-generation and Palm oil, apart from the newly entered segments of Waste-to-Energy, Combined Cycle, Oil & Gas etc.

In the domestic market, the Company witnessed postponement of order finalisation towards the latter part of Q4, which resulted in lower order intake by 32% over the corresponding quarter of the previous year. However, on an annual basis, the domestic order booking grew by 8%. The main segments of traction in order finalisation were Sugar co-generation, including Distillery, as well as Biomass IPP, Food Processing and Waste Heat recovery.

Aftermarket Business

Aftermarket business is services driven relationship management that aligns customer and OEM goals for mutually beneficial outcomes. This function is the custodian for managing the Companys relationships, and for promoting customer retention and loyalty all through the turbines life-span and beyond.

The Companys aftermarket business was further fortified during the year with focus on turnkey services, automation, transformations, refurbishing and efficiency improvements solutions, not only for the Triveni brand of turbines, but also for other brands of turbines of any age, in any industrial segment and at any global location.

The Company has leveraged technology to enhance its customer focus, with its concerted digitisation thrust, aided by its established remote monitoring and diagnostics solution "Triveni Touch", specially developed for turbines. This solution provides both, its field service engineers and the turbine asset managers of its customers, visibility of turbines operating parameters and real-time status updates from anywhere. It generates reports, helps analyse performance trends, gives instant notifications, and provides peace of mind to the asset managers through a real-time dashboard which is visible through an app on his/ her mobile phone from any part of the world. "Triveni Touch" can anticipate any equipment issues for providing preventive solutions, thus avoiding unexpected downtime.

The Triveni team of trained and experienced engineers utilises the latest communication tools for live and secure customer engagement, with actual Facetime via screens of personal devices, irrespective of large distances and varied time zones. This gives customers the added comfort of having access to expert guidance at the click of a button. The Triveni teams embrace the virtues of remote service support and follow standard operating procedures to help troubleshoot any issues that the customer faces, and recommend solutions while saving precious time.

Webinars have been organised by the Company across industries, through a series of knowledge-sharing sessions attended by key personnel of large customers in India and overseas.

With focus on providing refurbishment solutions to other brands of turbines, the aftermarket business has successfully ventured into new geographies. The "Triveni REFURB" sub brand is promoted through a robust multi-channel social media presence, not only generating interest in hitherto unexplored industry segments such as Geothermal Energy Providers, but also securing business.

Nearly one-third of the aftermarket business order booking is currently being contributed by international markets.

Impact of COVID-19

The World Health Organization declared a global pandemic of the novel Coronavirus disease (COVID-19) on February 11, 2020. The pandemic has severely impacted the world economy including India. The operations of the Company were also impacted, particularly from the last week of March 2020. During the lockdown period, both the manufacturing facilities and all sales and service offices were closed. However, our employees could quickly respond to the challenge by working from home and remote locations. With necessary IT and other digital support, the new working norm of working from home stabilised fast and the Company is able to support customers needing attention.

The Company resumed partial operation from the third week of April 2020 following government guidelines and gradually stabilised the manufacturing process to near normal towards the middle of May. During the process, the Company faced upheaval challenges in the supply chain and logistic system as certain State borders were intermittently closed, prolonged lockdown in some of the States and restriction of movements. Non availability of labour force in our major vendors base also impacted sourcing of raw material and components. However, the Company could partially overcome the challenge through alternative sources of supply.

Due to the above bottlenecks in logistics, closure of customers site and suspension of travel, there has been an impact on production, revenue, customer services and order booking.

The COVID-19 pandemic has disrupted demand and supply chains across industries, negatively impacting the business of almost all companies and driving the global economy towards a recession. Governments in several countries have imposed stringent lockdown in a bid to contain the spread of the disease. This in turn has forced companies to reconfigure their investment strategy and slow down the order finalisation process, impacting our business.

The travel restriction has significantly impacted our revenue stream as our service engineers are unable to travel at customers sites and our sales team is unable to attend tender meetings and for order finalisation. All these factors collectively have impacted our International business significantly. Domestic business, on the other hand, has an impact of lesser magnitude. However, on the positive side, our enquiry book position still remains healthy. The loss of business due to travel & other restrictions is partially overcome with digital marketing and other remote control tools such as video conferencing tools and secure digital transference of files and data.

The Company also had its share of impact due to COVID-19, which affected its order booking and revenue recognition in Q4 FY 20. The adverse effect of COVID-19 has significantly impacted Trivenis short-term outlook and the Company is taking prompt actions to adapt its operations. With COVID-19 impacting domestic as well as global markets and economies, and based on the current situation, the Company may witness a decline in revenues and order booking in H1 FY 21. We believe FY 21 key financial indicators most likely will be lower than last_year.

The Company has started booking orders by deploying digital technology. Digital platforms are being used to be in touch with customers. Customer focussed webinars and virtual walk through of our facilities have been highly appreciated by our customers. ‘Work from home is continuing, limiting attendance in offices and factories following safety guidelines. Cost of operations has been systemically rationalised to cope up with the revenue challenges during these pandemic times. Since the onset of the pandemic, the Companys primary focus has been on securing the health and safety of its employees while maintaining business continuity. Social distancing, compulsory wearing of masks, daily measuring of temperature and blood oxygen and frequent washing of hands are some of the safety measures mandated in our internal safety protocols in addition to limiting attendance in office. The Company has also upgraded its medical facilities at factory with its own ambulance for employees and their families.

Despite short-term disruptions, the Company is confident in the underlying resilience of its businesses and operating model ensuring safety of employees.

Manufacturing

The Company has two state-of-the-art and eco-friendly manufacturing facilities at Bengaluru (Peenya and Somapura) to manufacture steam turbines up to 100 MW capacity. Both these facilities are certified for AS9100D Rev 2016 / ISO 9001:2015 Quality Systems, ISO 14001:2015 Environmental Systems and ISO 45001: 2018 Occupational Health and Safety Management Systems.

The manufacturing facility at Peenya has been awarded the prestigious Platinum Rating by the Indian Green Building Council (IGBC). This is the highest green rating certification for Factory Buildings. The manufacturing facilities have best-in-class multiple axis CNC machine tools, fully equipped test beds for mechanical run test of steam turbines with wireless data recording systems, IoT-enabled Industry 4.0 systems, biometric-enabled Automatic Tool Dispenser, elaborate operating processes and SOPs, trained operating sta_, as well as rigid quality assurance processes to ensure high quality of the product through all stages of manufacturing. The two cardinal principles in Triveni manufacturing are ‘zero defect and ‘do it right the first time. This ensures the highest level of quality and timely delivery of products to international and domestic customers.

The manufacturing facilities are also equipped with High Speed Balancing Vacuum Tunnels Machine of reputed make, large sized Coordinate Measuring Machine (CMM), Non-Destructive Testing (NDT) facilities and other advanced machinery to support new product development. This enables the Company to offer new avenues of customer services in precision balancing of rotors, not only for turbines but also for all rotary equipment such as compressors, alternators, pumps, and impellers, to further augment its refurbishing business. The Company offers customised high quality turbines in the range of 0.25 MW to 100 MW, completely made in India in line with the Indian Governments ‘Make in India campaign – across all stages of designing, engineering, sourcing, manufacturing and testing. The Companys agile manufacturing set-up has enabled it to successfully compete with MNCs and retain high market share consistently.

Technology and Research & Development

The world-class Research and Development unit of the Company is recognised and registered as an in-house R&D unit by the Department of Scientific and Industrial Research (DSIR), Government of India. It is engaged in developing efficient and cost-effective turbomachinery that matches the latest international quality standards. Based on the fast-evolving market demands and trends, and in response to the continuous feedback received from its own installed turbines generating over 13 GW globally, the Company undertakes continuous upgradation of its products. This has resulted in high-power dense, cost-competitive, robust and efficient turbines that meet the requirements of the global customer.

Collaborating with globally renowned research institutions, such as IISc Bangalore, Cambridge University UK, Politecnico di Milano Italy, IIT Madras and IIT Bombay, through various research programmes and joint studies, the Company continues to be a preferred industrial partner for Indian Government-funded programmes of MNRE, DST, Ministry of Power and the Indian Navy. Extensive in-house validation and testing of newly developed rotary components in European labs is conducted, along with strict monitoring of performance parameters in the field, before commercial deployment, in order to ensure trouble-free performance. The Company has well-defined processes for development, testing, field feedback and continuous advancement of technology through in-house processes, and through association with global research and scientific institutions, including in Europe and USA.

The Company has installed in-house load test facilities with dynamo meter for power test of the newly developed aero profiles. This facility enables the R&D team to internally test the design and off-design characteristics of aero profiles of HP, IP and LP sections of turbine. The facility can test profile losses, secondary losses and leakage losses, and compare the same with CFD predictions. This helps in accurately predicting the turbine stage performance and removes uncertainties of field_power.

Triveni continues to develop cost-competitive and increasingly efficient models, reducing carbon footprint to produce power solutions that meet the requirements of its diverse international and domestic customers. These include customised solutions for specific industrial applications, such as Cement, Distillery, Oil and Gas, Naval and Government projects in new technology areas. The application segments of the Company encompass Waste-to-Energy, Combined Cycle, Process industries, Renewables, Captive and Co-generation, among others. In line with industry trends, the Company has been diversifying into different types of turbines and other renewable energy products that focus on high efficiency cycles, including injection applications, distillery processes, and supercritical CO2 turbines.

The Company is constantly upgrading and improving its steam turbine designs for optimal performance to meet the increasing power solution requirements globally. During the year, GeoThermal application-specific technology enhancement was also carried out. Another thrust area of the Company has been in the Oil and Gas market, where application-specific and API code compliant solutions are increasingly preferred by global_customers.

Intellectual Property Rights

Development of advanced technologies, along with improvements and research in newer product variants, leads to the creation of valuable in-house intellectual property. Such innovations and technological improvements demand immediate protection, and therefore the creation and protection of the Intellectual Property (IP) portfolio is of paramount importance for the Company and all its stakeholders. A dedicated team of IP specialists works closely with the R&D team from planning and conceptualisation to the manufacturing stage, so that the generated Intellectual Property is adequately captured and protected.

The Company has in place a robust IP strategy for the creation and protection of its long-term IP assets, to secure and preserve its technological advantage over its competitors. In line with its global focus, the Company constantly undertakes patent and industrial design filings in different international jurisdictions, even while continuously enhancing its IP portfolio in India. The Company has filed for patent protection and product design protection in India, Europe, South East Asia, and in the United States of America, and plans to protect its IP in the new international markets that it serves. A substantial number of Intellectual Property Rights have already been awarded to the Company in India and other jurisdictions. The Company had filed 269 IPRs in the market globally till March 2020.

Digitalisation

The Company has procured, and also developed in-house, a comprehensive suite of software and automation technologies for industrial applications. These cover the entire lifecycle - from product design and production to aftermarket services, as well as for commercial and financial applications. In recent years, the Company has laid greater emphasis on further digitisation and automation, specifically dealing with project management and remote monitoring of deployed machines, thus paving the path for embracing IoT and Industry 4.0 in a big way. Continuous upgrade of these applications, to bring them at par with the latest available technology, is undertaken as per business requirements. The applications are mostly customer-centric and aim to optimise costs while enhancing business productivity. The Company plans to further automate and upgrade its array of software with constant evaluation, while also strengthening its digital security architecture to address the rapidly increasing cyber security threats.

Supply Chain

Triveni has, over the years, built a sound global supply chain, covering a range of countries - from Asia to Europe and North America, apart from developing dedicated suppliers in India. The Triveni supply chain has a unique advantage in terms of cost, due to bulk purchases owing to the high production volumes of turbines. Cost efficiency, high quality checks, on-time deliveries and effective management of working capital have always been the key focus areas for the Companys supply chain.

With all suppliers treated as ‘Partners in Progress, the Company has developed an elaborate code of conduct to regulate its dealings with suppliers. Following a fully transparent approach, the Company shares Annual and Quarterly production and supply plans with suppliers to ensure that their production activities are streamlined with its own requirements, and also to ensure that the deliveries are on schedule. There are regular and planned visits to suppliers to appraise them about current business requirements of the Company. Inputs and feedbacks are given to suppliers on quality, specific customer needs, technology upgradation, compliances to international standards, new product developments, quality plans and value engineering ideas. This ensures seamless functioning of the supply chain across diverse supply chain partners, and helps the Company maintain its competitive edge through optimisation of cost, quality and delivery parameters.

The Company periodically conducts the audit of its critical suppliers, to identify issues of concern and initiate corrective actions well in advance. In view of the volatile supply chain position due to the recent international geo-political developments, it constantly conducts supplier risk analysis, with mitigation actions on key performance parameters, including on-time deliveries, quality and cost.

The Company is currently exploring and assessing ways to minimise risks by developing alternative suppliers in different geographical areas and equitably distributing the orders. This ensures a lean supply chain, with consistent advantage in terms of volume discounts and distributed vendor base, and also helps cover the risk of cartelisation by vested vendors. The Company undertakes periodic vendor-wise spend analysis, and has established adequate control processes with suppliers to ensure compliance standards, desired quality, good ratings and loyal trade relations. The Company partners with suppliers to evaluate technological innovations in their products and services, and incorporates these changes to improve its technological features, quality and cost competitiveness.

The Company maintains strict controls on inventory through product standardisation, which improves serviceability of its parts. This also helps the Company improve its material procurement planning, and optimise the supply chain cost through long-term rate contracts with suppliers. The Company ensures that suppliers have subscribed to international quality standards such as ISO 9001, ISO 14001, and comply with international regulations on health, safety and environment.

Triveni has a robust and reliable logistics system to ensure that turbines and other ancillaries are safely delivered to customers across the globe in a timely and safe manner.

Quality Assurance

Trivenis design, manufacturing, supply chain, project execution and service capabilities are benchmarked to the highest levels of international quality and responsiveness. A digital process of quality controls and assurances is evolving fast to ensure complete customer satisfaction. During the year, the Company further reinforced the foundation of its Quality Operating System at TTL (QOS@TTL), aiming for Zero Defect and Total Customer Satisfaction.

The Company remains consistently focussed on building a robust quality culture at all levels. This was amply demonstrated in the enthusiastic employee participation during the week-long Quality Day Celebrations in November 2019. ‘Importance and Future of Quality was the main theme for these celebrations. More than 600 man-days of quality related learning and development opportunities were created for all, thus affecting product quality directly. This, along with the Kaizen programme being run at the Company consistently, ensured that all employees remained engaged in quality compliance and improvements.

With refinements in the Companys turbine technology continuing, special focus is given to preventive design philosophy, resulting in faster and error-free execution of the API range of turbines. Detailed problem solving and improvement-oriented approach to handling defects has substantially reduced design-related customer complaints.

Years of instilling quality awareness in the execution teams, both at the manufacturing facilities and on site, made it possible for the Company to continue with its sustained quality improvements during FY 20. This was done by strengthening process checks and risk-based intervention by_QA.

At Triveni, a vital driver of success is the suppliers, who continue to make significant contribution to the deliverables. The Companys multi-pronged approach to improving its supply chain has paid dividends in terms of quality improvement. And more benefit is sure to come in the years ahead, led by the Companys risk-based approach to qualify, evaluate and develop suppliers.

All the above functional focus areas are continuously strengthened with three process focus areas:

Prevention – risk-based approach now entrenched in everything that Triveni does, with the end-of-year COVID-19 crisis adding another dimension to ensuring business continuity.

Compliance – to international quality standards (API, ASME, AGMA, NEMA, IEC, etc.) and global customer requirements (CE, GOST, SONCAP, etc.).

Improvement – by focussing on cost of poor quality and taking actions to improve profitability.

The result of building of this QOS@TTL foundation was indicative of Trivenis success in the journey towards Zero Defect and Total Customer Satisfaction.

Human Resources

The Company considers its human capital critical to its success. It believes that its people enable business growth through delivery of quality products and services crafted to meet the needs of customers, and help enhance business value.

The Companys HR strategy is aimed at achievement of business objectives of growth, while creating and delivering superior and unmatched customer value. This strategy focusses on imbuing the organisation with a culture of continuous learning, innovation, performance, customer orientation. The Company believes in enhancing employee engagement, as well as the growth and welfare of its people. It has implemented various initiatives aimed at augmenting the organisational capabilities that it believes will enable it to sustain competitiveness in the global marketplace. The Company focusses on attracting, retaining and developing talent.

The Companys HR Management processes are aligned to the goal of enhancing organisational capability and agility for constant innovation and change, as well as its readiness for seizing the market opportunities. At the same time, its steadfast commitment to investing in talent management practices ensures that these are relevant and effective, and drive performance and achievement of the highest order.

The Company endeavours to build its talent from within, and as a result of this effort, 50% of its present workforce is home grown. This has given the Company a strong competitive edge over technology, products, services and processes. This has been enabled through the creation of a dedicated, world-class, in-house training facility – the ‘Learning Centre, which is housed in a green environment conducive to learning. The Learning Centre ensures continuous and unobstructed learning for all employees, including the young engineers recruited from various campuses. These youngsters undergo a structured 2-years training programme before being inducted into various departments. The Learning Centre is equipped with multiple classrooms, Computer Based Product Training Lab (CBT), a Library, as well as a highly trained faculty from in-house and external sources.

The Company has embarked on various Employee Engagement Programmes promoting a culture of celebration and collaboration. The Programme also takes care of the physical, mental and emotional well-being of the employees.

Trivenis robust performance management system is designed to achieve Company and individual goals through a well-formulated planning, review and monitoring mechanism. The system also covers the rewards and recognition process, as well as employee development, through monitoring of competencies. The Company continues to drive a culture of high performance, development and growth of employees. The Company also continues to enhance safety and security at the workplace by prescribing policies and procedures, creating awareness and imparting trainings. It has institutionalised key policies like the Prevention of Sexual Harassment policy.

The Company is focussed on building Project Management and Quality Management Skills for Projects, Customer Care and Erection Commissioning, and also imparts Negotiation Skills training to a large section of employees facing customers and vendors. It has also introduced the Supervisory Development Programme and Continuous Improvement Programme (CIP) as part of its efforts to create a multi-level learning environment.

During the year, the Company provided 7,090 training man-days, which translates into approximately 10 man-days of training per employee. It launched multiple training programmes in various facets, including but not limited to upgradation of technical skills, soft skills, performance development, as well as environmental and EHS, commercial and compliance capabilities. Employees are encouraged to build their capabilities through classroom trainings, e-learning modules, learning through subject experts and peers, outbound trainings, on-job learning, mentoring and orientations.

Environment, Health and Safety (EHS)

Nurturance of an organisation-wide EHS climate is a key priority area for Triveni. Both the manufacturing facilities of the Company are eco-friendly and zero discharge plants, complying with ISO 45001 (Occupational Health and Safety Assessment series) and ISO 14001 (Environmental Management System) International Standard requirements. Both facilities boast of lush green nature cover with natural landscaping. During the year under review, both the plants implemented the Integrated Management System (IMS), comprising the ISO 14001 EMS standards and ISO 45001 OHSAS standards, to create a robust Environmental and Occupational Health and Safety System Standards for the overall benefit of the Company. Employees are involved in ensuring good EHS practices through various joint management committees. The entire campus is covered with electronic surveillance through CCTV and IT-enabled security systems.

Environmental Management programmes are drawn with specific Key Performance Indicators each year to improve the environmental performance of the unit. Ambient air quality is ensured through proper maintenance of DG Sets and Boilers. The entire sewage water is treated at the plant, and used for landscaping and gardening. Also, 300 KW of solar panels are installed on the rooftop of the Peenya manufacturing facility, generating about 3.5 Lakh Units of non-conventional electric power, catering to the energy requirements of the factory. Energy efficient LEDs are introduced in a phased manner to replace the conventional CFLs / Fluorescent lights. Both units are also provided with recreational facilities, with indoor and outdoor games and fitness equipment for all employees. The Company also has rainwater harvesting facilities, maintains natural water bodies, and recycles water for garden maintenance.

Triveni has scaled up its safety regulations to address the COVID-19 pandemic. The premises are sanitised on regular basis. Social distancing and wearing of mask are among the protocols strictly enforced in factories and offices. All safety directives issued by Central and State Governments, including adherence to the maximum number of employees permitted per day, are being followed. Thermal screening and hand sanitising are being done for all persons entering the office premises. Awareness creation on prevention of COVID-19 is done on daily basis among all sections of employees, including contract labour.

Business Outlook

The global economic growth in 2019 slipped to 2.3%, though slow recovery was seen from the latter half of the year due to the USA-China trade deal and frequent rate cuts by FED to shore up the US economy. However, the unprecedented global pandemic, COVID-19, brought global economy to a standstill in the last quarter of the fiscal. It opened floodgates for Central Banks in various countries to announce stimulus packages to safeguard human life and eventually restart the economy. The Government of India also announced a fiscal and monetary package to the tune of USD 266 billion to bring the Indian economy back on track. The focus on Self-Reliant India will also augur well for the Company.

Needless to say, the lockdowns in India and other countries resulted in considerable loss of opportunities for order booking, both in domestic and international markets, for almost two months. Even after the lockdowns were lifted several customers continue to face difficulty in financial closure, with their banks forcing them to hold despatches. Sales, profit and cash flows, thus, are likely to be affected in the remaining months of FY 21.

Notably, however, despite the slowdown across major international markets, the Company was able to secure orders from Europe, South Africa, LATAM, South East Asia and Australasia, together with the domestic market, during the year. This will give the Company an important advantage in its efforts to get back on the growth trajectory.

Also, all attempts are being made to minimise the COVID-19 related impacts, though, given the situation with the customers – both in terms of funds availability as well as finances, some situations are out of the Companys control. With a close control on expenses, which include manpower rationalisation and administrative overhead reduction, apart from aggressive continuance of the value engineering and cost reduction programme on the manufacturing front, the Company believes it will be able to maintain its margins and generate positive cash flows. With a good outstanding order book, together with a healthy pipeline of enquiries which are expected to be converted into orders in the coming year, the Company is well positioned to maintain its leadership position.

Subsidiaries

The growth potential of foreign subsidiaries to expand in the international market is encouraging. Through these foreign subsidiaries, the Company has increased its capabilities to connect with global EPC players and industries. The subsidiary offices, being located in close proximity to customers and capable of providing specialised services, give confidence to customers. They also help to promote the brand strongly, which is essential and helps the Company effectively pursue its strategy to achieve market penetration on a sustainable basis. During the year, the Company engaged with industries from various segments, such as API, Waste-to-Energy, Combined Cycle, and Process industries of global scale through its subsidiaries. The Company expects that the foreign subsidiaries will further augment business growth in the coming years.

In order to improve cost efficiencies and consolidate the marketing infrastructure, the marketing activities in Europe region were shifted during the year from the subsidiary in the UK to the subsidiary in Dubai. This has resulted in better supervision of market operations and cost rationalisation. The subsidiary in South Africa has been further strengthened, mainly to cater to the aftermarket segment of the region.

Joint Venture

GE Triveni Limited (GETL), Trivenis joint venture company with General Electric, is engaged in the design, supply and service of advanced technology steam turbine generator sets, with generating capacity in the range of above 30-100 MW. The flange-to-flange turbine is manufactured cost competitively at the Companys world-class facilities located at Peenya and Somapura in Bengaluru. The complete project is executed by GETL in accordance with GEs manufacturing, quality and supply chain standards and processes, which include certification of suppliers, adherence to environment and health standards, and other ethical requirements.

In FY 20, GETL achieved a total revenue of Rs1.29 billion with a profit after tax of Rs131 million.

During the year, the Company filed a petition, on June 10, 2019, under the provisions of Sections 241, 242, 244 of the 2013 Act before the National Company Law Tribunal, Bengaluru ("NCLT"), seeking specific reliefs to bring to an end the matters of oppression and mismanagement in the joint venture company viz. GE Triveni Ltd (GETL) by the General Electric company and its affiliates (GE). The grounds on which the Company was constrained to file the petition were certain actions of GE which were oppressive, fraudulent, prejudicial, harsh and burdensome to the interest of GETL, including but not limited to lack of probity, diversion of business, violation of non-compete, conflict of interest by GE employees/nominee directors etc. Instead of submitting its objections on merits to the said Company petition, two of GE affiliates filed applications before the NCLT, praying to refer the dispute raised in the Companys petition to arbitration. The matter is now pending adjudication before NCLT, Bengaluru.

D I Netherland BV, affiliate of GE and Joint Venture partner in GETL, invoked separate arbitration proceedings before Arbitration Tribunal under the UNCITRAL Arbitration Rules, 1976, in the United Kingdom and filed a statement of claim on June 1, 2020, alleging violation of certain terms of the JV Agreement by the Company. The claims made are based on estimation and amounts are not quantified with precision. The Company firmly believes that the allegations raised are unsubstantiated, untenable and unsustainable. The Company will submit its defence and counter claim, if any, in due course. Accordingly, at this preliminary stage, no provision is considered necessary in the standalone financial results.

Corporate Social Responsibility (CSR)

The Company has proactively embraced social responsibility to create a positive impact in the communities in which it works and operates. Along with sustained economic performance, Triveni believes in the importance of social stewardship. The Company is committed to creating an environment that contributes to the well-being of communities and the conservation of nature. Towards this objective, the Company contributes to inclusive growth by empowering communities and accelerating development through interventions in water and sustainable environment, health, education and technology development.

CSR Objectives and Vision

The Company wishes to be perceived as a ‘Company with Conscience, and to actively and continually contribute to the social and economic development of the communities for the benefit of the deprived, under-privileged and differently able persons. Its approach is based on merit only, without any regard to religion, caste or creed.

CSR Focus Areas

Though there are numerous addressable areas where there are cultural prejudices, as well as lack of equity, social justice, awareness and a_ordability for basic rights in the society, the Company has identified the following areas for the well-being of people, providing employment potential to them, and preserving the environment: Promoting healthcare, especially amongst children, women, elderly and other weaker sections of the society Promoting education/literacy enhancement Skill development for enhancing employment and livelihood Environment protection and sustainability Engagement in technology and innovation

Highlights of the CSR Initiatives undertaken during FY 20:

1) Healthcare

Triveni Turbines Preventive Health Programme (Triveni Turbines PHP) for Females

The Company identified, as part of its CSR plan, a project focussed on preventing diseases, such as osteoporosis, breast cancer, cancer of the cervix and ovary, anaemia of various types, and on promoting healthcare in women, especially of the lower socio-economic strata. Under this project, the Company provided free investigations and medical advice/consultation to women. The programme contributed significantly to increasing the awareness level of women towards health issues and the need for timely prevention.

Protecting the Girl Child from Cervical Cancer

The Company provided vaccination to girls, especially of the lower socio-economic strata, in the age group 9-14 years, to protect them from Cervical Cancer. Nearly 1,32,000 women in India su_er from Cervical Cancer and nearly 74,000 of these die each year, but this can be easily prevented through vaccination given at an appropriate age. The programme was successful as, apart from vaccination, it helped in creating awareness among the parents and girls about the potential threat and need for prevention.

New Born Screening Programme

New born babies, especially from the economically weaker section of the society, were screened under the New Born Screening (NBS) Programme for Thyroid profile, CAH, G6PD, Hearing test. In India, New Born Screening is seen detecting two major diseases among babies. Congenital Hypothyroidism (CH) is being found in 2 out of 1,000 babies in the country, followed by G6PD deficiency, found among 8.6% of Indias total population. NBS is done to find out if a baby it at a higher risk of a disorder for which early treatment or management can prevent intellectual disability, physical disability or even death. By treating these conditions, damages like mental retardation, thyroid issues, autism and sudden death can be reversed.

2) Education and Women Empowerment Support to Nursing School

As part of the CSR projects relating to promotion of education and women empowerment, the Company provided financial support to the Nursing School of a hospital to improve teaching standards. It provided scholarships to good performers and deserving students, especially from the economically weaker section of the society.

Other Educational Initiatives

Under its sponsorship for education and training programmes for differently-abled students, the Company provided financial support for the development of the infrastructure of schools. It also provided financial support to the Government Model Primary Schools in Peenya and Sompura, located near its factories, to help them run pre-nursery schools for under-privileged children of their respective areas. A total of more than 500 students benefited from these initiatives. In addition, the Company also provided IT facilities and furniture to improve the basic infrastructure of these schools.

India- Israel Master-Class Series on emerging technologies

The Company provided financial support to a Centre, which is a non-partisan and non-profit organisation that focusses on value-based leadership development and open dialogue on important issues facing the Indian society, to help its transformation. This Centre connected Indian students from universities and colleges with experts from Israeli academic institutions, companies and entrepreneurs, to understand contemporary trends and dynamics in the global technology front through webinars.

3) Environment Sustainability

Water tool Applications for Sustainable Solutions, Enhanced capacities, and Renewal (WASSER)

Water continues to grow as a priority area for India and Indian business in a scenario where there is an increased variability in water availability and the resource quality is deteriorating. To facilitate appropriate decision-making amongst diverse stakeholders on water, it is important to integrate data, tools and water networks into a comprehensive, simple-to-use system that can readily be used by Industry, Government and diverse stakeholders such as farmers, utilities and community at large; and also to enhance awareness and disseminate knowledge amongst various stakeholders on the tools to enhance improve the water security of an area.

It is in this context that the project WASSER was undertaken in association with an implementation agency with an intent to develop state-of-the-art tools and world-class techniques meeting international standards. The project was aimed at raising awareness, building capacities of diverse stakeholders on usage of innovative methods, and enabling appropriate decision-making for water resource planning in India.

Skill Development Intervention for Industry towards Environmental Sustainability for Operating Renewable Energy Plants

The Company conducted skill development programmes focussing on environment sustainability for operating renewable energy/biomass/co-generation power plants, as part of its CSR initiative under environment sustainability. The goal of the programme was to enable the industry to achieve operational excellence by reducing the carbon footprint and create an eco-system of environmentally sustainable organisations that contribute as much to the environment as they do to the economic progress of the country.

4) Technology and Innovation

The Company encourages and supports technological developments undertaken by various reputed technological institutes of national importance. As part of a long-term project, the Company continued, during the year, to provide financial support to the Indian Institute of Science, Bangalore, for development of waste heat recovery power plant, applying new and cost effective technology for which the Institute is currently conducting research in its laboratory.

Financial Review

The financial results of the Company for the financial year 2019-20 compared with the previous year are summarised hereunder:

(Rs in Million)

Description FY 20 FY 19 Change %
Revenue from operations (gross) 8,099.0 8287.9 (2.3)
Other Income 218.4 161.8 35.0
EBITDA 1,655.9 1569.2 5.5
EBITDA Margin 20.4% 18.9%
Depreciation & Amortisation 200.8 201.0 (0.1)
PBIT 1,455.1 1368.2 6.4
PBIT Margin 18.0% 16.5%
Finance Cost 33.3 11.2 197.3
PBT 1,421.7 1357.0 4.8
PBT Margin 17.6% 16.4%
PAT 1,100.6 875.4 25.7
PAT Margin 13.6% 10.6%
Other Comprehensive Income (net of Tax) (81.4) 44.0 (285.0)
Total Comprehensive Income 1,019.2 919.4 10.9

The aforesaid summarised financial results are based on the standalone financial statements which have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies Act, 2013 ("the Act") and other relevant provisions of the Act.

During the year, the Company adopted Ind AS 116 "Leases" using modified retrospective method. The adoption of this standard did not have any material impact on the profit of year ended March 31, 2020.

Financial Performance

Revenue from Operations is marginally lower than previous year by 2.3%. The financial performance of the Company started impacting from the 4th quarter of the year. COVID-19 pandemic has severely impacted the world economy, particularly from the beginning of the year 2020, including India. The operations of the Company are also impacted, particularly during the lockdown period as both the factories and all sales and service offices were closed. Due to logistics bottlenecks, closure of customers site and suspension of travel, there was an impact on sales and profits. Further, slowdown in domestic economy, particularly in later part of the year, has also impacted domestic sales.

In terms of profitability, the performance is better than previous year due to on-going value engineering and various supply chain initiatives taken during the year. The Company is focussed to develop upgraded efficient models with cost optimisation and launched some for these models in current year which improved the margins. efficiency in conversion cost is also achieved during the year.

The working capital of the Company improved compared to previous year as a result of which liquidity was comfortable. The Company continues to remain debt free, barring loans for vehicles.

Revenue from Operations

Revenue from both Product and Aftermarket sales has come down by 0.4% and 8.3% respectively for the reasons as stated above. The revenue in Product as well as in Aftermarket Sales segment is shown below:

( Rs in Million)
Description FY 20 FY 19 Change %
Product Sales 6,283.8 6,307.7 (0.4)
% to Total Sales 77.6% 76.1%
Aftermarket Sales 1,815.2 1,980.2 (8.3)
% to Total Sales 22.4% 23.9%
Total Sales 8,099.0 8,287.9 (2.3)

Certain export consignments were struck up in the port towards end of the year due to lockdown and non-availability of vessels. Even, after market revenues were impacted as several customers could not arrange payments before the year end, mainly due to covid 19 pandemic. Due to these reasons, the Company has lost revenues of at least Rs500 million during the year for which goods were ready.

During the year, the exports were almost flat, but there was a dip was in domestic market, mainly due to slow down in Indian economy. The percentage change in sales mix of Domestic and Exports is shown in table below:

( Rs in Million)

Description FY 20 FY 19 Change %
Export 3,841.5 3,827.9 0.4
% to Total Sales 47.4% 46.2%
Domestic 4,257.5 4,460.0 (4.5)
% to Total Sales 52.6% 53.8%
Total Sales 8,099.0 8,287.9 (2.3)

Other Income

Other Income has increased by 35.0% over previous year. The increase is mainly due to dividend income received from the Companys wholly owned foreign subsidiary, Triveni Turbines Europe Pvt Ltd., UK, amounting to Rs 65 Million. Further, the Company has earned higher income from investment from various mutual fund schemes and bank fixed deposits over previous year, as surplus fund from operation increased.

Expenses

Raw Material consumption

( Rs in Million)

Description FY 20 FY 19 Change %
Raw material consumption and change in inventories 4,401.8 4,656.6 -5.5
Percentage of sales 54.3% 56.2%

Decrease in Raw Material cost by 5.5% over previous year is a combined effect of lower sales by 2.3% and reduction in material costs arising from various value engineering and supply chain initiates taken by the Company. The Company has long term relationship with major and minor vendors and have well established pricing policy. This helps for consistent quality, on time deliveries and price. The Company is constantly focussing to deliver turbines at competitive price with improved efficiency.

Personnel cost, Other Expenses and Depreciation

( Rs in Million)

Description FY 20 FY 19 Change %
Employee cost 943.9 911.7 3.5%
% to Total Sales 11.7% 11.0%
Other Expenses 1,271.1 1,307.8 (2.8%)
% to Total Sales 15.7% 15.8%
Depreciation & Amortisation 200.8 201.0 (0.1%)
% to Total Sales 2.5% 2.4%

Employee Cost

The increase in employee cost is due to annual increment as per Companys policy. However, there is reduction in number of employees during the year, which partially offset effect of annual increment. The industrial relations were cordial.

Other Expenses

Other expenses include manufacturing expenses, administrative expenses and selling expenses. Manufacturing expenses such as Store, Spares and Tools consumed and Power & fuel etc. are semi-variable in nature. Due to improvement in manufacturing process, the manufacturing cost was significantly lower in the current year over previous year. There is no significant variation over previous year in other administrative expenses except that certain provisions were made for expected future cost of warranty and receivables as per Companys accounting policy. Selling expenses are also lower than last year in view of logistic and other cost savings. Over all, there was 2.8% savings in Other Expenses over previous year.

Depreciation and Amortisation

There are no material changes in depreciation and Amortisation expenses as compared to previous year.

Balance Sheet

Major items, including where significant changes have taken place during the year are being explained hereunder:

Non-Current Assets

Property, Plant and Equipment (PPE), Capital work in progress & Intangible assets

There is no major investment in Plant and Machinery or civil work made during the year. However, due to adoption of Ind AS 116 "Leases", the Company has created Right of Use assets of Rs34.0 Million under PPE.

Capital work in progress mainly includes extension of a civil structure work in Somapura plant to provide enhanced facility of testing of turbines. This will be completed by the second quarter of next year.

Non-current investment

This represents investment in wholly owned foreign subsidiary and joint venture in India. There is no further investment during the year. The accumulated profits of joint venture, under equity method of accounting, are included under this head.

Current Assets

Inventories

Inventory has significantly decreased by Rs 442.7 million over previous year. The decrease is mainly in raw material and component by Rs 254.8 million as a result of planned efforts to optimise working capital structure. Similarly, Work-in-Progress was also decreased by Rs 143.1 million due to improvement in production planning. This has resulted in improvement of inventory turnover ratio and cash inflows. The Company improved its strategy of Procedure to Pay inventory management system and are being monitored on regular basis for ensuring its effectiveness and minimum lead time.

Trade Receivables (Current)

Trade Receivables have decreased by Rs 517.5 million over previous year due to improved realisation of dues. About 26% of Trade receivables is secured against Letter of Credit and about 30% is contractually not due. There remaining receivables are considered to be good and appropriate provisions are made, whenever considered doubtful.

Other financial assets

Other financials assets have decreased by Rs 103.6 million over previous year. This is due to adjustment of MTM gain on derivatives financial instruments i.e. forward contract of Rs100.9 million against the sales in current year in compliance with hedge accounting policy of the Company. As on March 31, 2020, MTML loss on forward contract of Rs60.4 million has been shown under other financial liability.

Other current assets

Other current assets have increased by Rs 144.4 million over previous year. Increase in other current assets is mainly due to higher GST input tax credit of Rs 132.21 million receivable from GST authorities as compared to previous year. There are certain delays in obtaining GST refunds on exports from Customs Department, which the Company has taken up with the authorities for fast resolution. All other items under this head, including Export Incentive receivables from DGFT and advance paid to vendors etc. are normal in nature and fully recoverable.

Non-Current Liabilities

These mainly comprise deferred tax liabilities (net) and certain long term provisions towards employee benefits as mandated by relevant provisions of Ind AS, warranty etc. which are made in normal course of business.

Current Liabilities

Current liabilities mainly consist of Trade Payable for purchase of goods and services and Advances from Customers. Trade Payable has decreased to Rs637.3 million from Rs1,188.1 million in view of reduction of purchases in a planned manner to bring down inventory and increase in cash flows.

The other major components of Current Liabilities are Advances from Customers which increased by Rs 289.5 million over previous year.

Consolidated Financial Statements

Consolidated financial statements have been prepared consolidating the results of a wholly owned foreign subsidiary, Triveni Turbines Europe Pvt. Ltd. (TTEPL), UK, its step down subsidiary, Triveni Turbines DMCC (TTDMCC), Dubai and Triveni Turbines Africa (Pty) Ltd (TTAPL). The Consolidation is made by adding line by line items complying relevant provisions of Ind AS. In addition, the Company has a domestic subsidiary company namely GE Triveni Ltd. (GETL) which, in accordance with Ind AS, been considered as a Joint Venture and accordingly accounted by using equity method for preparation of consolidated financial_statements.

Headline figures for consolidated financial statements duly compared with standalone are provided here under:

( Rs in Million)
Financial Statements
Consolidated Standalone
1. Revenue from operations (gross) 8,178.7 8,099.0
2. Profit before tax 1,468.5 1,421.7
3. Share of income of joint venture 90.9 -
4. Profit after tax 1,217.8 1100.6

Risk Management and Internal Financial Control System

The Company has in place a robust risk management framework which is aligned with ISO 31000. The Enterprise Risk Management (ERM) system of the Company supports the organisations objectives by addressing the full spectrum of its risks and managing the impact of those risks individually or combined, as an inter-related risk portfolio. The ERM system aims to develop a ‘Risk Intelligent Culture within the Company to encourage risk-informed business decision-making, as well as resilience to adverse environment. It also seeks to create awareness of opportunities in order to enhance the long-term stakeholder value.

The Risk Management Policy is the core of the ERM system, and is reviewed and approved by the Board. The risk management culture has grown and been developed in line with the Companys core objectives, and also reflects its level of awareness and cautious approach on opportunities and threats. This Policy provides guidance for the management of various business risks, encompassing strategic risks, emerging risks and operational risks across the organisation. It focusses on ensuring that the risks are identified, evaluated and treated within a given time-frame on a regular basis, covering all the key functions of the Company.

The Risk Management Policy lays down the guiding principles and policies, as well as a risk organisation structure for implementation and review. Pursuant to its Risk Management Policy, the Company presents an enterprise-wide approach to ensure that key aspects of risks that have an enterprise-wide impact are considered and contained in its conduct of business. This Policy document also serves as a guideline for respective components of risks which resonate uniformly across the_Company.

The sudden outbreak of COVID-19 has bought unprecedented threat to human life and lockdown of economic activity across the world. The Company has implemented a short-term continuity plan, taking into consideration regulatory guidelines and employee safety with sustainability of operations. Being in the capital goods market, and supporting various core industrial segments both in domestic and international space, market risks are well diversified and thus mitigated even amid the current economic disruption resulting from the pandemic.

In addition, the Company is responsible for design and implementation of sound Internal Financial Controls over Financial Reporting. The Company has laid down the necessary procedure for the same, and periodically assesses its operational effectiveness by conducting reviews of various Risk Control Matrices. The Control System, and review thereof, provides reasonable assurance that the business is operating in an orderly and efficient manner, including adherence to the Companys policies, safeguarding assets, and prevention and detection of frauds and errors, if any, along with accuracy and completeness of accounting records and timely preparation of financial information. These are achieved through Delegation of Authority, Policies and Procedures, and other specifically designed controls, and their effectiveness is tested regularly as per the well laid out mechanism and through external agencies.