Triveni Turbine Limited
Triveni Turbine Limited
Triveni Turbine Limited
Triveni Turbine Limited: Long-term rating upgraded; outlook revised to Stable, short-
term rating reaffirmed and rated amount enhanced
Summary of rating action
Rationale
The upgrade in the long-term rating for the bank facilities of Triveni Turbine Limited (TTL) factors in the expected improvement
in its revenues and operating profits as well as robust debt coverage metrics in FY2023-FY2024. This is supported by a healthy
order book of Rs. 1,232 crore as on December 31, 2022 – a multi-year high, robust order intake and a continued favourable
investment cycle in various end-user industries in India as well as globally. The current order book lends increased revenue
visibility at 1.1 times (order execution period is generally 6-12 months for the product segment and 3-9 months for the after-
market segment) amid the ongoing capacity expansion in various key end-user segments in both the domestic and global
markets. Further, the company’s order book as of December 2022 is fairly diversified in terms of end-user industries with
process co-generation constituting 28%, followed by independent power plant (IPP: 17%), after-market (~16%), steel (~12%),
sugar co-generation (10%) and others. The diversified end-user base, coupled with TTL’s recent foray into American Petroleum
Institute (API)-compliant turbines for the oil and gas sector, an expanding market size and the limited number of players,
augurs well for the company.
The ratings continue to factor in the company’s market leadership in steam turbines of up to 30 MW (though it manufactures
turbines above 30 MW), its long track record in the industry, a strong after-sales service network and technical and cost
competitiveness. The company’s operating income is expected to improve over the medium term owing to a healthy current
order book along with its diversified geographical presence, competitiveness by virtue of value engineering, faster turnaround
to customers and constant focus on introducing designs to better suit the evolving customer requirements. These factors had
aided healthy profitability and steady accruals in the recent past as well. The low working capital intensity of operations, driven
by access to advances from customers, besides healthy cash accretion over the years, has resulted in a largely debt-free capital
structure and strong coverage indicators. Also, the company’s liquidity profile is expected to be strong with no major debt-
funded planned capital expenditure and a favourable working capital intensity.
ICRA also notes the settlement of dispute with respect to Triveni Energy Solutions Limited (TESL; formerly known as GE Triveni
Limited) with its JV partners. The resolution of the unproductive disputes/litigation would aid focused business growth in the
30-100 MW segment as well.
The ratings, however, are constrained by the sensitivity of the order book to the capex cycle of the end-user industries, intense
competition from various global players and the counterparty risks due to its exposure to capital-intensive sectors like sugar,
cement and textiles that have moderate credit profiles. In light of the sizeable exposure to exports, TTL remains exposed to
the risks emanating from slower execution in the international markets pursuant to any disruption in economic activity amid
the ongoing geopolitical tensions. Nevertheless, the company’s diversified customer base, geographically diverse presence,
varied end users, in-house engineering capabilities with high level of product efficiency and reliability, technological
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advancement and ability to expand product portfolio and faster turnaround time to customers have allowed it to build a strong
pipeline of orders and compete with large players with global presence.
The Stable outlook on the rating reflects ICRA’s opinion that TTL will continue to benefit from its established position as a
leading manufacturer of steam turbines with a healthy and well-diversified order backlog and a strong financial profile.
Credit strengths
Leading position in domestic market – TTL holds a dominant position with around 60% market share in the sub-30 MW
domestic steam turbines market, aided by a healthy pipeline of orders and strong research, development and engineering
capabilities. Further, with the recent revival of capex cycle in various end-user industries, including captive power plants and
waste heat recovery systems, renewable power solutions, sugar, process co-generation and waste-to-energy systems, TTL
witnessed a strong order inflow of Rs. 1,139 crore in 9M FY2023 (~26% YoY growth), compared to an order booking of Rs.
1,184 crore in FY2022.
Geographically diverse presence across various end-user markets with healthy current order book position- TTL’s steam
turbines are used in diverse industries, ranging from sugar, steel, cement, textiles and chemicals to pulp and paper, fertilisers,
distillery, waste-to-energy, biogas, palm oil and food processing. The company’s presence in South Asia, the Middle East and
some African markets has been relatively long. In the last few years, it has expanded its presence across markets like Europe
and South America. TTL’s unexecuted order book of Rs. 1,232 crore as on December 31, 2022 (1.1 times of OI) is fairly
diversified in terms of the end-user industries with process co-generation constituting 28%, followed by independent power
plant (IPP: 17%), after-market (~16%), steel (~12%), sugar co-generation (10%) and others. TTL’s current order book lends
strong medium-term revenue visibility, given that an order’s average execution tenure is six to 12 months.
Focus on exports and refurbishing markets supports profitability – TTL’s operating profits are supported by a healthy
proportion of after-market sales (where the company sells spares and servicing for its own, other turbines and other rotating
equipment) and exports, wherein contributions are higher than the domestic product segment. The after-market business has
been boosted by TTL’s expanding presence and growing refurbishment needs for existing equipment for better efficiency.
However, the operating profit margin moderated to 19.1% in 9M FY2023 (19.4% in FY2022 and 21.2% in FY2021) on account
of increased raw material and logistic costs, along with lower operating profitability in certain new geographies in the after-
market segment, even as the company reverted to its pre-Covid domestic exports sales mix in 9M FY2023. The mix of domestic
and export sales was 58:42 in 9M FY2023 against 69:31 in 9M FY2022. In FY2021-22, the company’s incremental orders were
largely from the domestic market on account of travel restrictions in various countries.
Strong financial profile and liquidity – The high value-additive nature of TTL’s operations has resulted in healthy profitability
over the years. The company remains debt-free and strong accruals ensure that it will continue to have a conservative capital
structure. The working capital requirements are partly funded by advances from customers, leading to a healthy liquidity
profile for the company over the years. While TTL had around Rs. 837 crore of cash and current investments as on December
31, 2022, there was an outgo (including taxes) of Rs. ~234 crore in Q4 FY2023 on account of the buyback announced by TTL
earlier. The significant cash generation has increased the net worth base, adding to the company’s financial flexibility.
Credit Challenges
Order booking and revenues sensitive to capex cycle in end-user industry – While the capex cycle in both the domestic and
export markets has picked up over the last couple of years, TTL’s order booking and, hence revenues remain vulnerable to the
capex cycle in the end-user industries. However, diversification across geographies and end users mitigates this risk to an
extent.
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Intense competition - TTL competes with large players that benefit from the operational, technical and financial support from
global parent companies. However, the company too has been able to compete with and gain market share globally. In
addition, it has continued to maintain its dominant presence through experienced engineering and manufacturing capabilities,
good coverage of after-sales services and faster turnaround to its customers.
Exposure to counterparty risks - The company is vulnerable to counterparty credit risk due to its exposure to capital-intensive
sectors like sugar, cement and textiles that have moderate credit profiles. Nonetheless, the risk is mitigated by favourable
contractual terms that ensure partial upfront payment from customers. Also, TTL’s extremely diversified customer base helps
to reduce the risk.
Rating sensitivities
Positive factors – The ratings could be upgraded if the company demonstrates a significant growth in its scale and operating
profits, driven by a substantial growth in order bookings, scaling up of after-market business and diversification into new
segments, while maintaining strong credit metrics and liquidity profile.
Negative factors – ICRA could downgrade the ratings if there is a sustained slowdown in the domestic and export markets
which results in weak order booking and/or deferred execution or elongated working capital cycle, thereby impacting the cash
flows and profitability. Any large debt-funded capex and acquisition or sharp reduction in liquidity could also result in an
unfavourable rating action.
Analytical approach
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Key financial indicators (audited)
The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: Click Here.
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Annexure-1: Instrument details
Coupon Amount Rated
ISIN No Instrument Name Date of Issuance Maturity Current Rating and Outlook
Rate (Rs. Crore)
Fund based - Working
NA NA NA NA 129.5 [ICRA]AA+ (Stable)
capital facilities
Non-fund based -
NA Working capital NA NA NA 495.0 [ICRA]A1+
facilities
Source: Company data
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ANALYST CONTACTS
Sabyasachi Majumdar Girishkumar Kashiram Kadam
+91 124 4545 304 +91 22 6114 3441
sabyasachi@icraindia.com girishkumar@icraindia.com
RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com
info@icraindia.com
Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency
Moody’s Investors Service is ICRA’s largest shareholder.
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