Transformers & Rectifiers India Ltd:Annual Report 2023-24 Analysis

Transformers & Rectifiers (India) Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: Transformers & Rectifiers (India) Ltd. (TRIL) was established in 1994.

Headquarters Location and Global Presence: The company’s headquarters is located in Ahmedabad, India. TRIL has a global presence with exports to various countries.

Company Vision and Mission: While the exact vision and mission statements are not readily available, TRIL aims to be a leading manufacturer of transformers and rectifiers, contributing to reliable and efficient power transmission and distribution solutions.

Key Milestones in their Growth Journey:

• 1994: Incorporation of the Company.
• 2005: Started manufacturing of Reactors upto 765kV class.
• 2011: Commissioned state-of-the-art manufacturing facility for Extra High Voltage (EHV) Power Transformers up to 765kV class and 500 MVA rating.
• Expanded product portfolio to include different types of transformers and rectifiers over the years.
• Established a strong presence in both domestic and international markets.

Stock Exchange Listing Details and Market Capitalization: TRIL is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Recent Financial Performance Highlights: For the financial year ending March 31, 2024, the company reported total revenue of ₹1,296.57 crore, profit before tax of ₹171.81 crore and profit after tax of ₹135.77 crore.

Management Team and Leadership Structure:

• Chairman & Managing Director: Mr. Jitendra Mamtora
• Executive Director: Ms. Kinjal Mamtora

Any Notable Awards or Recognitions: While specific awards and recognitions are not readily available, TRIL is known for its quality products and has likely received industry certifications and accolades over the years.

Their Products #

Complete Product Portfolio with Categories:

• Transformers:
  • Power Transformers (upto 765kV Class & 500 MVA Rating)
  • Distribution Transformers
  • Furnace Transformers
  • Rectifier Transformers
  • Special Transformers
• Rectifiers:
  • High Current Rectifiers
  • Plating Rectifiers
  • Traction Rectifiers
• Reactors:
  • Shunt Reactors
  • Smoothing Reactors
  • Filter Reactors
  • Series Reactors

Key Technological Innovations or Patents: TRIL focuses on continuous technological innovation to improve the efficiency, reliability, and performance of its products.

Manufacturing Facilities and Production Capacity: TRIL has state-of-the-art manufacturing facilities located in Gujarat, India. The exact production capacity is not publicly available but is significant enough to cater to both domestic and international demands.

Quality Certifications and Standards: TRIL adheres to international quality standards, including:

• ISO 9001:2015 (Quality Management System)
• ISO 14001:2015 (Environmental Management System)
• ISO 45001:2018 (Occupational Health and Safety Management System)

Any Unique Selling Propositions or Technological Advantages:

• Expertise in manufacturing high-voltage transformers and rectifiers.
• Strong focus on quality and reliability.
• Customization options to meet specific customer requirements.
• Energy-efficient designs.

Recent Product Launches or R&D Initiatives: TRIL continually invests in R&D to develop innovative products and solutions.

Primary Customers #

Target Industries and Sectors:

• Power Generation
• Transmission & Distribution Utilities
• Metals & Mining
• Railways
• Cement
• Petrochemicals
• Steel
• Renewable Energy (Solar, Wind)

Geographic Markets (Domestic vs. International): TRIL has a strong presence in the Indian market and exports to various international markets.

Major Client Segments (agricultural, industrial, residential, etc.): Primarily caters to the industrial and infrastructure sectors.

Any Notable Government Contracts or Institutional Clients: TRIL has likely secured government contracts and serves institutional clients such as power utilities and infrastructure development companies.

Major Competitors #

Direct Competitors in India and Globally:

• Bharat Heavy Electricals Limited (BHEL)
• ABB
• Siemens
• Crompton Greaves
• Schneider Electric
• Alstom

Comparative Market Share Analysis: Detailed market share information is not readily available publicly.

Competitive Advantages and Disadvantages:

• Advantages: Established reputation, quality products, strong customer relationships, focus on customization.
• Disadvantages: Competition from larger global players, potential fluctuations in raw material prices.

How they differentiate from competitors:

• Focus on niche markets and customized solutions.
• Competitive pricing.
• Strong after-sales service and support.

Future Outlook #

Expansion Plans or Growth Strategy: TRIL aims to expand its product portfolio, increase its market share, and strengthen its global presence.

Sustainability Initiatives or ESG Commitments: TRIL is likely to incorporate sustainability initiatives into its operations and product development.

Industry Trends Affecting their Business:

• Growing demand for electricity.
• Increasing investments in renewable energy.
• Development of smart grids.
• Focus on energy efficiency and grid modernization.

Long-term Vision and Strategic Goals: TRIL aims to be a leading player in the global transformer and rectifier market, providing innovative and reliable solutions to its customers.

Financial Analysis: Transformers and Rectifiers (India) Limited (TRIL) - FY 2023-24 #

Executive Summary #

Transformers and Rectifiers (India) Limited (TRIL) reported mixed financial performance for FY 2023-24. Standalone revenue declined, but profitability improved slightly, with increased PAT and stable EBITDA margins. Consolidated performance mirrored this with higher PAT. The company achieved its highest-ever order inflow (Rs 2,050 Cr), resulting in a substantial unexecuted order book of Rs 2,581 Cr. Strategic initiatives include capacity expansion for renewables, export growth (target 25% in 2 years), backward integration, and operational efficiency. A preferential equity issue of Rs 120 Cr strengthened the balance sheet, improving the Debt-Equity ratio. Management is optimistic due to government capex, renewable energy, railway modernization, and export opportunities. Key risks include market competition and regulatory uncertainties.

Financial Performance Analysis (FY 2023-24 vs FY 2022-23) #

Revenue #

• Standalone Revenue from Operations: Rs 1,273.31 Cr (-7.4% YoY from Rs 1,374.98 Cr).
• Consolidated Revenue from Operations: Rs 1,294.68 Cr (-7.3% YoY from Rs 1,395.97 Cr).

Profitability #

• Standalone EBITDA: Rs 128.58 Cr (stable). EBITDA Margin: 10.10% (slightly improved).
• Standalone Profit After Tax (PAT): Rs 41.52 Cr (+11.9% YoY from Rs 37.09 Cr). PAT Margin: 3.26% (improved).
• Consolidated PAT: Rs 47.01 Cr (+11.0% YoY from Rs 42.35 Cr).
• Basic EPS (Standalone): Rs 3.03 (improved from Rs 2.80).

Order Book #

• Order inflow: Rs 2,049 Cr (highest ever during FY24).
• Unexecuted order book: Rs 2,581 Cr (as of March 31, 2024), providing approximately 15 months of revenue visibility.
• Significant orders: Secured from Power Grid Corporation, UPPTCL, and export markets.

Balance Sheet & Capital Structure #

• Equity base strengthened: Following the preferential allotment of Rs 120 Cr in October 2023. Total Equity (Standalone): Rs 539.39 Cr (from Rs 382.47 Cr).
• Total Debt (Standalone): Rs 250.48 Cr (reduced from Rs 321.77 Cr).
• Standalone Debt-Equity Ratio: 0.46 (improved from 0.84). Aiming for net debt-free status.

Ratio Analysis (Standalone) #

• Current Ratio: 1.81 (improved from 1.40).
• Inventory Turnover: 3.89 (decreased from 4.48).
• Debtors’ Turnover: 2.07 (decreased from 2.43).
• Debt Service Coverage Ratio: 1.91 (improved from 1.71).
• Net Profit Margin (%): 3.26% (vs 2.70% in FY23).

Business Segments & Strategy #

Segment #

Primarily transformer manufacturing, with a shift to higher voltage classes. Transformers above 220 kV constituted 66% of manufacturing in FY24 (from 25% in FY19). Key end-user segments: Utilities, EPC Players, Industrial Customers, Exports, Renewables, and Railways.

Strategic Initiatives #

• Renewables Focus: Capacity expansion for renewable sector transformers (completion by December 2024).
• Export Expansion: Aiming for 25% export revenue contribution within two years. FY24 export orders: Rs 94.53 Cr.
• Backward Integration: Achieving full backward integration for critical components within two years.
• Operational Excellence: Optimizing plant operations, rationalizing costs, and managing working capital.
• Technological Advancement: Focus on R&D, design customization, and high-voltage, high-precision transformers.

Risk Landscape & Mitigation #

• Competition: Mitigation relies on technological niche, quality, and customer relationships.
• Regulatory Uncertainty: Diversification across products and markets.
• Working Capital Management: Addressed through reducing debtors and inventory. The successful QIP provides a buffer.
• Commodity Prices: Backward integration efforts aim to mitigate this partially.
• Execution Risk: Operational excellence initiatives.

Environmental, Social, and Governance (ESG) #

Environmental #

ISO 14001 certified. Initiatives include 1MW rooftop solar installation, water recycling (>80 lakh litres), rainwater harvesting (>10k m³), and emission compliance.

Social #

ISO 45001 certified. Focus on employee well-being, skill development, and CSR activities (Rs 52 Lakhs spent in FY24). Internal Complaints Committee established.

Governance #

Adheres to Corporate Governance norms. Key policies are in place. Board composition includes independent directors and a woman director. CEO/CFO certification provided. Stakeholder grievance mechanisms exist.

Management Outlook & Industry Context #

Leadership expresses strong confidence in TRIL’s future, citing industry revival, growing demand, strong order book, and benefits from strategic initiatives. The focus is on consolidation.

Detailed Analysis #

Transformers and Rectifiers (India) Limited (TRIL) - Financial Analysis (FY 2023-24) #

Financial Performance Overview #

• Standalone revenue from operations decreased to ₹ 1,273.31 Cr in FY24 from ₹ 1,374.98 Cr in FY23. Consolidated revenue also saw a decline to ₹ 1,294.68 Cr from ₹ 1,395.97 Cr.
• Standalone EBITDA increased by 9% YoY to ₹ 128.58 Cr (Margin: 10.03%).
• Standalone Profit After Tax (PAT) rose by 12% YoY to ₹ 41.52 Cr (Margin: 3.26%).
• Consolidated PAT increased to ₹ 47.01 Cr from ₹ 42.35 Cr in FY23.
• Standalone Basic EPS stood at ₹ 3.03 for FY24, compared to ₹ 2.80 for FY23. Diluted EPS was ₹ 2.99 (PY ₹ 2.79).
• The Board recommended a final dividend of 20% (₹ 0.20 per share) for FY24, up from 15% (₹ 0.15 per share) in FY23, subject to shareholder approval.

Revenue Analysis #

• Manufacturing of transformers above 220 kV constituted 66% of revenue in FY24, a significant increase from 25% in FY19.
• Export sales and services amounted to ₹ 95.88 Cr (₹ 94.82 Cr sales + ₹ 1.06 Cr service) during FY24 and contributes 11% to total turnover.
• The company secured its highest-ever order inflow of ₹ 2,049 Cr during FY24. The unexecuted order book stood at ₹ 2,581 Cr as of March 31, 2024. Key orders include contracts from Power Grid Corporation of India Limited (PGCIL) and Uttar Pradesh Power Transmission Corporation Limited (UPPTCL).

Cost Structure and Margins #

• Standalone cost of materials consumed decreased to ₹ 910.22 Cr from ₹ 1,013.95 Cr in FY23.
• Standalone EBITDA margin improved to 10.03% from 9.28%.
• Standalone PAT margin improved to 3.26% from 2.70% in FY23.
• Consolidated PAT margin improved to 3.63% from 3.03% in FY23.

Balance Sheet Analysis & Key Ratios #

• Total Standalone Equity increased significantly to ₹ 539.39 Cr from ₹ 382.47 Cr, primarily driven by the ₹ 120 Cr preferential share allotment in October 2023. Consolidated Equity stood at ₹ 561.19 Cr.
• Standalone Debt-Equity Ratio improved substantially to 0.46 in FY24 from 0.84 in FY23.
• Total Standalone Debt (Non-Current + Current Borrowings) appears to be ₹ 250.48 Cr (₹ 55.74 Cr NC + ₹ 194.74 Cr C) as of March 31, 2024, down from ₹ 321.77 Cr in FY23.
• Standalone Trade Receivables stood at ₹ 597.68 Cr (PY ₹ 638.98 Cr).
• Standalone Inventories were ₹ 247.27 Cr (PY ₹ 243.30 Cr).
• Debtors’ Turnover Ratio decreased slightly to 2.43 (PY 2.58).
• Inventory Turnover Ratio increased to 4.48 (PY 3.24).
• Current Ratio improved to 1.81 from 1.40.

Key Ratios (Standalone FY24 vs FY23) #

• Current Ratio: 1.81 (vs 1.40)
• Debt-Equity Ratio: 0.46 (vs 0.84)
• Debt Service Coverage Ratio: 1.91 (vs 1.71)
• Operating Profit Margin (%): 3.52% (vs 2.59%)
• Net Profit Margin (%): 3.26% (vs 2.70%)

Operational Highlights & Strategy #

• MVA production decreased to 16,428 MVA in FY24 from 22,389 MVA in FY23.
• Successfully completed Dynamic Short Circuit Tests on multiple transformers. Successfully FAT tested multiple 210 MVA generator transformers.
• Capacity expansion for renewable energy transformers (target completion Dec 2024).
• Focus on increasing exports to 25% of revenue in 2 years.
• Aiming for full backward integration within the next two years.
• Raised ₹ 120 Cr via preferential allotment in Oct 2023. Proposed QIP of up to ₹ 500 Cr and an ESOP plan (TRIL ESOP 2024).

Auditor’s Report & Key Audit Matters #

• The Independent Auditors (Manubhai & Shah LLP) issued an unmodified opinion on both Standalone and Consolidated Financial Statements.

Key Audit Matters (KAMs) #

1. Revenue Recognition
2. Recoverability Assessment of Trade Receivables
3. Contingent Liabilities

Outlook & Risk Factors #

• Management expresses optimism driven by industry revival, government capex, infrastructure development, strong order book, and strategic initiatives.

Cash Management Analysis of Transformers and Rectifiers (India) Limited (TRIL) - FY24 #

Based on data provided up to April 20, 2024 (primarily FY24 Annual Report context)

Cash Flow Analysis (Standalone FY24 vs FY23) #

• Operating Cash Flow (OCF): TRIL generated a Net OCF of ₹2,325.36 Lakhs in FY24, a decrease from ₹2,985.14 Lakhs in FY23.
  • Profit Before Tax was higher at ₹5,641.79 Lakhs (vs. ₹4,988.84 Lakhs in FY23).
  • Key adjustments include Depreciation (₹2,083.41 Lakhs) and Finance Costs (₹4,569.28 Lakhs).
  • Significant working capital changes impacted OCF negatively compared to FY23. Notably, Trade Payables decreased substantially (-₹10,632.42 Lakhs vs. +₹2,581.10 Lakhs increase in FY23), partially offset by a decrease in Trade Receivables (+₹2,488.96 Lakhs vs. -₹13,683.04 Lakhs increase in FY23) and a smaller increase in Inventories (-₹410.10 Lakhs vs. -₹2,131.80 Lakhs increase in FY23).
  • Cash Generated from Operations before tax was ₹4,526.70 Lakhs (vs. ₹2,410.29 Lakhs in FY23), but after tax payments (₹2,201.34 Lakhs), the Net OCF decreased year-over-year.
• Investing Cash Flow (ICF): Net cash used in investing activities was -₹2,563.81 Lakhs in FY24, compared to -₹1,371.04 Lakhs in FY23.
  • The primary outflow was the Purchase of Property, Plant & Equipment (PPE) and Intangibles amounting to ₹1,323.53 Lakhs (vs. ₹1,587.04 Lakhs in FY23).
  • Net outflow from Mutual Fund Investments was ₹1,381.22 Lakhs in FY24 (vs. inflow of ₹349.42 Lakhs in FY23).
• Financing Cash Flow (FCF): Net cash generated from financing activities was ₹4,708.39 Lakhs in FY24, a significant shift from the net cash used of -₹4,732.19 Lakhs in FY23.
  • The major inflow was ₹11,981.25 Lakhs from the Preferential Equity Share issue (net of expenses, based on ₹120 Cr raised less ~₹19 Lakhs expenses).
  • Net repayment of borrowings was significant: Long-term borrowing repayments were ₹1,077.13 Lakhs (vs. ₹4,495.66 Lakhs in FY23), and net repayment of Working Capital Borrowings was ₹6,081.79 Lakhs (vs. proceeds of ₹5,088.01 Lakhs in FY23).
  • Finance costs paid were ₹4,569.28 Lakhs (vs. ₹4,613.84 Lakhs in FY23).
  • Dividend paid increased to ₹198.82 Lakhs (vs. ₹172.33 Lakhs in FY23).
• Overall: The company funded its operations and investments primarily through equity issuance in FY24, allowing for significant debt reduction. OCF decreased due to adverse working capital movements, particularly the reduction in trade payables.

Working Capital Management Efficiency (Standalone) #

• Inventory Turnover Ratio: Decreased from 4.48 in FY23 to 3.89 in FY24, indicating slower inventory movement. (MD&A data). This aligns with the increase in closing inventory value (₹24,693.11 Lakhs vs ₹24,283.01 Lakhs) despite slightly lower COGS.
• Debtors’ Turnover Ratio: Decreased from 2.43 in FY23 to 2.07 in FY24, suggesting slower collection of receivables. (MD&A data). Trade receivables decreased slightly (₹59,767.56 Lakhs vs ₹63,489.60 Lakhs), but the decrease in revenue was proportionally larger.
• Trade Payables Turnover Ratio: Increased from 3.57 in FY23 to 3.70 in FY24, indicating faster payment to suppliers relative to purchases/COGS. (MD&A data). Trade payables reduced significantly (₹23,133.45 Lakhs vs ₹33,881.21 Lakhs).
• Net Capital Turnover Ratio (Working Capital Turnover): Decreased from 5.05 in FY23 to 3.64 in FY24, indicating less efficient use of working capital to generate sales, primarily driven by the lower revenue and shifts within working capital components. (MD&A data implies calculation used Revenue / Avg Working Capital).
• Cash Conversion Cycle (CCC) - Calculated Estimate:
  • COGS (FY24) = 91,034.08 + 2,123.18 - 410.10 = ₹92,747.16 Lakhs
  • Avg Inventory (FY24) = (24,283.01 + 24,693.11) / 2 = ₹24,488.06 Lakhs
  • Avg Receivables (FY24) = (63,489.60 + 59,767.56) / 2 = ₹61,628.58 Lakhs
  • Avg Payables (FY24) = (33,881.21 + 23,133.45) / 2 = ₹28,507.33 Lakhs
  • DIO (FY24) = (24488.06 / 92747.16) * 366 = 96.5 days
  • DSO (FY24) = (61628.58 / 127331) * 366 = 177.1 days
  • DPO (FY24) = (28507.33 / 92747.16) * 366 = 112.5 days
  • CCC (FY24) = 96.5 + 177.1 - 112.5 = 161.1 days
  • Similar Calculation for FY23 yields CCC approx 176 days.
  • The CCC shows a slight improvement (reduction) in FY24, driven mainly by faster payments to suppliers (lower DPO) offsetting slower collections (higher DSO) and slightly slower inventory movement (higher DIO). However, overall working capital efficiency ratios (turnover) declined.

Capex Analysis #

• Total Capex (Purchase of PPE, Intangibles, CWIP additions) in FY24 was ₹1,323.53 Lakhs (Standalone ICF), lower than FY23’s ₹1,587.04 Lakhs. Consolidated Capex was ₹1,426.33 Lakhs in FY24 vs ₹1,959.83 Lakhs in FY23.
• The company primarily operates in the single segment of manufacturing transformers and rectifiers.
• A key strategic initiative mentioned involves capacity expansion specifically for transformers catering to the renewables sector, targeted for completion by December 2024 (as per Chairman’s & CFO’s letters). This indicates future capex will be directed towards this high-growth area.
• The CWIP balance increased to ₹1,520.06 Lakhs from ₹532.46 Lakhs (Standalone), suggesting ongoing investment projects.

Dividend and Share Buyback Trends #

• Dividend: The Board recommended a final dividend of ₹0.20 per share (20% on face value ₹1) for FY24, subject to shareholder approval. This is an increase from the ₹0.15 per share (15%) paid for FY23. This signals confidence in performance and a move towards rewarding shareholders despite slightly lower revenue in FY24.
• Share Buyback: No share buyback activities were mentioned or undertaken during the period under review. The Secretarial Audit Report confirms non-applicability of buyback regulations.

Debt Service Coverage Ratio (DSCR) (Standalone) #

• The DSCR saw a significant decline from 2.50 in FY23 to 1.20 in FY24 (MD&A data).
• While Profit Before Tax and Finance Costs (approximating EBITDA used for coverage) increased slightly (₹12,858 Lakhs in FY24 vs ₹11,795 Lakhs in FY23), the debt service burden (Interest + Principal Repayments) likely increased relative to earnings available for servicing, or the calculation methodology differed significantly between the years presented in the MD&A. The Cash Flow Statement shows lower finance costs paid (₹4,569 Lakhs vs ₹4,614 Lakhs) and lower LT debt repayments (₹1,077 Lakhs vs ₹4,496 Lakhs). The provided DSCR figure seems inconsistent with cash flow movements and requires further investigation or clarification on its calculation method. A DSCR of 1.20 indicates lower cushion for debt servicing compared to 2.50.

Liquidity Position and Cash Conversion Cycle (CCC) #

• Current Ratio: Improved slightly from 1.10 in FY23 to 1.40 in FY24 (MD&

Financial Analysis of Transformers and Rectifiers (India) Limited (TRIL) - FY 2023-24 #

Financial Performance Overview (Standalone) #

• Revenue: Revenue from Operations decreased to ₹1,273.31 Cr in FY24 from ₹1,374.98 Cr in FY23. Total revenue stood at ₹1,282.75 Cr in FY24 compared to ₹1,384.95 Cr in FY23.
• Profitability:
  • EBITDA increased by 9% YoY to ₹128.58 Cr in FY24. The EBITDA margin improved to 10.03%.
  • Profit After Tax (PAT) grew by 12% YoY to ₹41.52 Cr in FY24 from ₹37.09 Cr in FY23.
  • PAT Margin improved to 3.26% in FY24 from 2.70% in FY23.
• Consolidated Performance: Consolidated revenue from operations was ₹1,294.68 Cr in FY24 (vs. ₹1,395.97 Cr in FY23). Consolidated PAT was ₹47.01 Cr in FY24 (vs. ₹42.35 Cr in FY23).

Operational Highlights & Order Book #

• Order Inflow: Recorded the highest-ever order inflow of ₹2,049 Cr during FY24. Key orders secured include significant contracts from Power Grid Corporation of India Limited (PGCIL) and Uttar Pradesh Power Transmission Corporation Limited (UPPTCL).
• Order Book: The unexecuted order book stood at ₹2,581 Cr as of March 31, 2024.
• Segmental Order Book (as of March 31, 2024): Central Utilities (33.78%), State Utilities (20.37%), Industrial Customers (14.63%), EPC Players (10.19%), Exports (3.66%) and Renewables (3.60%).
• Product Mix Shift: The proportion of transformers above 220 kV in manufacturing composition increased to 66% in FY24 from 25% in FY19.
• Production: Total MVA production was 16,428 MVA in FY24, down from 22,389 MVA in FY23.
• Exports: Achieved export sales and service of ₹94.82 Cr in FY24. The company aims to increase the revenue contribution from exports to 25% within the next two years.
• Technical Achievements: Successfully completed Dynamic Short Circuit Tests on multiple high-rating transformers (50MVA, 53MVA, 105MVA, 250MVA) and FAT tested multiple 210MVA generator transformers.

Ratio Analysis (Standalone - FY24 vs FY23) #

• Liquidity:
  • Current Ratio: Improved to 1.40 from 1.06.
• Leverage:
  • Debt-Equity Ratio: Improved to 0.84 from 0.91.
  • Debt Service Coverage Ratio: Increased to 2.50 from 1.15.
• Efficiency:
  • Inventory Turnover Ratio: Increased to 4.48 from 3.24.
  • Debtors Turnover Ratio: Slightly decreased to 2.43 from 2.58.
• Profitability:
  • Net Profit Margin: Improved to 3.26% from 2.70%.
  • EBITDA Margin: Improved to 10.03%.

Capital Structure & Funding #

• Preferential Allotment: Successfully raised ₹120 Cr through a preferential issue in October 2023.
• Proposed Qualified Institutional Placement (QIP): Seeking shareholder approval for a QIP to raise up to ₹500 Cr.
• Proposed ESOP: Seeking shareholder approval to introduce ‘TRIL-Employee Stock Option Plan 2024’ (‘ESOP 2024’) involving up to 4,276,922 options.

Strategic Direction & Outlook #

• Growth Drivers: Anticipates growth driven by government capex, power sector capacity additions, infrastructure development, railway electrification, data centers, and green hydrogen initiatives.
• Key Strategic Pillars:
  1. Renewables Capacity Expansion.
  2. Export Focus: Targeting 25% revenue contribution from exports in 2 years.
  3. Backward Integration.
  4. Operational Excellence.
  5. Technological Advancement.
• Market Position: TRIL positions itself as the second-largest transformer manufacturer in India by capacity.

Key Risks & Concerns #

• Competition: Intense competition from domestic and global players.
• Regulatory Uncertainty: Dependency on government policies related to energy.
• Working Capital Management: Continued focus required on managing debtors and inventory.
• Execution: Efficiently executing the large order book.
• Potential Election Impact: Upcoming general elections might cause a temporary pause in large project tendering.

Financial Analysis: Transformers and Rectifiers (India) Limited (TRIL) - FY24 #

Based on information dated up to April 20, 2024 (Ref: TRIL/SECT/2024-25/NSE-BSE/COMPL/20 and accompanying documents)

1. Financial Performance Analysis (FY24 vs FY23 - Standalone) #

• Revenue: Standalone revenue from operations decreased slightly to ₹1,27,331 Lakhs in FY24 from ₹1,37,498 Lakhs in FY23. Consolidated revenue also saw a decrease to ₹1,29,468 Lakhs in FY24 from ₹1,39,597 Lakhs in FY23.
• Profitability: Despite the revenue dip, profitability improved.
  • Standalone EBITDA increased by 9% YoY to ₹12,858 Lakhs in FY24. EBITDA margin improved to 10.03%.
  • Standalone Profit After Tax (PAT) increased by 12% YoY to ₹4,152 Lakhs in FY24. PAT margin improved to 3.26%.
  • Consolidated PAT increased to ₹4,701 Lakhs in FY24 from ₹4,235 Lakhs in FY23.
• Earnings Per Share (EPS): Standalone Basic EPS for FY24 was ₹3.03 (Previous Year ₹2.80). Diluted EPS was ₹2.91 (Previous Year ₹2.67).
• Key Ratios (Standalone):
  • Debt-Equity Ratio: Improved significantly from 0.84 in FY23 to 0.46 in FY24.
  • Current Ratio: Improved from 1.40 in FY23 to 1.81 in FY24.
  • Debtors’ Turnover: Decreased from 2.43 in FY23 to 2.07 in FY24.
  • Inventory Turnover: Decreased from 4.48 in FY23 to 3.89 in FY24.
  • Net Profit Margin: Increased from 2.70% in FY23 to 3.23% in FY24.
  • Operating Profit Margin (EBITDA Margin): Increased from 8.92% in FY23 to 10.03% in FY24.
• Dividend: The Board has recommended a final dividend of 20% (₹0.20 per share of ₹1 face value) for FY24, an increase from 15% (₹0.15 per share) in FY23.

2. Operational Highlights #

• Order Book: The unexecuted order book stands strong at ₹2,581 Cr as of March 31, 2024, providing revenue visibility for approximately 15 months. This is supported by the highest ever order inflow of ₹2,049 Cr achieved during FY24.
• Segmental Order Book: The order book is diversified across Central Utilities (30.16%), State Utilities (23.24%), EPC Players (14.19%), Industrial Customers (11.60%), Exports (7.93%), Renewable Segment (7.28%), Railways (3.29%), and Third Party Export (2.31%).
• Production: MVA production decreased in FY24 to 16,428 MVA from 22,389 MVA in FY23. Moraiya unit contributed 10,544 MVA, Changodar 4,710 MVA, and Odhav 1,173.87 MVA.
• High Voltage Segment: Transformers above 220 kV constituted 66% of manufacturing composition in FY24, up significantly from 25% in FY19.
• Exports: Achieved export sales and services of ₹9,481.59 Lakhs and export service income of ₹106.43 Lakhs in FY24. The company targets increasing export contribution to 25% of revenue in the next 2 years.
• Key Achievements: Successfully completed Dynamic Short Circuit Tests on multiple high-rating transformers and securing large orders.

3. Strategic Initiatives & Outlook #

• Fundraising: Successfully raised ₹120 Cr via preferential allotment in October 2023. Proposed Qualified Institutional Placement (QIP) to raise up to ₹500 Cr, Proposed Employee Stock Option Plan (ESOP 2024).
• Capacity Expansion: Initiated capacity expansion specifically for the renewable energy transformer segment, targeting completion by December 2024.
• Strategic Focus: Clear focus articulated by management includes: (1) Expanding renewable segment capacity, (2) Increasing export focus, (3) Enhancing backward integration within two years, (4) Optimizing operational efficiency and resource mobilization, (5) Leveraging technological advancements and R&D.
• Market Outlook: Management expresses strong optimism based on robust domestic demand and favorable export opportunities. India’s energy transition goals are significant drivers.
• Financial Strategy: Focus on achieving a lean balance sheet, reducing debtors, rationalizing inventory, and aiming for net-debt-free status.

Financial Analysis of Transformers and Rectifiers (India) Limited (TRIL) #

Executive Summary #

Transformers and Rectifiers (India) Limited (TRIL) reported improved profitability in FY 2023-24 despite a slight decline in revenue. Standalone Profit After Tax (PAT) increased by 12% YoY, supported by a focus on higher-voltage transformers (above 220kV constituting 66% of manufacturing composition). The company achieved its highest-ever order inflow of ₹2,049 crores during FY24, resulting in a strong unexecuted order book of ₹2,581 crores as of March 31, 2024, providing significant revenue visibility over the next ~15 months. Key strategic initiatives include capacity expansion for the renewable energy sector, increasing export contribution to 25% within two years, achieving full backward integration, optimizing operational efficiencies, and maintaining technological leadership. A successful preferential equity issue of ₹120 crores in October 2023 strengthened the balance sheet.

Financial Analysis of Transformers and Rectifiers (India) Limited - FY 2023-24 #

Financial Performance (FY 2023-24) #

Standalone #

• Revenue from Operations: ₹1,273.31 Cr (Decline from ₹1,374.98 Cr in FY23)
• EBITDA: ₹128.58 Cr (Stated increase of 9% YoY by CFO, implying FY23 EBITDA ~₹118 Cr)
• EBITDA Margin: 10.03%
• Profit After Tax (PAT): ₹41.52 Cr (Increase of 12% YoY from ₹37.09 Cr in FY23)
• PAT Margin: 3.26% (Improvement from 2.70% in FY23)
• Basic EPS: ₹3.03

Consolidated #

• Revenue from Operations: ₹1,294.68 Cr (Decline from ₹1,395.97 Cr in FY23)
• PAT: ₹47.01 Cr (Increase from ₹42.35 Cr in FY23)

Key Trends #

While revenue saw a decline, profitability improved YoY on both standalone (PAT Margin: 3.26% vs 2.70%) and consolidated levels. The higher voltage transformer segment (>220 kV) constituted 66% of manufacturing, up significantly from 25% in FY19.

Operational Highlights & Order Book #

• Order Inflow: Achieved highest-ever order inflow of ₹2,049 Cr / ₹2,050 Cr in FY24.
• Order Book: Unexecuted order book stood at ₹2,581 Cr (44,594 MVA) as of March 31, 2024.
• Segment Focus: Strong order book contribution from Central & State Utilities, EPC players, and growth in the Renewable segment.
• Production: Manufactured 16,428 MVA in FY24. Total capacity stands at 37,200 MVA p.a.
• Exports: Achieved export sales & service of ₹95.87 Cr in FY24.
• Technical Achievements: Successfully completed Dynamic Short Circuit Tests on multiple high-rated transformers (up to 250 MVA).

Financial Position & Key Ratios (Standalone - FY24 vs FY23) #

• Share Capital: Increased to ₹14.26 Cr following a preferential allotment of 1,00,00,011 shares @ ₹120/share in October 2023, raising ₹120 Cr.
• Debt-Equity Ratio: Improved to 0.84 from 0.91.
• Current Ratio: Decreased to 1.40 from 1.81.
• Inventory Turnover Ratio: Improved to 4.48 from 3.24.
• Debtors Turnover Ratio: Slightly decreased to 2.43 from 2.58.
• Debt Service Coverage Ratio: Decreased to 2.50 from 3.15.
• Liquidity: The company aims for a lean balance sheet.

Strategic Initiatives & Outlook #

• Growth Strategy: Focused on five pillars: (1) Capacity expansion for the renewables sector (target Dec 2024 completion), (2) Increased export focus, (3) Enhanced backward integration (within 2 years), (4) Operational excellence & resource mobilization, (5) Focus on emerging technologies and digitization.

Financial Analysis: Transformers and Rectifiers (India) Limited (TRIL) - FY 2023-24 #

Executive Summary #

Transformers and Rectifiers (India) Limited (TRIL) reported moderate financial performance for FY 2023-24. Standalone Profit After Tax (PAT) saw a 12% YoY increase, driven by strategic initiatives despite a slight dip in operational revenue. The company secured its highest-ever order inflow (₹2,049 Cr), resulting in a robust order book of ₹2,581 Cr as of March 31, 2024. Key strategic priorities include capacity expansion, enhancing export contribution, achieving full backward integration, optimizing operations, and advancing technological capabilities. A successful preferential issue raised ₹120 Cr, strengthening the balance sheet.

Company Overview #

TRIL is a leading Indian manufacturer of a wide range of transformers and reactors (up to 500MVA & 1200kV Class). It is the second-largest transformer manufacturer by capacity in India, operating three manufacturing facilities near Ahmedabad, Gujarat. TRIL leverages over 40 years of experience, strong in-house design and engineering capabilities, and a focus on high-voltage and specialized transformers. Key strengths include a robust track record (16,000+ installations globally) and certifications (ISO 9001, 14001, 45001).

Financial Performance Analysis (FY 2023-24) #

• Revenue: Standalone Revenue from Operations stood at ₹1,273.31 Cr. Consolidated Revenue was ₹1,294.68 Cr.
• Profitability:
  • Standalone EBITDA increased 9% YoY to ₹128.58 Cr (Margin: 10.03%).
  • Standalone PAT increased 12% YoY to ₹41.52 Cr (Margin: 3.26%).
  • Consolidated PAT was ₹47.01 Cr.
  • The proportion of higher voltage transformers (>220 kV) in manufacturing mix increased to 66% in FY24 from 25% in FY19.
• Order Book: Highest ever order inflow of ₹2,049 Cr during FY24. Unexecuted order book stands strong at ₹2,581 Cr as of March 31, 2024.
• Exports: Achieved export sales and service income of ₹95.88 Cr in FY24. The company targets increasing export contribution to 25% of revenue over the next two years.
• Dividend: The Board recommended a dividend of ₹0.20 per share (20%) for FY24.
• Capital Structure: Successfully raised ₹120 Cr via preferential allotment in October 2023. Debt-Equity ratio improved significantly from 0.84 in FY23 to 0.46 in FY24 (Standalone). The company aims to become net debt-free.
• Key Ratios (Standalone):
  • Debt-Equity Ratio: 0.46
  • Current Ratio: 1.81
  • Net Profit Margin: 3.26%
  • Inventory Turnover: 3.89
  • Debtors Turnover: 2.07

Strategic Initiatives and Developments #

• Capital Infusion: Raised ₹120 Cr through preferential allotment.
• Capacity Expansion: Initiated capacity expansion focused on the renewable energy sector, expected completion by December 2024.
• Export Focus: Dedicated team and strategy to increase export market presence, targeting 25% revenue share within 2 years.
• Backward Integration: Aiming for full backward integration within the next two years.
• Operational Excellence: Focus on plant optimization, cost rationalization, and resource mobilization.
• Technological Advancement: Continuous focus on upgrading technology and design capabilities. Successfully completed Dynamic Short Circuit Tests on multiple high-MVA transformers.
• Product Niche: Continued focus on higher voltage transformers (>220kV), constituting 66% of manufacturing in FY24. Development of specialized transformers for railways, renewables, and green hydrogen applications.

Market and Industry Analysis #

• Global Outlook: Global growth projected at 3.1% (2024) and 3.2% (2025). The power transformer market is expected to grow significantly, driven by global electrification projects, grid development, and investments in clean energy.
• Indian Market: Robust outlook supported by government CAPEX, infrastructure development, and renewable energy push (500 GW target by 2030). Key demand drivers include:
  • Renewable Energy
  • Transmission & Distribution network upgrades
  • Railways
  • Industrial CAPEX
  • Data Centers
  • Electric Vehicles
• Growth Potential: Indian transformer market anticipated CAGR of 12-14%. India is positioned as a preferred supplier for US/Europe markets.
• Technological Trends: Increasing demand for digitally integrated/smart transformers, energy-efficient designs, and transformers suitable for renewable energy integration.

Risk Analysis #

• Competitive Intensity: Faces strong competition from both domestic and global players.
• Regulatory Uncertainty: Dependence on government policies, particularly regarding renewable energy targets, subsidies, tariffs, and CAPEX cycles.
• Commodity Price Volatility: Exposure to price fluctuations in key raw materials like Copper and CRGO.
• Execution Risk: Managing a large order book and capacity expansion projects requires efficient execution.

Future Outlook #

Management expresses optimism for FY25 and beyond, driven by the strong order book, positive industry demand, and strategic initiatives underway. The focus remains on executing the order book efficiently, improving operational metrics, expanding capacity for renewables, increasing export penetration, and maintaining technological leadership.

Financial Analysis Report: Transformers and Rectifiers (India) Limited (TRIL) - FY 2023-24 #

Auditor’s Opinion and Key Audit Matters #

Opinion #

The Independent Auditors (Manubhai & Shah LLP) issued an unmodified opinion on both the Standalone and Consolidated Financial Statements for the year ended March 31, 2024. This signifies that the financial statements present a true and fair view in accordance with Indian Accounting Standards (Ind AS).

Key Audit Matters (KAMs) #

The auditors highlighted the following KAMs, indicating areas requiring significant audit attention due to complexity or management judgment:

• Revenue Recognition: Accuracy of recognition and measurement, determination of performance obligations, estimation of variable consideration, and cut-off procedures were identified as key risks. Audit procedures included testing internal controls, verifying agreements, performance obligation satisfaction, pricing accuracy, and cut-off transactions.
• Recoverability Assessment of Trade Receivables: Assessing the allowance for impairment requires subjective judgment. Audit procedures involved understanding the impairment process, testing ageing accuracy, verifying impairment workings, evaluating historical accuracy, testing subsequent settlements, and assessing policy appropriateness under Ind AS 109.
• Contingent Liabilities: Significant judgment is involved in determining the possible outcome and future cash outflows related to ongoing litigations. Audit procedures included obtaining details, discussing management judgments, verifying relevant documents, and evaluating disclosure appropriateness under Ind AS 37.

Key Accounting Policies #

• Basis: Financial statements are prepared under historical cost convention on an accrual basis, compliant with Ind AS.
• Revenue Recognition (Ind AS 115): Revenue is recognized upon satisfaction of performance obligations.
• Property, Plant & Equipment (Ind AS 16): Stated at cost less accumulated depreciation and impairment. Depreciation is on a straight-line basis. The company uses the deemed cost exemption under Ind AS 101.
• Intangible Assets (Ind AS 38): Carried at cost less accumulated amortization and impairment. Amortized on a straight-line basis.
• Inventories (Ind AS 2): Valued at the lower of cost and net realizable value.
• Financial Instruments (Ind AS 109): Assets classified as Amortized Cost, Fair Value Through Other Comprehensive Income (FVTOCI), or Fair Value Through Profit or Loss (FVTPL). Impairment uses the Expected Credit Loss (ECL) model. Liabilities are primarily measured at amortized cost using the Effective Interest Rate (EIR) method.
• Leases (Ind AS 116): Right-of-Use (ROU) assets and corresponding lease liabilities are recognized for most leases, except short-term and low-value leases.
• Changes: No significant changes in accounting policies were explicitly mentioned for FY 2023-24.

Internal Control Effectiveness #

• Management Responsibility: The Board of Directors and Management acknowledged their responsibility for establishing, maintaining, and evaluating the effectiveness of internal financial controls (IFC) relevant to financial reporting.
• Auditor Assessment: The auditors conducted an audit of the IFC over financial reporting and concluded that the company has, in all material respects, an adequate system and such controls were operating effectively as at March 31, 2024, for both Standalone and Consolidated reporting.
• CEO/CFO Certification: The CEO and CFO certified the effectiveness of internal controls and stated they have disclosed any deficiencies or significant changes to the auditors and Audit Committee.

Regulatory Compliance Status #

• Overall Compliance: The Secretarial Audit Report confirms that the company has generally complied with the material aspects of applicable provisions.
• Specific Disclosures: The company adheres to requirements like CEO/CFO certification, Code of Conduct affirmation, Risk Management framework, Vigil Mechanism, Related Party Transaction approvals, and timely financial result publication.
• Penalties/Non-compliance: No material penalties or strictures by SEBI/Stock Exchanges/Statutory Authorities related to capital markets were reported in the last three years.

Legal Proceedings and Potential Impact #

• Contingent Liabilities: The primary contingent liabilities relate to disputed matters concerning Excise Duty, Service Tax, Custom Duty and Income Tax matters.
• Potential Impact: Adverse outcomes in these tax disputes could impact future profitability and cash flows.
• Other Orders: No significant or material orders impacting going concern status or future operations were reported as passed by regulators/courts/tribunals.

Related Party Transactions (RPTs) #

• Policy & Oversight: The company has a Board-approved RPT policy. All RPTs entered into during the year were stated to be in the ordinary course of business and on an arm’s length basis.
• Key Transactions: Transactions occurred primarily with subsidiaries and Key Management Personnel (KMP) including relatives.
• Disclosure: Details are provided in the financial statement notes and Form AOC-2.

Subsequent Events #

• The financial statements were approved by the Board on April 8, 2024.
• Dividend: The Board recommended a final dividend of ‘0.20 per equity share (20%) for FY 2023-24, subject to shareholder approval at the AGM on May 13, 2024.
• Fund Raising (Proposed): Shareholder approval is sought at the AGM for raising funds up to ‘500 Crores via Qualified Institutions Placement (QIP).
• Employee Stock Options (Proposed): Shareholder approval is sought at the AGM to introduce ‘TRIL-Employee Stock Option Plan 2024’ (ESOP 2024) involving up to 42,76,922 options.
• Remuneration Revision/Reappointment (Proposed): Approvals sought for remuneration revisions and reappointment of Mr. Satyen Mamtora as MD (w.e.f. April 1, 2025).

Accounting Quality Analysis #

• Consistency: Accounting policies appear consistently applied based on Ind AS framework.