TD Power Systems Ltd:Annual Report 2023-24 Analysis

TD Power Systems Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

TD Power Systems Ltd. (TDPS) was established in 1999. The company’s origins lie in providing AC generators for various power generation applications.

Headquarters Location and Global Presence:

• Headquarters: Bangalore, India
• Global Presence: TDPS has a presence in several countries, primarily focused on export markets.

Company Vision and Mission:

While the specific vision and mission statements might not be publicly accessible, TDPS generally aims to be a leading global provider of AC generators and related solutions, contributing to efficient and reliable power generation worldwide.

Key Milestones in Their Growth Journey:

• Early years focused on establishing manufacturing capabilities and securing initial contracts.
• Expansion into higher-capacity generators and specialized applications.
• Successful entry into export markets, driving revenue growth.
• Development of strategic partnerships to enhance technology and market reach.

Stock Exchange Listing Details and Market Capitalization:

• Listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
• Market Capitalization: (Please find the live market cap on BSE/NSE)

Recent Financial Performance Highlights:

• (Refer to recent annual reports and investor presentations for key financial metrics such as revenue, profit, and order book.)

Management Team and Leadership Structure:

• (Refer to the company’s website or annual reports for details on the key management personnel and their roles.)

Any Notable Awards or Recognitions:

• (Search for news articles or company publications highlighting any industry awards, export recognitions, or quality certifications.)

Their Products #

Complete Product Portfolio with Categories:

• AC Generators: Synchronous generators for steam turbines, gas turbines, hydro turbines, diesel engines and wind turbines.
• Special Purpose Generators: Generators for specific applications such as captive power plants, co-generation, and waste heat recovery.

Flagship or Signature Product Lines:

• High-Capacity AC Generators.

Key Technological Innovations or Patents:

• (Search for company announcements, patents, or technical publications to identify specific technological innovations related to generator design, efficiency, or control systems.)

Manufacturing Facilities and Production Capacity:

• The company has a manufacturing facility in Bangalore, India.
• (Please refer to the annual report for more specific production capacity.)

Quality Certifications and Standards:

• TDPS maintains various quality certifications, including ISO 9001.

Any Unique Selling Propositions or Technological Advantages:

• Experience in designing and manufacturing generators for diverse applications and prime movers.
• Strong engineering capabilities for customized solutions.

Recent Product Launches or R&D Initiatives:

• (Search for press releases or company announcements to identify any recent product launches or R&D initiatives related to generator technology or new applications.)

Primary Customers #

Target Industries and Sectors:

• Power Generation
• Oil and Gas
• Renewable Energy (Hydro, Wind)
• Industrial Manufacturing
• Captive Power Plants

Geographic Markets (Domestic vs. International):

• Significant focus on export markets, especially in Asia, Africa, and the Middle East.
• Presence in the Indian domestic market.

Major Client Segments (agricultural, industrial, residential, etc.):

• Industrial
• Power Utilities
• Original Equipment Manufacturers (OEMs)

Any Notable Government Contracts or Institutional Clients:

• (Search for news articles or company announcements related to any significant government contracts or deals with institutional clients.)

Distribution Network and Sales Channels:

• Direct sales to end-users and OEMs.
• A network of agents and distributors in select international markets.

Major Competitors #

Direct Competitors in India and Globally:

• Bharat Heavy Electricals Limited (BHEL)
• Siemens
• ABB
• WEG
• Crompton Greaves

How they differentiate from competitors:

• TDPS focuses on customized solutions and strong engineering capabilities.
• Potentially competitive pricing for certain segments.
• Agility in responding to customer needs.

Industry challenges and opportunities:

• Challenges: Raw material price volatility, increasing competition, technological advancements.
• Opportunities: Growing demand for power generation, renewable energy adoption, increasing focus on energy efficiency.

Market positioning strategy:

• Focus on being a reliable and cost-effective provider of AC generators for a range of applications.
• Building strong relationships with key customers and OEMs.

Future Outlook #

Expansion plans or growth strategy:

• Expanding into new geographies and customer segments.
• Developing new product lines and enhancing existing offerings.

Upcoming products or innovations:

• (Search for company announcements regarding future products or R&D plans.)

Sustainability initiatives or ESG commitments:

• (Refer to the company’s website or annual reports for information on any sustainability initiatives or ESG (Environmental, Social, and Governance) commitments.)

Industry trends affecting their business:

• Shift towards renewable energy sources.
• Growing demand for distributed generation.
• Increasing focus on energy efficiency and emissions reduction.

Long-term vision and strategic goals:

• To be a globally recognized leader in the AC generator market.
• To provide innovative and sustainable solutions to customers.

TD Power Systems Limited: Financial Analysis Report (FY 2023-24) #

Financial Performance Overview (FY24 vs. FY23) #

Consolidated Performance #

• Total Income: Increased by 13.98% to ₹1,01,672.60 Lakhs in FY24 from ₹89,205.17 Lakhs in FY23, driven primarily by higher sales volume.
• Sales: Grew by 14.70% to ₹1,00,051.99 Lakhs in FY24.
• EBITDA (including other income & exceptional item): Rose by 21.34% to ₹18,360.03 Lakhs in FY24 from ₹15,131.49 Lakhs in FY23.
• Profit Before Tax (PBT) (including exceptional item): Increased by 25.21% to ₹16,220.20 Lakhs in FY24.
• Profit After Tax (PAT): Increased by 22.25% to ₹11,834.92 Lakhs in FY24.
• Total Comprehensive Income: Grew by 22.33% to ₹11,564.74 Lakhs in FY24.
• Net Worth: Stood at ₹70,513.35 Lakhs, an increase of ₹10,061.38 Lakhs over FY23.
• Consumption of Raw Materials: Increased by ₹6,481.97 Lakhs (11.0%) to ₹65,518.70 Lakhs, forming 64.44% of total income (FY23: 66.18%).
• Operating and Other Expenses: Increased by 17.29% to ₹17,793.87 Lakhs, primarily due to higher personnel expenses (up 17.00% including salary revisions and a one-time VRS cost of ₹321.82 Lakhs) and welfare expenses (up 28.56%).

Standalone Performance #

• Total Income: Increased by 19.43% to ₹1,00,738.01 Lakhs in FY24 from ₹84,348.64 Lakhs in FY23.
• Sales: Grew by 19.77% to ₹98,387.90 Lakhs in FY24.
• EBITDA (including other income & exceptional item): Rose by 33.56% to ₹18,714.38 Lakhs in FY24.
• PBT (including exceptional items): Increased by 39.45% to ₹16,651.97 Lakhs in FY24.
• PAT: Increased by 40.38% to ₹12,417.82 Lakhs in FY24.
• Total Comprehensive Income: Grew by 38.27% to ₹12,225.74 Lakhs in FY24.
• Net Worth: Stood at ₹70,111.64 Lakhs (FY23: ₹59,389.25 Lakhs).

Key Ratios (Standalone) #

• Operating Profit Margin: 16.63% (FY23: 14.44%).
• Return on Net Worth: 17.44% (FY23: 14.89%).
• Debt-Equity and Interest Coverage ratios are not applicable as the company is debt-free on a standalone basis.

Dividend #

• FY24 Interim Dividend: ₹0.50 per share.
• FY24 Proposed Final Dividend: ₹0.60 per share (total outflow approx. ₹937.02 Lakhs).
• Total dividend for FY24: ₹1.10 per share (Interim ₹0.50 + Final ₹0.60).
• FY23 Final Dividend Paid in FY24: ₹0.50 per share.

Business Segment Performance and Outlook #

Manufacturing Business (Overall) #

• Pending order book as of April 1, 2024: ₹1,18,942.03 Lakhs (India: ₹1,17,259.52 Lakhs, Turkey: ₹1,682.51 Lakhs), includes traction business of ₹41,794.24 Lakhs.
• Export and deemed exports share: 64% of order book (excluding traction).
• FY24 Order Inflow: ₹1,05,141.50 Lakhs (Domestic: 43%, Export & Deemed Export: 57%).
• Top 10 customers contributed 77% of consolidated revenues in FY24.

Product Segment Highlights & Outlook #

• Steam Turbine Generators: Remains highest revenue contributor. Domestic market shows capex revival. Export markets driven by renewable transition, waste-to-heat, etc. Long-term demand from EV sector and domestic heating.
• Hydro Generators: Strong order pipeline from OEMs worldwide. Key markets: Vietnam, Nepal. India gradually opening for small hydro. Recent orders include a 2.1MW unit for Tanzania and 3.4MW units for Indonesia.
• Motors, Wind Repair & Railways Segment: Significant order booking growth of 96% in FY24. Healthy growth projected for FY25. Successfully refurbished a 40MW synchronous motor. Approved vendor for Indian Railways for traction motors.
• Gas Turbine & Gas Engine Segment: Increasing order trend. Strong and stable outlook. Driven by oil & gas, data centers (AI), and grid stabilization. Recent supplies include units for Guyana, USA (also stators), and Mexico.
• Turkey Business: Significant downturn due to economic slowdown and government incentive policy. Production to be temporarily halted after fulfilling last deliveries, though equipment remains for quick restart. Market leader for “made in Turkey” generators with over 190 units installed. FY24 revenue ₹593.98 Lakhs (FY23: ₹2,759.51 Lakhs), resulting in a loss before tax.

Subsidiary Performance #

• TD Power Systems (USA) Inc.: FY24 Revenue ₹3,823.25 Lakhs (FY23: ₹4,834.63 Lakhs). PAT ₹168.28 Lakhs. Market improving, data center demand for gas turbine generators is high. Steam market in Latin/South America active.
• TD Power Systems Europe GmbH (Germany): FY24 Revenue ₹11,664.29 Lakhs (FY23: ₹9,252.73 Lakhs). PBT ₹308.44 Lakhs. Steam turbine generator market shows remarkable growth (waste-to-energy, heat recovery, geothermal). Hydro turbine generator demand surge. Gas engine segment stable. Supplied generators for new battery storage application. This is a material subsidiary.

Detailed Analysis #

Balance Sheet Analysis #

Operating Performance #

Income Statement #

Cash Management #

Cash Flow and Liquidity Analysis #

Key Performance Indicators #

TD Power Systems Limited: Financial Year 2023-24 Analysis #

Long-Term Strategic Goals and Progress #

TD Power Systems Limited (TDPS) aims for global leadership in AC generator manufacturing, focusing on robust, reliable, and efficient engineered-to-order solutions. Key strategic pillars include:

• Maintaining world-class manufacturing facilities
• Continuous process automation
• Enhancing design capabilities through innovation
• Ensuring high quality and reliability
• Diversifying product offerings (including for marine and railway applications)
• Fostering strategic technology partnerships with a focus on localized solutions
• Expanding global market reach, particularly in Europe and North America
• Diversification into new electric rotating machines

Progress in FY2023-24 includes a global footprint with 6,392 generators installed across 105 countries. The company is pursuing growth in various generator segments (steam turbine, hydro, gas turbine, gas engine) and motors. For FY2025, TDPS projects consolidated revenue of ₹1,200 crores in its manufacturing business. The acquisition of land for a new manufacturing facility underscores its commitment to capacity expansion and operational efficiency.

ESG Framework #

ESG and Sustainability Analysis #

TD Power Systems Limited - Financial Analysis (FY 2023-24) #

Financial Performance Overview (FY2023-24) #

TD Power Systems Limited (TDPS) demonstrated robust financial growth in FY2023-24.

Standalone Performance: #

• Total income rose by 19.43% to ₹1,00,738.01 Lakhs from ₹84,348.64 Lakhs in FY2023.
• EBITDA (including exceptional items) increased by 33.56% to ₹18,714.38 Lakhs, compared to ₹14,012.38 Lakhs in the previous fiscal.
• Profit Before Tax (PBT), including exceptional items, grew by 39.45% to ₹16,651.97 Lakhs from ₹11,941.55 Lakhs.
• Profit After Tax (PAT) saw a significant increase of 40.38%, reaching ₹12,417.82 Lakhs from ₹8,845.83 Lakhs.
• Total Comprehensive Income rose by 38.27% to ₹12,225.74 Lakhs.
• Net worth improved to ₹70,111.64 Lakhs from ₹59,389.25 Lakhs in FY2023.

Key Ratios (Standalone):

• Operating Profit Margin: 16.63% (FY24) vs. 14.44% (FY23). Variance of 15.17%.
• Return on Net Worth: 17.44% (FY24) vs. 14.89% (FY23). Variance of 17.12%.
• The company remains debt-free on a standalone basis.

Consolidated Performance: #

• Total income increased by 13.98% to ₹1,01,672.60 Lakhs from ₹89,205.17 Lakhs in FY2023.
• EBITDA (including other income & exceptional item) grew by 21.34% to ₹18,360.03 Lakhs.
• PBT (including exceptional item) increased by 25.21% to ₹16,220.20 Lakhs.
• PAT rose by 22.25% to ₹11,834.92 Lakhs.
• Total Comprehensive Income increased by 22.33% to ₹11,564.74 Lakhs.
• Consolidated net worth stood at ₹70,513.35 Lakhs.

Dividend: #

• An interim dividend of ₹0.50 per share (face value ₹2) was paid for FY2024.
• A final dividend of ₹0.60 per share (face value ₹2) has been recommended for FY2024.
• Total cash outflow for dividends in FY2024 (final FY23 + interim FY24) was ₹1,561.70 Lakhs.
• The Dividend Distribution Policy is available on the company’s website. The record date for the final dividend is August 6, 2024.

Segment-Wise Performance and Order Book #

• Order Book (as of April 1, 2024): ₹1,18,942.03 Lakhs (₹1,17,259.52 Lakhs for India, ₹1,682.51 Lakhs for Turkey), including ₹41,794.24 Lakhs from the traction business. Exports and deemed exports constituted 64% of the order book (excluding traction).
• Order Inflow (FY24): ₹1,05,141.50 Lakhs (₹923.90 Lakhs from Turkey). Domestic orders were 43%, while export/deemed export orders were 57%.
• Sales Mix (FY24): Exports and deemed exports contributed 43% of total sales (standalone), with domestic revenues at 57%. Top 10 customers contributed 77% of consolidated revenues.

Segment Performance & Outlook: #

• Steam Turbine Generators: Remains the highest revenue contributor.
• Hydro Generators: Strong order pipeline from global OEMs.
• Motors, Wind Repair & Railways: Significant order booking growth of 96% in FY24.
• Gas Turbine & Gas Engine Segment: Increasing order trend from major customers.
• Turkey Business: Market downturn due to economic slowdown and government incentive policy.

Subsidiary Performance #

• DF Power Systems Private Limited (India): No significant business operations. Revenue of ₹6.26 Lakhs (interest income). Loss after tax of ₹5.59 Lakhs. Positive net worth.
• TD Power Systems (USA) Inc.: Revenue of ₹3,823.25 Lakhs. PAT of ₹168.28 Lakhs. Market improvement noted.
• TD Power Systems Europe GmbH (Germany): Revenue of ₹11,664.29 Lakhs. PBT of ₹308.44 Lakhs. Strong growth in steam turbine generator market. This is a material subsidiary.
• TD Power Systems Jenerator Sanayi AS (Turkey): Revenue of ₹593.98 Lakhs. Loss before tax of ₹355.97 Lakhs. Total comprehensive loss of ₹383.85 Lakhs.
• TD Power Systems Japan Limited: Voluntarily liquidated effective June 26, 2023.

Management Guidance and Outlook for FY2025 #

• Revenue Projection: Targeting consolidated revenue of ₹1,200 Crores in the manufacturing business for FY2025.
• EBITDA Margin: Expects improved EBITDA margin driven by operational leverage.
• Profitability: Anticipates a higher level of profit in FY2025.
• Growth Drivers:
  • Domestic capex revival.
  • Export market opportunities in renewable energy.
  • Strong pipeline in hydro, gas turbines, and gas engines.
  • Growth in motors business.
  • Traction motors for Indian Railways and export opportunities.
• Strategic Initiatives:
  • Continuous process automation, design, manufacturing, and quality capability enhancement.
  • Focus on localized solutions and expansion of global market reach.
  • Development of generators for special applications and varied specifications.
• Capital Expenditure: Acquired 15 acres of land in Tumkur, Karnataka, for a new facility.
• Efficiency Improvement: Ongoing efforts in cost reduction and operational efficiency improvements.

Risk Factors and Mitigation Strategies #

• Economic Slowdown and Market Concentration: Mitigation through growing overseas market presence and diversified product verticals.
• Product Concentration: Mitigation through R&D and diversification into hydro, gas, and other applications.
• Technology Risk: Mitigation through ongoing design activity, technology absorption, and R&D focus.
• Competition Risk: Mitigation through value proposition, shorter delivery times, and customer support.
• Transnational Sale of Products Risk: Mitigation through strict quality control and clear contractual obligations.
• Foreign Exchange Risk Sensitivity: The company uses foreign exchange forward contracts to hedge exposure.

Key Items from 25th Annual General Meeting (AGM) Notice #

• AGM Details: Tuesday, August 13, 2024.
• Ordinary Business:
  1. Adoption of Audited Financial Statements (Standalone & Consolidated) for FY 2023-24.
  2. Confirmation of interim dividend and declaration of final dividend for FY 2023-24.
  3. Re-appointment of Ms. S. Prabhamani as a Director.
• Special Business (Ordinary Resolution): 4. Ratification of remuneration of M/s. Rao, Murthy & Associates, Cost Auditors, for FY 2024-25.

Other Material Disclosures #

• Share Capital: Paid-up equity capital as of March 31, 2024, was ₹31,23,40,202.
• Internal Financial Controls: The Board opines that IFCs are commensurate with the business size and operate effectively with no material weakness.
• Conservation of Energy & R&D:
  • Energy Conservation: Replacement of high wattage lights with LEDs, power control mechanisms. Capital investment of ₹81.67 lakhs in energy conservation equipment in FY24.

Financial Analysis Report: TD Power Systems Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

Standalone Financial Statements #

• The statutory auditors, Varma & Varma, Chartered Accountants, issued an unmodified opinion, stating that the standalone financial statements give a true and fair view of the state of affairs as at March 31, 2024, and of its profit, total comprehensive income, changes in equity, and cash flows for the year then ended, in conformity with Ind AS.

Emphasis of Matter #

• Attention was drawn to Note 52(a) and 52(b) concerning the going concern assumption for two subsidiaries and the evaluation of the carrying value of investment in one subsidiary, for which management deems no further impairment necessary. The opinion was not modified in respect of these matters.

Other Matter #

• Reliance was placed on the audit report of the Japan Branch auditors for the financial information of the Japan Branch. The opinion was not modified.

Consolidated Financial Statements #

• The statutory auditors issued an unmodified opinion, stating that the consolidated financial statements give a true and fair view of the consolidated state of affairs, consolidated profit, consolidated total comprehensive income, consolidated changes in equity, and consolidated cash flows, in conformity with Ind AS.

Emphasis of Matter #

• Attention was drawn to Note 54(a) and 54(b) concerning the going concern assumption for two subsidiaries. The auditors noted that the independent auditors of one subsidiary (DF Power Systems Private Limited) expressed a material uncertainty regarding its going concern status, but the financial information of this subsidiary is not material to the group. The opinion was not modified.

Other Matters #

• Reliance was placed on the audit report of the Japan Branch auditors (for Holding Company’s standalone) and the audit/review reports of auditors/Chartered Accountant firms for one Indian subsidiary and four foreign subsidiaries for their respective financial information used in consolidation. The opinion was not modified.
• CARO 2020 (Consolidated): No qualifications or adverse remarks were reported, except for D F Power Systems Private Limited concerning Paragraph 3(xix) (cash losses).

Key Accounting Policies and Changes #

Basis of Preparation #

• Financial statements are prepared on a going concern basis, under the historical cost convention, on an accrual basis, in accordance with Indian Accounting Standards (Ind AS). Certain financial assets and liabilities are measured at fair value. The operating cycle is determined as 12 months.

Key Policies #

• Revenue Recognition (Ind AS 115): Recognized when performance obligations are satisfied. For construction-type contracts, the percentage-of-completion method is used based on costs incurred to date. For product sales, revenue is typically recognized upon transfer of title and risk/rewards or upon completion of tests as per customer terms.
• Property, Plant and Equipment (PPE): Carried at cost less accumulated depreciation and impairment. Depreciation is on a Straight-Line Method (SLM) based on useful lives prescribed in Schedule II of the Companies Act, 2013, or as estimated by management, whichever is lower.
• Intangible Assets: Technical know-how/license fees/software are amortized over 5 years (SLM).
• Impairment of Assets: Financial assets are assessed for Expected Credit Losses (ECL). Non-financial assets are tested for impairment if indicators exist.
• Inventories: Valued at the lower of cost (FIFO for raw materials) and net realizable value.
• Employee Benefits: Defined contribution plans (Provident Fund, ESI) are charged as incurred. Defined benefit plans (Gratuity - funded) are accounted for using the Projected Unit Credit method with actuarial valuations; remeasurements are recognized in OCI.
• Share-Based Payments (Ind AS 102): Fair value method used. TDPSL Employee Welfare Trust shares are treated as treasury shares.
• Leases (Ind AS 116): Right-of-use assets and lease liabilities are recognized for leases, with exemptions for short-term and low-value leases.
• Foreign Currency Transactions: Transactions are recorded at rates prevailing on transaction dates. Monetary items are restated at year-end rates. Exchange differences on foreign operations (Japan Branch) are recognized in OCI. For foreign subsidiaries (consolidation), assets and liabilities are translated at closing rates, income/expenses at average rates, with resulting exchange differences in OCI.
• Financial Instruments (Ind AS 109): Classified and measured at amortized cost, Fair Value Through Profit or Loss (FVTPL), or Fair Value Through Other Comprehensive Income (FVTOCI).
• Borrowing Costs: Capitalized if directly attributable to qualifying assets.
• Segment Reporting (Ind AS 108): Based on internal reporting to the Chief Operating Decision Maker (CODM). Primary segment is manufacturing; secondary is geographical.

Changes in Accounting Policies #

• No new standards or amendments to existing Ind AS were notified by MCA applicable to the Company for FY 2023-24, indicating no mandatory changes in accounting policies during the year. Policies appear consistently applied.

Internal Control Effectiveness #

Management’s Responsibility #

• The Board of Directors is responsible for establishing and maintaining adequate internal financial controls (IFC) and for their operating effectiveness.

Auditor’s Opinion (Standalone - Annexure B) #

• The Company has, in all material respects, an adequate IFC system over financial reporting, and such controls were operating effectively as at March 31, 2024.

Auditor’s Opinion (Consolidated - Annexure A, based on Holding and Indian Subsidiary) #

• The Holding Company and its Indian subsidiary have, in all material respects, adequate IFC over financial reporting, and such controls were operating effectively as at March 31, 2024.