Q&A WITH VICE CHAIRMAN & MANAGING DIRECTOR

FY 24 was a challenging period, especially for our Sugar and Alcohol businesses due to adverse climatic conditions and regulatory developments. Heavy rainfall, water logging in certain regions and the spread of red rot disease in the Co0238 variety sugarcane crop, significantly impacted plant cane. The season also witnessed a higher diversion of sugarcane to kolhus/crushers, which is the unorganised jaggery sector. This reduced sugarcane availability and thus its crush.

Amidst expectations of lower sugar production in the country, the Department of Food and Public Distribution (DFPD) issued directions on December 15, 2023, to limit the sugar sacrifice through B-heavy molasses (BHM) and sugarcane juice route to 1.7 million tonnes, compared to 4.1 million tonnes in the previous season. Additionally, the lower quota released for sale in the domestic market and the restrictions on sugar exports by the Government dampened the Company’s sales volumes.

Distilleries were faced with significant feedstock challenges. The suspension of surplus rice supplies by the Food Corporation of India (FCI) for ethanol production in July 2023, necessitated distilleries to adopt maize as feedstock. Further, with the restrictions on BHM, the sugar units, including ours, switched to C-heavy molasses (CHM) for ethanol production in the last quarter.

With sugar operations largely carried out using CHM instead of BHM and the distillery operations with maize instead of FCI rice, our operating capacities and production were lower. The profitability of the Alcohol business was also impacted given a larger proportion of ethanol being produced from relatively low‑margin maize as against the traditional high‑margin molasses especially BHM. This was despite the OMCs incentivising maize-based ethanol from January 5, 2024 onwards.

Lower sugarcane availability was an industry-wide phenomenon and Triveni was no different.

The red-rot disease was mostly prevalent in western and central Uttar Pradesh and thus our Deoband, Chandanpur, Rani Nangal and Milak Narayanpur units faced a decline in crush. Whereas, the Khatauli and Sabitgarh units were relatively unimpacted by the disease and thus saw a marginal decline in crush. The Ramkola unit became the only Group unit to register an increase in sugarcane crush. This was on account of its proactive effort to reduce the Co0238 sugarcane variety and shift to other varieties in response to some instances of disease in the previous season. Overall, our sugarcane crush declined by 11.4% to 8.26 million tonnes.

We continued our efforts to increase production of refined and pharmaceutical-grade sugar which attracts a premium over sulphitation sugar. The successful shift to the refining process (DRP) at the Milak Narayanpur unit, helped enhance the proportion of this premium portfolio from ~60% to ~70%, enhancing average blended realisations by 5.8% for the Company.

In distillery operations, we seamlessly transitioned to maize feedstock at our multi-feed Milak Narayanpur facility and grain-based distillery at Muzaffarnagar. Despite the challenges, alcohol production and sales were at 18.44 crore litres and 18.27 crore litres respectively, both higher than the previous year. Our continued focus on forward integration enhanced IMIL sales by 34% to 44.73 lakh cases, which along with an increase in average realisation price led to an 8.6% increase in net turnover in the Alcohol business.

The year gone by was a one-off where several external variables posed tough challenges for both Sugar and Alcohol business. We expect the scenario to improve in FY 25. The prediction of above-average monsoon and renewed focus on the EBP by the Government are expected to create a favourable operating context for both businesses. We are also taking several proactive measures to tackle challenges with agility and seize the opportunities.

Our sugarcane development teams deployed a multi-pronged strategy to secure sugarcane availability. They are engaging with the farmers to uproot the diseased crop to contain the damage and limit its spread. A comprehensive varietal substitution programme has been taken up, especially in low-lying, water-logging-prone areas, aimed at reducing the planting of vulnerable Co0238 cane variety and substituting it with other high-sucrose and high-yield varieties. Additionally, we continued to invest in our facilities to enhance crush rate, sugar quality and efficiencies. This year we are adding 2,000 TCD of crushing capacity at our Sabitgarh sugar unit, enhancing our total capacity to 63,000 TCD. We expect these efforts to improve our crush and recoveries in the coming season.

In the Alcohol business, we expect significant opportunities from India’s Ethanol Blended Petrol (EBP) programme, which targets achieving 20% ethanol blending in petrol by FY 26. For the Ethanol Supply Year 2023-24, the OMCs have floated a tender for 825 crore litres with a 15% blending target which is expected to progressively increase in the next year.

Considering the Government’s commitment to EBP and the significance of sugarcane in achieving it, we expect favourable policy decisions for addressing the industry’s feedstock and profitability challenges. Recent steps towards this were the revisions in ethanol prices (from maize) and the Government allowing sugar mills to convert their existing 6,70,000 tonnes of B-heavy molasses stock into ethanol at the end of April 2024.

Triveni is actively partnering in India’s EBP programme with a long-term strategic intent of growing the Alcohol business. Aligned with this, we recently commissioned a 200 KLPD multi-feed distillery at the Rani Nangal unit, which will start contributing to alcohol volumes in FY 25. Our aggregate distillation capacity now stands at 860 KLPD.

The growth and progress in our Power Transmission business is inspiring. We have successfully established a prominent position in high-speed gear solutions, supplying to all major global OEMs in India including aftermarket support. We have also made significant strides in the international market, with our technologies, products and aftermarket capabilities receiving excellent responses.

FY 24 was a breakthrough year for the gears segment with prestigious product order bookings and progress in our international expansion strategy. Throughout the year, we undertook extensive international customer outreach and continued investments in R&D, technology advancements and infrastructure to enhance product market share. These efforts translated into orders from South American and European customers, including a maiden order from a leading European turbine manufacturer. The execution of initial orders resulted in product qualifications in these critical markets, highlighting our growing acceptance in the international market. The Defence segment is also witnessing healthy progress supported by our capabilities in multiple product lines and enhanced competencies through partnerships.

These developments contributed to the best-ever performance of the Power Transmission business with record revenue, profitability and order booking in FY 24. That said, this is just the beginning. We expect the business to continue benefiting from the rapid growth in the Indian economy and the accelerated capex cycle towards infrastructure creation and private sector capacity expansion. The defence indigenisation led by the Government’s Make in India programme is also opening a plethora of opportunities.

Considering the immense growth prospects, the Board approved a further capex of ₹ 180 crore during the year. Investments are aimed towards a new bay for both power transmission and defence products as well as setting up a new multi-modal manufacturing, assembly and testing facility at Mysuru for defence products. This expansion is poised to enhance the capacity of the gears business alone, excluding defence, from ₹ 250 crore to ₹ 500 crore.

Our strategic initiatives in both product and aftermarket position us ideally to seize the opportunities, especially in steam, compressors and gas turbines, pump segments, and sectors like steel, cement, oil and gas, and waste heat recovery. In the defence segment, we expect increased ordering in key segments like gas turbine packaging, propulsion gearboxes, propulsion shafting and special application pumps where we have made considerable progress over the years.

We are confident of a strong rebound in FY 25. While our performance saw some moderation during FY 24, it was primarily on account of external factors. Our long-term growth fundamentals remain strong. The agility exhibited by our team in executing strategic priorities including capacity expansion initiatives along with the expectation of policy decisions and a favourable macro environment, positions us for improved performance. The growth witnessed in our Engineering businesses has been exceptional, helping reduce dependence on the Sugar business. At the same time, our efforts around cost optimisation, efficiency improvement and value-additions will help improve margins. Through a combination of these efforts, we expect to deliver long-term growth and create value for our stakeholders sustainably.