Transformers & Rectifiers (India) hosted a conference call on Aug 11, 2023. In the conference call the company was represented by Jitendra Mamtora, Chairman and Satyen Mamtora, Managing Director.

Key takeaways of the call

Orders on hand as on July 31, 2023 stood at Rs  2149 crore. Of the current order book 95% are domestic orders and 5% are export orders.

The company has received new orders of Rs 377 crore during Q1FY24.  So far in Q2FY24 the company has received new orders worth Rs 250 crore including one large order worth Rs 145 crore from PGCIL. 

In present order book the GETCO orders were just about Rs 92 crore. 

Q1FY24 revenue from operations declined by 48%  (to Rs.155.57 Crore from Rs.300.34 crore in Q1FY23)  on account of multiple factors i.e. significant inventory built up as materials were ready for dispatch but delivery got delayed due to non receipt of dispatch instruction from customers there by unable to invoice those orders;  delay in inspection from customers side in few instances because of which the orders could not be dispatched and invoiced; Some of the orders were deliberately slowed down by the company where there were delayed payments by the customer.  Apart from these another factor that impacted the topline is non receipt of any amount from GETCO during the quarter which increased the outstanding to Rs 183 crore, which impacted heavily on the deliverable of the company.

GETCO Issue update:  On July 13, 2023 GETCO issued stop dealing (not black list) notice stating that it has decided to stop dealing with the company for 3 years on the ground that company had allegedly submitted forged material dispatched clearance certificate (MDCC) relating to 20 transformers supplied by the company under the ongoing contract for supply of 29 transformers and 1 reactors to GETCO. As per purchase policy of GUVNL (the parent company of GETCO), if stop deal order is issued to any supplier same will be applicable to new business opportunities or where the tender is not awarded. Purchase policy of GUVNL clearly mentioned that it does not have any impact on existing contract or contract which is awarded to suppliers and delivery has started under the same nor will it have any impact on outstanding receivables.  The delay in payment to the company by GETCO is because the transformers that are said to be supplied under the wrong documents are to be retested. The re test of 8 transformers has been done successfully and the same has been dispatched under the fresh delivery instruction (DI) given by GETCO. The balance transformers are already commissioned and are in operational in good condition. The company expects that payment process to start by end of August 2023 or early Sep 2023.  Company is representing its case to GETCO management to reconsider the stop deal order and revoke the same, management is hopeful to get it revoked in near future.

The GETCO order that was in question is of 29 transformer and 1 rectifiers the pending order executable of this order is  Rs 30 crore and apart from that one more small order is that that is pending executed due to this issue . The company expect the stop working letter will be revoked and this is one sided. 

GETCO may do away with retesting of balance of the transformers other than the 8 already tested as they are already in operation. There  is no question quality not meeting the requirement or performance parameters agreed upon by the parties.  The company has booked revenue for all the 25 transformers. Total outstanding has been withheld by them is  about Rs 183 crore and that will start released starting from this month.

The company is confident of YoY growth in revenue in Q2FY24 as the situation has improved considerably and the company is showing good growth. About Rs 1400-1500 crore of execution of present order book is expected in FY24.

In Q1FY24 the company manufactured 3600 mva but has sold only 2019 MVA. 

Company has participated under bidding process of state utilities, central utilities, EPC’s, Private, TBCB tenders etc. for more than Rs.3,700 crore during the quarter. It has also participated in 2-3 export tenders during the quarter through its overseas associates and expects favorable outcome inQ2FY24.

Current capacity utilization is about 60-65% with current throughput time.  With reduction in throughput time the capacity will go up by 15-20%.

Looking for Rs 100-150 crore of bridge loan for meeting WC requirement. It is talking to few funds.

Built up inventory –  The inventory buildup comprises of Rs 50 crore of Oil India order and Rs 20 crore of small customers.  Not releasing of fund of Rs 183 crore by GETCO has deprived the company from   further booking of Rs 150 crore of revenue as the company could not fund WD requirements.    Similarly the company has also not despatched orders for nonpayment.

Transformers for green energy are seeing strong demand across the globe and the company with its technology is well set to capitalize on this trend.