TRF+Transcript 011110

8/7/2019 TRF+Transcript 011110

1/42

Emkay Research | 01 November, 2010 1

TranscriptionTRF

Moderator:Good morning ladies and gentlemen. I am Saranya, moderator for this conference. Welcome to the conference call of TRF

hosted by Emkay Global Financial Services Limited. We have with us today Mr. Sudhir Deoras, Managing Director and Mr.

Ashim Roy, CFO of TRF Limited. At this moment, all participants are in listen only mode. Later, we will conduct a question

and answer session. Please note this conference is being recorded. I would now like to hand over the conference to Ms.

Prerna Jhavar of Emkay Global for opening comments. Over to you maam.

Prerna Jhavar:

Good morning everybody and good morning Mr. Roy and Mr. Deoras. Thank you so much for giving us this opportunity to

host this call. I believe we could kind of start with a small presentation on the results and overview on the results, and then we

could take up the Q&A session. So over to you sir.

Sudhir Deoras:

I am Deoras here. I would like to say that this quarters results have been disappointing. We have declared losses. I would

like to remind all of you that in the last quarter results, we had come out with a footnote to the results saying that we have

found some misrepresentations of numbers in one of the divisions and independent investigation has been planned. That

investigation has been completed and whatever that investigation brought out and then our internal management work was

done, project by project, order by order, and we needed to kind of, we saw that the estimation of many of these projects or the

orders were not correctly done, and all that correction we did in this quarter and that is what has got reflected into this quarters

results. So this is the basic point, which I wanted to make. Mr. Ashim Roy would talk about numbers maybe a little later.

Another issue is that while other divisions are okay, but we had been discussing in the past that there is a long gap before the

new orders after the economic downturn, new orders started coming out and we won those orders. And the effect of those

orders and their kind of profits is expected to start coming from quarter 4, because unless it reaches a threshold limit we

cannot, so we did not have also a situation where other businesses could have brought enough money to kind of smoothenthis bumpy ride, but that is where we are just now. Overall, the margins obviously are under pressure because of this major

thing and also the new orders, which have tight margins. That is the picture. We hope that by the year end we would be back

to positive, but as of now todays picture is this one. Ashim, would you like to say something?

Ashim Roy:

No.

Sudhir Deoras:

Alright, so that is what are my opening remarks.

Question and Answer Session

Moderator:

Thank you sir. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please

press * and 1 on your telephone key pad and wait for your turn to ask the question. If your question has been answered

before your turn, and you wish to withdraw your request, you may do so by pressing # key.

First question comes from Mr. Kamlesh Kotak from Asian Market.

Kamlesh Kotak:

Hello, good morning sir.

Sudhir Deoras:

Very good morning.

01 November, 2010

TRF

Q2FY11 Conference Call Transcript

Transcript


2/42


3/42


TranscriptionTRF

Sudhir Deoras:

No, not in this quarter.

Kamlesh Kotak:

Okay. And sir, what is the status on the subsidiaries, there also we seem to be getting good traction on revenue growth, but

margins are not reflecting yet.

Sudhir Deoras:

See, if you look at the York performance, there is a big swing on the positive side, up till last year, we had problem with

economic downturn, but since then in the first two quarters York has performed as per plan. We are seeing that it will meet all

the targets what we had talked about for York for end of the year in terms of top line as well as bottom line. So York is moving,

in fact our product has been very well established and accepted in Indian markets and today, I think, about 33%, 34% of Indian

markets is with York. As far as DLT, trailer manufacturing is concerned, the Indian part TATA DLT has done very well in first

six months because again Indian economy has been doing very well. But yes, DLT, Sri Lankan part, which is an export-

oriented unit, has number-wise done good numbers, but the major products, the port trailers, which are the better revenue and

profitable products, the delivery schedule, is being shifted by many of these companies abroad. So while we have say about,

in todays position, as we have got about little less than 100 trailers orders in hand for the port, but the delivery schedule has(not sure) in quarter 4, so that is why there is little mismatch as far as DLT numbers are concerned. Triple A, which is a

Lucknow facility, last month we inaugurated the plant and we see now, in H2, it will start reflecting in terms of top line and

bottom line. I also want to say that our Hewitt Robinson International UK has also made money in this H1.

Kamlesh Kotak:

Okay. So sir, could you breakup the revenue of subsidiaries across these three companies?

Ashim Roy:

Company-wise?

Kamlesh Kotak:Yes sir.

Ashim Roy:

Okay, you go for the next question, I will answer.

Kamlesh Kotak:

Okay. And sir, what about the margins, when you see it directly is ramping up, on subsidiaries side?

Sudhir Deoras:

Subsidiaries, the margins now will start ramping up; in H2 certainly it would be better than H1, so they are already ramping upnow.

Kamlesh Kotak:

And has the execution on the three NTPC projects started or we will be booking from the third quarter, or beyond that?

Sudhir Deoras:

No, two of the projects Barh and Mouda, which are the first two orders we won, we will start booking from quarter 4 because

that is the time we will cross the threshold limit. Vindhyachal would go into the next year.

Kamlesh Kotak:

Okay, which means we will have one more lean quarter.


4/42


TranscriptionTRF

Sudhir Deoras:

Yeah.

Kamlesh Kotak:

Okay, fine sir. Just if you can help me with this breakup, maybe later on you can

Ashim Roy:

I will read out, York transport a Singapore based company are including Indian operations, their turnover for half year is 24

million USD. The Dutch Lanka Trailer, their consolidated turnover for H1 is 1721 million Sri Lankan rupees that means around

75 crores of INR. And HRI, the newly acquired business, they have H1 turnover of about 1 million GBP.

Kamlesh Kotak:

And Triple A we booked something?

Ashim Roy:

Triple A, it is marginal, just 8 crores the turnover is.

Kamlesh Kotak:

Okay sir, thank you.

Sudhir Deoras:

Thank you.

Moderator:

Thank you sir. Next question comes from Mr. H. R. Gala from Quest Investment.

H. R. Gala:

Hello?

Sudhir Deoras:

Yes please.

H. R. Gala:

Yeah, sir you are not at all audible, the people who are asking questions we can hear them correctly, but we cant hear you at

all, so I would just for the sake of repetition also, how much provision on account of investigation have we made?

Ashim Roy:

30 crores of provision has been made

H. R. Gala:

How much rupees? 30 crores?

Ashim Roy:

30 crores have been made in Q2.

H. R. Gala:

Okay. And in first half how much it is, including Q1.


5/42


TranscriptionTRF

Ashim Roy:

First half whatever was detected was given impact in the previous years this thing, first half we said that we are going to

H. R. Gala:

No, the total if we take first half of this year, how much?

Ashim Roy:

30 crores.

H. R. Gala:

Thats all. So, that means in Q1 we did not make any provision?

Ashim Roy:

No, you see, it is not a provision, I will tell you what happens in project business, the estimated cost of the project has to be

done correctly based on which turnover and profit are recorded and that particular thing has been corrected in this division

because it was not cost booking per se, but estimation correction was also being done to find out what is the right cost of theseprojects. This has impacted turnover and profit almost by the same extent because of the correction and the effect of that is

around 30 crores.

H. R. Gala:

Okay, so entire thing, this 30 crores is lying in revenue or something is in cost also?

Ashim Roy:

No, there is nothing in cost. It is

H. R. Gala:

So entire thing is, reversal in revenue itself.

Ashim Roy:

Mainly it has resulted in lesser realization.

H. R. Gala:

Okay, sir what was the total value of the few orders that we have received in this quarter and first half?

Ashim Roy:

Okay, I will give that numbers. Value of orders received?

H. R. Gala:

New orders.

Ashim Roy:

Okay, because the value of orders received in projects is around 420 crores

Sudhir Deoras:

Are we talking about H1?

H. R. Gala:

Yeah, this is H1?


6/42


TranscriptionTRF

Ashim Roy:

I will give you those numbers. One sec.

Sudhir Deoras:

You can move on to the next question in the meantime by the time he opens his computer.

H. R. Gala:

Hello?

Sudhir Deoras:

Do you have any other question because he is just opening his computer page to tell you H1 numbers, just hold on for a

second.

H. R. Gala:

Hello?

Sudhir Deoras:

Yeah, just hold on for a minute.

H. R. Gala:

Yeah, sure, I am holding on sir.

Ashim Roy:

Orders received during H1 of this year is 505 crores?

H. R. Gala:Hello?

Sudhir Deoras:

Yeah, the H1 order booking is 505 crores.

H. R. Gala:

This is also on the project side.

Sudhir Deoras:

Yeah, this we are talking on project side.

H. R. Gala:

Okay, now you are quite clearly audible. Okay sir, while looking at the consolidated numbers, we have reported a negative

PBIT of Rs.35.28 crores in Q2. Now if I have to remove this 30 crore, still there is a loss of 5.28 crore in the second quarter in

project business, so what could be the reason for that loss, sir?

Sudhir Deoras:

Okay. You see, the situation today as I was trying to explain a little while earlier, that after 18 months of gap we started

booking the new big project orders, which come under so called bulk material handling projects business. And because of

that, until we reach a threshold limit we cant start booking those turnover and profits. Two of these big projects Barh and

Mouda, both are slated to cross the threshold limit in quarter 4, while we continue to have our fixed overhead expenses, etc,carrying on with the expenses, that effect of that are expected in quarter 4, so that is the reason.


7/42


TranscriptionTRF

H. R. Gala:

Okay. Which are the two orders you said will cross the threshold in Q4?

Sudhir Deoras:

Barh and Mouda.

H. R. Gala:

Okay, they are both NTPC.

Sudhir Deoras:

Both are NTPC orders.

H. R. Gala:

Okay. So the entire order will be, how much is threshold limit, in our case is 40%?

Sudhir Deoras:

It depends on the size of the business, if it is 100 crores and above, then it is 25%, but 40 crores minimum.

H. R. Gala:

Yeah, if it is more than 100 crores, you said 40%.

Sudhir Deoras:

No, more than 100 crores is 25%.

H. R. Gala:

Yeah 25% and less than 100 crores, 40%.

Sudhir Deoras:

But more than 100 crores also, at least 40 crores. Not if it is 120 crores, I cant do it at 25 multiplied by 12; I will have to wait

till we reach 40.

H. R. Gala:

Okay, I understand. Sir, can you give broad revenue target for this year sir? In project and product consolidated?

Sudhir Deoras:

Revenue targets, we will reach, what we were talking about in BMH business, bulk material handling, in traditional business,we are expecting to touch 800 crores is what we were talking about.

H. R. Gala:

In current year?

Sudhir Deoras:

Yes. And we will get 400 crores plus in our auto application business.

H. R. Gala:

That is the product side.

Sudhir Deoras:

Auto application means those York axles and trailers, all those things.


8/42


TranscriptionTRF

H. R. Gala:

Yeah. So total consolidated revenue in the current year we are expecting is around 1200 crores?

Sudhir Deoras:

Yes.

H. R. Gala:

Okay. And we will have a positive bottom line despite this 30 crore provision and all?

Sudhir Deoras:

We will have positive bottom line.

H. R. Gala:

And if I heard correctly, you said that 30 crore provision, the total reversal has now been made in the books or still something

could come up?

Sudhir Deoras:

Chances are very little because we have done an extensive way of this, management has, see we dont see any kind of, that

kind of situation, but running business numbers is different, so we dont think that will

H. R. Gala:

Okay sir, if we have to eliminate this one time provision or whatever we call 30 crores, what kind of EBITDA margin do you

think we will have consolidated?

Ashim Roy:

Consolidated?

H. R. Gala:

Yes.

Ashim Roy:

Not EBITDA, EBITDA will be around

H. R. Gala:

Yeah sir, EBITDA last year excluding other income was around 10%.

Ashim Roy:

That is definitely going to come down; it will be around maybe 7% or so.

H. R. Gala:

Okay. And sir, what will be our capital expenditure plan, any change?

Sudhir Deoras:

No, no change.

H. R. Gala:

So we will spend around 20, 25 crore what you are telling.


9/42


TranscriptionTRF

Ashim Roy:

Yes.

H. R. Gala:

Okay, thank you very much sir.

Sudhir Deoras:

Thank you.

Moderator:

Thank you sir. Next question comes from Mr. Sandeep Tulsiyan from B&K Securities.

Sandeep Tulsiyan:

Yeah, good morning sir.

Sudhir Deoras:

Good morning Sandeep.

Sandeep Tulsiyan:

Sir, can I have the order book breakup. You have given a total order book of 1900 crores, how is it spread between the

projects and products division?

Ashim Roy:

See, out of that 1900 crores, around 300 crores is product order backlog and balance is projects.

Sandeep Tulsiyan:Okay and sir just wanted to confirm the sales turnover for DLT because you were not very audible. Is it 75 crores INR?

Ashim Roy:

Yes.

Sandeep Tulsiyan:

Okay. And sir I would like to know the volume breakup of York Transport and DLT, if you can give, as we had mentioned last

year we supplied about 443 trailers from DLT facility. How is that number compared to in the first half of this year and what

was the retrospective number for last years first half? Sir, volume numbers for DLT, how many trailers have you sold?

Sudhir Deoras:

Number of trailers, Sandeep, I dont have that readymade numbers, but let me tell you something. Broadly speaking,

whatever numbers we sold in H1 this year, they are more than what we sold in last full year.

Sandeep Tulsiyan:

Okay. Last full year I think sir we had given a number of 443 trailers.

Ashim Roy:

Yeah, it is around 448 or something.

Sudhir Deoras:

So, this year we have done 448 already.


10/42


TranscriptionTRF

Sandeep Tulsiyan:

In H1.

Sudhir Deoras:

Yeah.

Sandeep Tulsiyan:

Okay. And sir, we have also recently inaugurated the Triple A manufacturing facility. So how would our value-addition go up

and what is the kind of volume numbers we will do in second half of this year?

Sudhir Deoras:

We are expecting Triple A in, because the facility has now come up and we hope the production is now ramping up of course,

and our numbers for quarter 3, quarter 4, let me tell you, one sec.

Ashim Roy:

Quarter 3, Triple A will be around 14 crores and quarter 4 will be around 25 crores.

Sandeep Tulsiyan:

Okay. So roughly 40 crores we are assuming.

Ashim Roy:

Yeah, 35 to 40 crores will come from

Sandeep Tulsiyan:

Okay. And also sir, we have declared, I mean, officially we have inaugurated our BOP division also during last quarter, so just

wanted to know who are the business partners in the same for other packages like water cooling and cooling towers?

Sudhir Deoras:

See, Sandeep, in this business, there is no kind of permanent partner. But we have an agreement with some of these experts

that if we get a BOP order that they would work with us. But there is nobody who is going to be with you on exclusive basis.

Sandeep Tulsiyan:

So it would vary from project to project.

Sudhir Deoras:

Yes.

Sandeep Tulsiyan:

Okay. And sir finally, just one more thing about the one-time expense of 30 crores. Sir we have an operating expenditure of

about 134 crores, standalone, and even if I add the 30 crores of number that you stated to the revenue, we still do not make

any money at EBITDA level. So is that true, I mean, am I assuming it the right way?

Ashim Roy:

Yeah, if you see the segment results, I am Ashim Roy here, if you see the segment results, the main problem is with the

project division. Now, because of that gap of 18 months of projects not coming, what has happened is that projects, which

were in hand that time, Aravali is almost completed, Raghunatpur is in advanced stage of completion, in this quarter what has

happened, the revenue earned from project business in general is also less, because of the lesser volume of sales, the fixed

overhead of the division for the quarter, the business for the quarter has not been fully recovered.


11/42


TranscriptionTRF

Sudhir Deoras:

See, new turnover from these businesses, BMH businesses will start coming from quarter 4, so we have the (not sure).

Sandeep Tulsiyan:

Okay. Sir, how much percentage of Raghunatpur project is completed already?

Ashim Roy:

Around 65%.

Sandeep Tulsiyan:

So, that is the only project now which will contribute to our revenue in third quarter.

Ashim Roy:

Third quarter, yes, Raghunatpur mainly, and balance all

Sandeep Tulsiyan:

Smaller product orders.

Ashim Roy:

Yeah, balance from them.

Sandeep Tulsiyan:

Okay sir, thats it from my side. Thank you.

Sudhir Deoras:

Thank you.

Moderator:

Thank you sir. Next question comes from Mr. Madana Gopal from Sundaram Mutual Fund.

Madana Gopal:

Hello sir, good morning. Thanks for taking my question. Sir, first question is, how much of our order book is fixed price and

how much has price variation clause?

Ashim Roy:

See, the orders that we are executing right now, out of this 1900 crore of order book, around 1200 to 1300 crores is havingprice variation, say 1200 crores, the entire Barh, Mouda, and Vindhyachal, this 1000 crore project have price variation clause.

And we have Raghunatpur also with price variation clause, Aravali has price variation clause, all the NTPC projects are having

price variation clause.

Madana Gopal:

Okay, the remaining 700 crores is fixed price.

Ashim Roy:

Yeah, mostly, generally.

Madana Gopal:

Okay, and second is, how much of total order book will have public and private?


12/42


TranscriptionTRF

Ashim Roy:

You see, that particular thing around 70% is public sector.

Madana Gopal:

Okay and remaining will be private. Sir, the third question is on the automobile business. How much is the capacity for axle

and trailers right now, and what we plan to add as capacity over the next two years?

Sudhir Deoras:

Talking about axle business, we have current capacity of about 24000 axles per annum. We are putting up a plant in Pune in

Talegaon; we should be ready by April 2011. Once that facility comes up, our manufacturing capacity on two-shift basis will go

up to 72000.

Madana Gopal:

Okay. On trailers?

Sudhir Deoras:

As far as the trailers are concerned, again, in Pune, TATA DLT is putting up a new plant, which would be ready sometime in

the first quarter of next year, that plant will have a capacity of 3000 trailers and our DLTs facility in Sri Lanka has about 4200

capacity, so that is the capacity on which we will be sitting.

Madana Gopal:

So totally we will reach 7200 by next year.

Sudhir Deoras:

I would also like to say that as of now, TATA DLT in Pune, from the leased places, it operates from two or three places, and

the capacity has reached to about 3000, but we intend to now put it all together properly and then start off. So capacity-wise

this is the capacity. But let me also tell you, these are the numbers, what we work on the basis of a standard product mix.You know, there is always a weightage depending on the type of trailer and size of the trailer, so that is what it is. If and when

you start making specialized trailers, the numbers would obviously vary, but basic capacity is this.

Madana Gopal:

Okay. Sir, what could be realization per axle and per trailer in the current quarter?

Sudhir Deoras:

I dont see any limitation as far as York axle business is concerned. I think it has taken off very well as I mentioned little while

earlier. We have captured 33% market in India and we are doing well. We started selling well in countries like South Africa

and so on. But the only issue is that earlier our big market used to be Middle East, especially Dubai, which is not coming out

of the issues problem. But York has done well in terms of capturing markets in other countries and that is what we have saidthat whatever we had planned for York this year we will achieve top line as well as bottom line. As far as the trailers are

concerned, H1 numbers as I have mentioned, we have sold in H1 as many as we had sold in whole of last year.

Madana Gopal:

Okay. Sir, any realization numbers?

Ashim Roy:

Realization of?

Madana Gopal:

Sir, per axle and trailer?


13/42


TranscriptionTRF

Sudhir Deoras:

Turnover plan for the year?

Madana Gopal:

Per axle what is our realization or for trailer what is our realization?

Sudhir Deoras:

No, I dont think we would like to share that number now?

Madana Gopal:

Okay. We had total order book flow of 500 crore, right, for this quarter?

Ashim Roy:

Yeah, for H1.

Madana Gopal:

Okay. During this quarter, particularly?

Sudhir Deoras:

No, this quarter there is no major order, there are some small orders.

Madana Gopal:

Okay, sir have you bidded for any BOP project or in the process of bidding for any BOP project?

Sudhir Deoras:

Yes, we are in the process of bidding for a project.

Madana Gopal:

What could be the size of this?

Sudhir Deoras:

It will be a small project; it will be about 200 odd crores.

Madana Gopal:

Okay sir, thanks for taking my questions.

Sudhir Deoras:

Thank you.

Moderator:

Next question comes from Mr. Aniket Enamdar from DWS Investments.

Aniket Enamdar:

Sir, my question is regarding the 30 crores, which was as you said, it was wrong calculation in the budget. Now, for a

company of our size, it seems like a very high amount. So, my question is, could you throw some more color on how it was

misestimated or miscalculated? And secondly, what kind of systems have been put up to, where was the mistake and how

therefore it will not occur again, I am just confused a bit about the 30 crore underestimation?


14/42


TranscriptionTRF

Sudhir Deoras:

Let me tell you this, this was in a particular division, and what we realized was that the top management team of that division

have somehow suppressed the information and what was the reason, obviously there is an internal enquiry also, which is

being conducted. And somehow this information was misrepresented, suppression of information was there, and that is how

this whole thing happened. Now, obviously all these people have been asked to go and but at the same time we have made

lot of changes. For example, to simply give you two, three examples what we have done. One is that, any bid which is madeby this particular division, and which is there in any case, you know, all these big orders, which we have talked about Barh,

Mouda, etc, we have clear process in terms of estimation committee, then it is vetted by their senior, then it goes to second

level of iteration and so on. This particular division was operating on a smaller magnitude of orders, but at the end of the day,

altogether it became a bigger problem for us. So, so these people were kind of estimating on their own and maybe there was

not enough checks and balances to see what is happening. When the projects were getting delayed and the cost was going

up, that information was also being suppressed, so this was largely a mismanaged division and huge amount of

mismanagement was found and that is what we have done now, we have done this estimation committee is there, the

manufacturing part or the vendors offloading, you know, fabrication offloading, etc, all that has been moved back to

Jamshedpur, where we have got a very big materials management division, so all these orders are processed through that

system, so we do not have a situation where this division is operating on its own. So these are the corrective measures we

have taken and we still believe in it because our product is very good and there is a huge demand and I still keep getting calls

because in last quarter we had been really trying to get into the bottom of it and come to these things and so we have

purposefully stopped ourselves from quoting for the new orders for this division and I personally got calls from many

customers that why we are not kind of, we said okay we will start off. Now this quarter we will again start off. But we believe it

is a good product, a profitable business, and we will continue to drive it.

Aniket Enamdar:

And sir, one more question. Considering that because of the recession, which happened globally and a lack of orders, is it

going to kind of spoil your accounting numbers for the next quarter too. I was just wondering, why isnt TRF is part of the Tata

Group and why cant you go and pitch for all Tata Group Coal and Ash-handling projects to be done through TRF. I mean, it

sounds like, here we are waiting for orders, a Group company, and whereas, is there any proposal from your side to attach the

Tata Group more forcefully for in-house orders?

Sudhir Deoras:No, there is no problem. We do that, but Tata Group operates from very clear guidelines that we do not kind of pass on orders

if we are not competitive, so I dont know if you are aware a year ago, or year and a half ago, we lost a bid at Tata Power and

one of our competition picked it up at lower price. We know what kind of pricing was done and what kind of quotes we had

made, but well, this is how Tata operates, that we need to be competitive. So it is not that we are avoiding quoting for Tata

companies, but we need to be competitive.

Aniket Enamdar:

But maybe you can match part of the orders. Suppose you lost Mundra project, you can get part of the order by quoting at that

lower price, right, being L2 or something. I am just matching the first, because then that way your own group company would

be, as you said you have a competitive product, and if you get volumes, you can obviously pass on some of the thing and be

in action rather than not having any orders.

Sudhir Deoras:

I can only say thank you for your suggestions.

Aniket Enamdar:


Moderator:

Thank you sir. Next question comes from Mr. Amit Goela from Rare Enterprises.

Amit Goela:

Hello?


15/42


TranscriptionTRF

Sudhir Deoras:

Yes, please.

Amit Goela:

Yeah, sir good morning. Sir, could you just elaborate a little bit more on the margin guidance which you gave, you said that

you would be looking at an EBITDA margin of 7%, is that correct, for the whole year?

Ashim Roy:

I was talking about this going forward, so

Sudhir Deoras:

No, this year, this year I dont see EBITDA is at 7, because we are absorbing this huge hit, so we dont see that, but going

forward we should be operating at 7% EBITDA.

Amit Goela:

No, for the consolidated business, or your project business, like?

Sudhir Deoras:

Sir I am talking about the consolidated business, auto application business, I am just not talking about.

Amit Goela:

Okay. So sir, you expect your margins to fall from 10% to 7% for your project business, on a longer term basis?

Sudhir Deoras:

Longer term basis, yes, because this is where the competition is. If you look at the new orders, which are getting finalized, the

margins are quite tight because I suppose everyone is running short of orders, so we are seeing that project business is

becoming tighter and tighter.

Amit Goela:

Okay. Sir, then in the light of this kind of margin, which you are talking of 7%, then does it fit into your overall goal, which you

had, your vision of 2013, where you were talking of 2500 crores of turnover and x amount of profit or would you have to ramp

up your turnover to get this kind of profitability.

Sudhir Deoras:

No, as of now, we are not saying that we want to now go from 2500 crores to 3000 crores or something, as of now, goals

remains what we have said, by 2013, 2500 crores, we want to be there, that is why we have started our BOP business. I want

to tell you, BOP business will bring higher top line, but lower margins, that is the design of that business, because we are

going to be kind of contractors and a lot of things would be done by the other partners (inaudible) and so on. And if you look at

the BOP margins through out the industry, these are lower margins than the simple one coal-handling plant. So overall we

see top line growth, but margin percentage certainly is going to come down.

Amit Goela:

And sir I just want to clarify again, you are saying that 7% is because of the hit, if you have taken I am saying

Sudhir Deoras:

No, let me clarify. This year is going to be worse than 7% because of this hit, but going forward we see project business would

be operating at about 7%.

Amit Goela:

Sure. If you remove the hit this year sir, what kind of margins are you looking at?


16/42


TranscriptionTRF

Sudhir Deoras:

If we take out the hit?

Amit Goela:

Yes, if you remove the hit, because that is already done, no sir? So what is the running business, what is your currently

business running at sir?

Ashim Roy:

That is going forward, means; we are saying this 7% will be in BMH business for when we execute the balance orders. So,

there is not big drop in the (not sure) project realization, there is decrease here, but this 7% is, if we start from today, the new

orders will be giving an EBITDA of around 7%, that is what we are saying.

Amit Goela:

Okay. So your new orders you are taking at around an EBITDA of 7%.

Ashim Roy:

New orders means balance orders to be executed, existingly and the new series of orders, all put together.

Sudhir Deoras:

That is the trend we see, the future trend seems to be like that, but we cannot tell you that at what EBITDA there will be.

Amit Goela:

No, absolutely. I was just looking at an indication, like what are you working at sir.

Sudhir Deoras:

As of today, that is what it looks like.

Amit Goela:

Okay. And sir, like, is there any, like, in terms of your order book and in terms of your bidding process, are you seeing any

kind of pick up in activity taking place. Like you said there was a gap for 18 months, that was one, like gap in which you

started executing, but in terms of general industrial activity and more bids coming up for some projects.

Sudhir Deoras:

You know, there is, see in power industry, there is certainly normal movement, not a great pickup, but yes, power industry is

moving. But steel continues to be wherever it was; no new integrated steel plants are starting. We hear and read everyday in

the newspapers, every other day now, they had a (not sure) meeting in Delhi and no decision has come, so those kind of

situations are there, but power industry is moving and we are riding, whatever today we have riding, is on power industry.

Amit Goela:

And sir one last question sir, on this Coal India, they have said that they are getting into this washery in a very big way, so

would you be present in that space?

Sudhir Deoras:

As of now we are not in any washery. And we dont see that immediately we are getting into it.

Amit Goela:



17/42


TranscriptionTRF

Moderator:

Thank you sir. Participants are kindly requested to restrict with two questions in the initial round. Next question comes from

Mr. Chinmay Gandre from Asit C Mehta Invesment.

Chinmay Gandre:

Hello, good morning sir.

Sudhir Deoras:

A very good morning.

Chinmay Gandre:

Yeah, I just wanted to understand like right now how many projects are going on, I mean, the revenue, how many projects

revenue have you booked in this quarter?

Sudhir Deoras:

Lets put it this way, I am talking about big projects, because every machine is a project. So there are two big projects, whichwe talked about Barh and Mouda, NTPC projects, which will cross the threshold limit in quarter 4, and there are two big old

projects, which we are running, one is Aravali, which is reaching its end. And I must tell you all that Aravali was a famous

project, which was put up by NTPC and Haryana Government to meet the requirement of Commonwealth Games and I must

tell you that we have come out well in this project and Aravali people achieved what they wanted to achieve for the

Commonwealth Games. So that is reaching its fag end, and another one is DVC Raghunathpur, which also little bit earlier we

said, we completed about 65%. So this the major projects.

Chinmay Gandre:

Okay. And regarding the revenue bookings, I mean, I understand, like, for 120 crore projects you book after completion of

40% and for 100% you book after 25% completion. I just wanted to understand, like, after that how do you book it like,

suppose a 100 crore project, after 40% completion, suppose you do 43%, then you book accordingly the profits?

Ashim Roy:

Yes. After that it is progressive.

Chinmay Gandre:

Okay. And current, like the three projects you got from NTPC, the margins are roughly like 7 to 8%, that is what you are

expecting of those projects, or they will be little bit higher than 7 to 8%?

Sudhir Deoras:

We would not like to answer specific project questions.

Chinmay Gandre:

Okay. Sir and I missed the top line of York for H1.

Sudhir Deoras:

H1 top line is about 24 million USD.

Chinmay Gandre:

Okay, thank you sir.

Moderator:Thank you sir. Next question comes from Ms. Madhu Jaikumar an individual investor.


18/42


TranscriptionTRF

Madhu Jaikumar:

Hello?

Sudhir Deoras:

Good morning maam.

Madhu Jaikumar:

Good morning. I am still little confused, sorry to go back to this 30 crore number. Over the two financial years, what is the

total hit we have taken?

Sudhir Deoras:

Mr. Ashim Roy would attempt to answer that question.

Ashim Roy:

Yeah, it is around 46 crores.

Madhu Jaikumar:

Okay. So now, is this fraud or is this a wrong accounting practice, because from a Tata management company one has very

high expectations.

Sudhir Deoras:

No, let me tell you this way. I dont want to use that particular word. I tried to explain a while earlier. This is huge amount of

mismanagement, which has happened in this division. Yeah, you are right, that is from Tata company, we expect better,

maybe better control and better monitoring system, but as far as this particular division is concerned, over a period of time the

orders were being booked estimated incorrectly because I dont see that as a fraud really in that this could be viewed as wrong

estimation or incompetency or whatever you say. But if you look at it, the fraud part of this would be that as these projects

started progressing, the management team involved knew that they are going wrong as far as the costing is concerned andthey had not brought out this in time. Otherwise, this whole thing over a period of time, corrective measures could have been

taken, the future orders could have been booked differently, or what we have done today, like we have shifted lot of

manufacturing back to our plant, and lot of our yards are now being fabrication, which is much more cost competitive, all those

corrective measures could have been taken. So hiding that information is something, which certainly was done. And that is, if

I use the term fraud, this can be considered as a fraudulent practice by the management team, which is by design hiding

information from top management, knowing fully well. So this is certainly has happened that is what the investigation report

has brought about also.

Madhu Jaikumar:

But now finally this is behind us and we are out of this now.

Sudhir Deoras:

Yes, we believe so, that is behind us and we are out of it, because we have done huge amount of work in last three months

and as I was trying to explain little while earlier, we are bringing in a robust system as far as bidding process or estimation

process is concerned. We have merged our materials management back into Jamshedpur, where we have got better control

on vendors and outsourcing, or manufacturing within the plant, etc. And that will certainly start yielding results, you will see as

far as the new orders as we start booking.

Madhu Jaikumar:

Okay. I am also slightly disappointed because there were no notes on your quarterly results about this, so I had to come to

the call to just get the details, because in your...

Sudhir Deoras:

No maam, if you look at our quarter 1 result notes, we had said that an investigation is under way.


19/42


TranscriptionTRF

Madhu Jaikumar:

Yeah, no. Yesterday what the release came, this 30 crore number was not there.

Sudhir Deoras:

Yeah, we had not given the number, but in the note we had talked about that investigation is completed and whatever the

impact is, had been accounted for.

Madhu Jaikumar:

I know. But it is difficult to understand what is going in the business unless we have a little clarity about this. So going forward

do you think now the worst is behind us, as far as the company is concerned the order book is growing and you know we

have?

Sudhir Deoras:

Yes, as far as this part is concerned, the worst is over and

Madhu Jaikumar:

Even in terms of business

Sudhir Deoras:

Even in terms of business because the order book is healthy and our acquisition, acquired business also, positive results they

have started giving. So we believe that we are on the right path.

Madhu Jaikumar:

Okay. Thank you so much and all the best.

Sudhir Deoras:

Thank you.

Moderator:

Next question comes from Mr. Vinay Pandit from IFCI Financial Services.

Vinay Pandit:

Hello?

Ashim Roy:

Yes, please.

Vinay Pandit:

Yeah. Sir, I wanted to confirm the 800 crore turnover target that you are talking about this year if I look at it on a segmental

basis like to like, right. If I adjust for inter-segment revenue would be approximately 900 crores this year is what you are

looking at. Now, if I have to look at the order book, you would have to typically do 650

Sudhir Deoras:

One sec, we need to understand your 900 crores arithmetic.

Vinay Pandit:

Okay, 650 crores is your net sales for last year. If I go to segmental I see that as net sales from operations adjusted for inter-segment revenue, right?


20/42


TranscriptionTRF

Sudhir Deoras:

Yes.

Vinay Pandit:

So, non inter-segment revenue is 733 crores. So, the 800 crores that we are looking at this year

Ashim Roy:

One second, if you are saying last year number 650 crore was the net turnover

Vinay Pandit:

Yes, and in the segmental adjusted for inter-segment prior to that it was 733 crores, right?

Ashim Roy:

Yeah, and this 800 is equivalent to 650.

Vinay Pandit:

Right, so if I have to look at a number equivalent to 733, let us say it will be approximately 900 crores, just an assumptive

number, right?

Ashim Roy:

Yeah.

Vinay Pandit:

If I break that into projects and products I may have to do around 650 crores in projects and 250 crores in products compared

to 550 and 182 last year, right?

Ashim Roy:

Yes.

Vinay Pandit:

How would you manage to do 250 crores in your equipment segment on an order book of 300 crores, my first question?

Ashim Roy:

How much?

Vinay Pandit:

How would you manage to do 250 crores orders in the product segment on an order book of 300 crores?

Ashim Roy:

See, out if this 250 we have already executed around 95.

Vinay Pandit:

First half is 116 crores.

Ashim Roy:

First half is 116 crores, so that much is already executed. So, the 300 crore order book is for the balance.

Vinay Pandit:

Okay and out of 187 crores in the project segment, how would you push up to 650 crores?


21/42


TranscriptionTRF

Ashim Roy:

650 crores from?

Vinay Pandit:

Project segment, if we have to achieve that 900 crore number?

Ashim Roy:

Yeah, so once this 2, 3 orders comes into this revenue recognition stage it is not very difficult to achieve that number of project

business.

Vinay Pandit:

But then do you think there is potential to disappoint on that 800 crore turnover target?

Sudhir Deoras:

No, we dont think so, quarter four will. Large turnover will come in quarter four.

Vinay Pandit:

So, on a full year basis you think there is no scope for disappointment?

Sudhir Deoras:

No, we dont see that.

Vinay Pandit:

We are quite clear about our delivery orders?

Sudhir Deoras:Yeah.

Vinay Pandit:

Right sir, thats it from my side.

Sudhir Deoras:

Thank you.

Vinay Pandit:

Thank you.

Moderator:

Thank you sir. Next question comes from Mr. Sageraj Bariya from Angel Broking.

Sageraj Bariya:

Yeah, thanks for taking my question, sir. Sir, this 1600 crore in project division order book, is it all power?

Sudhir Deoras:

Yeah, mostly. Steel would be around 200 crores.

Sageraj Bariya:

Okay. Sir, if we were to look at this opportunity for this power division in projects in the next 3-5 years, how big do you

visualize the opportunity is, sir?


22/42


TranscriptionTRF

Sudhir Deoras:

All opportunities?

Sageraj Bariya:

Yeah, the opportunity for this power division from power segment for the next 3-5 years, because I believe as you said it, the

steel is not doing very well it is only the power which is kind of boosting your growth for the company.

Sudhir Deoras:

If you look at power industries five year plan up to 2012 and 2012 to 17, there is huge investments have been planned. The

increase in the installed capacity has been planned and so, all that is an opportunity for a company like ours.

Sageraj Bariya:

Okay, can you quantify it if possible?

Sudhir Deoras:

Sorry?

Sageraj Bariya:

Can you quantify the number?

Sudhir Deoras:

I have the numbers, but I can

Sageraj Bariya:

Sir, I believe for this plan that goes till 2012 the orders are already all awarded or still something is left?

Sudhir Deoras:

This 2012 more or less is over, now we are talking about 2012 to 2017, which from the next year they will start finalizing, but

still there are many bids on the way. You see, what has happened is that whatever the plan for five years there is always an

overlap and never completed, so it flows over into the next five years plan. So, there is no kind of bagged, so that okay, now

2012 orders are finished, no we wait t ill 2012, that is not the case.

Sageraj Bariya:

Okay, so when is it likely to start, sir?

Sudhir Deoras:

No, as I said, already in the pipeline there are many bids which we have made and we are waiting for opening the accounts.

Sageraj Bariya:

Okay, it is already on. Okay, sir, I am done. Thank you.

Moderator:

Thank you sir. Next question comes from Mr. Dewang Patel from Avendus Capitals.

Dewang Patel:

Yes, hi sir. You were mentioning earlier you would be looking at 7% EBITDA margin in the projects business, if you are taking

on BOP business where the subcontracting would be higher can we imply that the EBITDA margins would be lower than 7%?


23/42


TranscriptionTRF

Sudhir Deoras:

For BOP business lower than 7%.

Dewang Patel:

Sir, and then what does that imply in terms of ROC, is it really attractive at this point of time to get into that business?

Sudhir Deoras:

Yeah, because balance of planned business really does not require any capital from the company. Largely it is based on the

monies are paid after the plan pays you, that is the back-to-back arrangement with all these partners. So, from that point of

view I dont think that means that, that it sucks too much of capital from the company, so we dont see a huge issue. What it

brings in is that as I have been explaining in the past, there are clear indications in the market that the customers, both types

of customers there, some of them who kind of divide this project into various components like coal handling, ash handling, etc,

but there are also plants who want the complete BOP to be done by one contractor. We are getting into it because we do not

want to miss that opportunity and become a sub contractor of a sub contractor. So, that is the main thing and that also helps

us in building the top line. Margin, as I said is going to be lower than standard coal handling plants, but in terms of absolute

numbers it could be larger.

Dewang Patel:

Right sir. Sir, second question was what kind of capacity building have we done to get into this business? You mentioned

earlier overheads in the project business has gone up, is this related to any capacity building and your capital employed in the

project business is also showing an increased YOY?

Sudhir Deoras:

Largely hiring people, so project business equipment wise we dont buy too many equipments, it is largely hiring people.

Dewang Patel:

So, we have a project management team in place?

Sudhir Deoras:

Yeah, of course, yes.

Dewang Patel:

And how big would this be?

Sudhir Deoras:

Which project management?

Dewang Patel:

For BOP?

Sudhir Deoras:

For BOP we already have about 7 people with us.

Dewang Patel:

Okay. Any other CAPEX plans you would have for BOP?

Sudhir Deoras:

No.


24/42


TranscriptionTRF

Dewang Patel:

Fine, sir. Thats all from my side, thank you.

Moderator:

Thank you sir. Next question comes from Ms. Nidhi Agarwal from Share Khan.

Nidhi Agarwal:

Yes sir, the margins you told about 7%, it is only for the project segment? Hello?

Ashim Roy:

Yeah, but generally the project and the ratio of project and product is so tilted towards project, that it will be guiding the overall

margin of the company, but if you see the result consistently the product business is giving around 19%-20% profit on an

average.

Nidhi Agarwal:

Okay and sir, if I have to ask, what kind of revenues you look for next two years in the BOP sector?

Sudhir Deoras:

Too early to comment on this, we are just making a beginning, we are with small projects which we are picking up to quote for.

I think we will be in a better position to talk about in the next six months.

Nidhi Agarwal:

And sir, my last question is, like if you come in the BOP sector your working capital requirements will also go up?

Sudhir Deoras:

No, BOP sector helps us in fact in working capital management as I was telling you a little while earlier, it is all back-to-back,

unless I pick up money from the client I dont pay to my supplier.

Nidhi Agarwal:

Okay and sir, coming back to that 30 crore, I mean like what kind of revenues have we booked from this division on which we

have booked 30 crores loss till now, if you can give that kind of figure?

Ashim Roy:

Yeah, half yearly result is around 32 crore for this division.

Nidhi Agarwal:

Okay and last year, sir?

Ashim Roy:

Just a second, I will give you the number.

Sudhir Deoras:

It was around 94 crores.

Nidhi Agarwal:

Okay, so it was around 25% kind ofOkay, sir, thats all from my side, all the best for the future, sir.

Sudhir Deoras:

Thank you.


25/42


TranscriptionTRF

Moderator:

Thank you maam. Next question comes from Mr. Nirmal Shah from Alchemy Shares.

Nirmal Shah:

Yeah, good morning, sir.

Sudhir Deoras:

Very good morning.

Nirmal Shah:

Sir, just wanted to check on your NTPC projects, Barh, Mauda and Vindhyachal, put together what would be your margin

outlook for these three projects?

Sudhir Deoras:

Little while earlier I had said that project wise margins we dont discuss, so we will not give those.

Nirmal Shah:

Okay. Sir, my reason for asking this question is you got this orders in third quarter of last year and fourth quarter and your

mismanagement of cost came to highlight in first quarter of this year and what we understand is NTPC projects were very

intensely competitive, so I just wanted to get your outlook in terms of margin outlook?

Sudhir Deoras:

No, you are right. They are very intensely competitive and the margins are tight as said little while earlier.

Ashim Roy:

But this correction of system was not in the division in which these projects were taken.

Nirmal Shah:

Okay.

Sudhir Deoras:

There is no link between the two, please.

Nirmal Shah:

Okay, thanks for the clarification.

Moderator:

Thank you sir. Next question comes from Mr. Rajiv Ghosh from Wealth Management.

Rajiv Ghosh:

Good morning, sir.

Sudhir Deoras:

Good morning.

Rajiv Ghosh:

Sir, have you said anything on the conference call regarding the automotive divisions margin outlook, because that is what we

were expecting in this quarter?


26/42


TranscriptionTRF

Sudhir Deoras:

You know I have been saying that I would be talking about the margins etc, give me six months time and I only want to tell you

that automotive application business has done quite well in H1. The numbers are better than what they did for whole of the

year, but on the margins, etc., I had said that I am going to comment in the may be next six months time. But, let me tell you

they are all making money.

Rajiv Ghosh:

Okay, sir, last question. If you exclude the extraordinary item of 30 crores odd, then would the PAT margins on your final

business be 7% on the full year?

Ashim Roy:

We said that EBITDA will be around 7%.

Rajiv Ghosh:

Excluding the item or including the item?

Ashim Roy:

We said that 7% will be going ahead, so it is definitely excluding that, I think.

Rajiv Ghosh:

Okay, so this is lower than what we have been doing earlier, sir?

Ashim Roy:

Yeah, that is what also we say that in these new projects the margins are tighter.

Rajiv Ghosh:

Okay sir, thank you very much.

Moderator:

Thank you sir. Next question comes from Mr. Rohit Tandon from Max Newyork.

Rohit Tandon:

Hello, sir. Sir, a couple of questions, sorry to belabor on the point of margins, but I couldnt understand the dichotomy, you

know, we are saying that orders are there, people are bidding for them and still we feel that structurally margins would be

around 7% or is this just till the NTPC projects are out of the way we are expecting say lower margins and ones they are out of

the way probably margins might move up.

Sudhir Deoras:

No, this is what we see what is happening in the market place. See, we have been analyzing the projects what we have won

or the projects what we have lost and then we look at the lost projects and the kind of margins at which competition has picked

up from the projects it is a clear indication that, that coming years it is going to be working on very tight margins, but at the

same time I must say, this is my personal view that if and when the steel plants will start happening, this should happen, they

are just like all integrated steel plants, if and when they will start happening there would be certainly much more demands

because there would be another industry opening up for us and that might bring in better days for our companys growth. But

as of now there is a huge amount of competition.

Rohit Tandon:

Thank you, sir. Sir, the second thing would be, when would be the NTPC projects completed?

Sudhir Deoras:

NTPC project means, the projects which I had talked about Barh and Mauda?


27/42


TranscriptionTRF

Rohit Tandon:

Sir, Barh and Mauda, yeah.

Sudhir Deoras:

Yeah, as I have said that in quarter 4 we will start booking, it means in quarter 4 we are going to be reaching 25%. So, it is a

three years period project, so it is going to go till 12, 13.

Rohit Tandon:

Okay, fine sir. Sir, on the second thing on BOPs, there sir, I understand overall margins would be lower, but would we be

booking for MHE projects or say the MHE part that will be coming to us, will our margins be better than the outside work that

we do or is there some such assumption that we will be building in, sir while bidding?

Sudhir Deoras:

Sorry, I havent understood your question.

Rohit Tandon:

Sir, I am saying that for the BOPs that we are going for, I believe that TRF will be doing the MHE portion and for that MHE

portion would margins be better than other projects that we bid for?

Sudhir Deoras:

No, what is MHE?

Rohit Tandon:

Sir, material handling, coal handling, ash handling.

Sudhir Deoras:

No, coal handling is what TRF has been doing and coal handling would be obviously our internal thing. Rest of the things we

will get it done by our partners whosoever join us.

Rohit Tandon:

Yeah, sir but margins would be better than say projects that are non BOPs for material handling specifically?

Sudhir Deoras:

No, I really dont think so.

Rohit Tandon:

Okay. Sure sir. Sir, the second thing would be sir, if you can give us a medium term outlook on autos, the portion that we dofor autos and any further products or segments that you are probably looking at in this particular division.


28/42


TranscriptionTRF

Sudhir Deoras:

See, as of now, as little while earlier I have said, that auto application business and I am specially talking about India market, if

you recall some of my earlier discussions our acquisition or our entry into this business we have done based on the logic of

India market and that is now coming through. This year as I had told you little while earlier York has established itself very well

in Indian markets and I also want to tell you all that while it has captured 33% market share in India 60% of their sales have

happened to non TATA Motors trailers, so that is very important thing. 40% they have sold to our other joint venture TATADLT which makes trailers, but 60% they have sold in open market and York is now very strongly positioned and we see huge

growth coming into the next year as far as York is concerned. As I said in the first two quarters they have sold as much as

what they sold last year. TATA DLT which is largely making trailers for TATA Motors today is also doing very well. The H1

numbers again are very good. DLT Sri Lanka little while earlier I have said that is a place where we got to make more and

more specialized trailers. We have been selling some port trailers from there and we are going to focus on that more. So,

overall we see that auto application business going forward, H1 has done well, H2 will certainly do better and next year we are

seeing much better numbers.

Rohit Tandon:

Okay, sir. Thank you very much.

Sudhir Deoras:

Thank you.

Moderator:

Thank you sir. Next question comes from Mr. Kenin Jain from Voyager Funds.

Kenin Jain:

Sir, why our other expenditure has come at 29 crores on a standalone level versus the average of last two quarters of 16

crores, can you explain that?

Ashim Roy:You are talking about this other expenditure of 25 crores?

Kenin Jain:

Yeah, around 28.7 crore in Q2FY11 on the standalone financials?

Ashim Roy:

It is 26.74. There are some increases in certain project related expenses like bank guarantee charges, services charges, etc.,

and there is around 3 or 4 crores of LD that has been provided, then some maintenance expenses have gone up.

Professional fees has gone up, because we have engaged a few professionals for improvement in the project monitoring

system, works production control system and all. SAP was introduced their consultant fees have also contributed to this.

Kenin Jain:

Right, sir secondly this provision of 30 crores which is a one time in nature that has been reduced from sales or it has been

Ashim Roy:

It has impacted the sales.

Kenin Jain:

Okay, so otherwise the sales would have been around 138 or 140 crores, right? Fine sir, thanks.

Ashim Roy:

Welcome.


29/42


TranscriptionTRF

Moderator:

Thank you sir. Next question comes from Mr. Naysar Shah from Birla Sunlife AMC.

Naysar Shah:

Hi, good morning, my questions have already been answered, thanks.

Moderator:

Thank you sir. Next question comes from Mr. Pranav Gokhale from Religare Asset Management.

Pranav Gokhale:

Hello, good morning, sir.

Sudhir Deoras:

Very good morning.

Pranav Gokhale:

Sir, out of the total order book which you have in hand, 1600 crores how much is the portion of order book which you actually

do and how much is outsourced from the BOP portion?

Sudhir Deoras:

No, in this order book there is no BOP order. BOP we are just starting and we are trying to bid for some projects, so

everything is ours.

Pranav Gokhale:

Okay, so the outlook which you have given for a 7% margin, which includes the BOP portion, right on which most of the bulk of

the things will be outsourced?

Sudhir Deoras:

Yeah, we believe that it will average out. Little while earlier we said that manufacturing brings us better margins, project brings

us less margin, but we hopefully will average out at that.

Pranav Gokhale:

Okay, but currently out of the order book there is nothing which needs to be outsourced?

Sudhir Deoras:

No, no BOP orders.

Pranav Gokhale:

Sir, the second question is on the division which actually had a problem and you had said that the revenue has been about 90

crores last year and 30 odd crores this year, which they have booked about 120 crores. Just in terms of order book, how

much does that division contribute, just to understand what has the impact been like?

Ashim Roy:

Pardon, sorry this order backlog of this division?

Pranav Gokhale:

Yeah.


30/42


TranscriptionTRF

Ashim Roy:

Is around 160 crores.

Pranav Gokhale:

So, out of 160 crores now this is the revised order backlog after reducing this, this the 40 odd crores?

Ashim Roy:

Yes.

Pranav Gokhale:

Okay, so going ahead in these orders of 160 crores whatever has been accounted for is already accounted for from this order

book?

Ashim Roy:

Yes.

Pranav Gokhale:

Okay, sure. Thank you, sir.

Moderator:

Thank you sir. Next is a followup question from Mr. Madana Gopal from Sundaram Mutual Fund.

Madana Gopal:

Hello? Sir, my questions have been answered, thanks.

Sudhir Deoras:Thank you.

Moderator:

Thank you sir. Next is a followup question from Mr. Amit Goela from Rare Enterprises.

Amit Goela:

Hello?

Sudhir Deoras:

Yes.

Amit Goela:

Sir, now my questions have also been answered, thank you.

Sudhir Deoras:

Thank you.

Moderator:

Thank you sir. Next is a followup question from Mr. H. R. Gala from Quest Investment.

H. R. Gala:

Yeah, sir, 2-3 things, when I asked the question about the FY11 revenue guidance this project 800 crores and products 400

crores, is it consolidated or standalone?


31/42


TranscriptionTRF

Sudhir Deoras:

No, not product. 800 crores is the bulk material handling business, which is our traditional business, which has manufacturing,

which has got projects, everything together, is at about 800 and auto application business, which is another vertical where

York and DLT and all those things come, their asset 400 crores.

H. R. Gala:But this is on a consolidated basis, right?

Sudhir Deoras:

Yeah, obviously, yes.

H. R. Gala:

Okay, so we have to eliminate the, see last year if we see on consolidated basis, the total inter-segment revenue was 83-1/2

crores.

Ashim Roy:

No, we are talking about after eliminating this JV.

H. R. Gala:

So, this is after eliminating, because one of the persons who asked the question, I think was probably mixing up this 800 and

400 crores with the standalone numbers.

Ashim Roy:

800 is precisely the standalone number and 1200 will be the consolidated number.

H. R. Gala:

Okay, so 1200 crores is net of inter-segment?

Ashim Roy:

Yes.

H. R. Gala:

Sir, coming to these capacities which you said for axles and trailers, axles currently we have a 24,000 capacity or 27?

Sudhir Deoras:

I have been saying 24,000, I dont know 27,000 have I said or what.

H. R. Gala:

Yeah, because I think 3000 is in Singapore or something?

Sudhir Deoras:

No, when I say 24,000 it is all consolidated between Singapore, China and India.

H. R. Gala:

Which is said to increase to 72,000, right?

Sudhir Deoras:

Yes, by year end or April, let us say April next financial year our plant would be ready in Pune.


32/42


TranscriptionTRF

H. R. Gala:

Yeah, by April 11.

Sudhir Deoras:

Yeah.

H. R. Gala:

Okay, as far as trailers are concerned, current capacity is 12000.

Sudhir Deoras:

3,000 in India.

H. R. Gala:

Okay, that is in TATA DLT.

Sudhir Deoras:

4,200 in Sri Lanka.

H. R. Gala:

Okay, 3000 and 4200. That is 7,200 that is the current capacity.

Sudhir Deoras:

Correct.

H. R. Gala:

And how it will increase by end of this year?

Sudhir Deoras:

We have not said that we are increasing our capacity, what we have said is we are putting up a new plant for trailer. As of

today we are operating from 2-3 leased facilities and in Pune we are putting a power plant and we operate to begin with the

3000. But as the demand gears up in India, we would replicate the lines.

H. R. Gala:

Okay, so this capacity is going to remain as 7,200 only?

Sudhir Deoras:

Yeah, as far as next year is concerned.

H. R. Gala:

Okay, thank you for clarifying, thank you very much.

Sudhir Deoras:

Welcome.

Moderator:

Thank you sir. Next is a followup question from Mr. Vinay Pandit from IFCI Financial Services.

Vinay Pandit:

Hello?


33/42


TranscriptionTRF

Sudhir Deoras:

Yes, please.

Vinay Pandit:

Yes, sir, continuing from my previous discussion, I was just looking at the profitability of the individual segments for the project

business we are looking at 7% margin from here on, right?

Sudhir Deoras:

Yes, please.

Vinay Pandit:

Which means on the balance 450 crores we may do around 32 crores of profit in the balance part of the year at the EBIT level

against a loss of 310 crores in the first half?

Sudhir Deoras:

310 crores?

Vinay Pandit:

Sorry, at the EBIT levels on the segmental standalone. Segment result projects and services 310? 31 crores sorry, 310

million, sorry sir.

Sudhir Deoras:

I would have been dead and gone if it had been 310.

Vinay Pandit:

So, do you think we will be barely be able to breakeven at the EBIT level during the year?

Sudhir Deoras:

Please understand that we have good manufacturing setup also, that will also bring in margins, no?

Vinay Pandit:

Right.

Sudhir Deoras:

So, we are going to make money.

Vinay Pandit:

So, PAT could be quite low during the year because of this adjustment?

Sudhir Deoras:

Yeah, overall it will be.

Vinay Pandit:

Okay, right sir. Thank you.

Moderator:

Thank you sir. Next question comes from Ms. Shilpa Hirani from Rosy Blue Securities.


34/42


TranscriptionTRF

Sushil Choksey:

This is Sushil Choksey here. Basically my first question is, you know, we may call it ourselves TATA retired force in the past

and you highlighted we are changing, but where corporate governance is concerned why are we not improving on what we

took off from first quarter to second quarter and there are no highlights, there is no material available in the press. The small

share holder who does not get on to your con call is totally killed, only the institutional guys or the large HNIs get benefit of it. I

think there is a necessity that we have a fundamental change that we care for every shareholder and not only institutionalsegment?

Sudhir Deoras:

No, sorry, sir what would you advise, what would you suggest, what do we need to do?

Sushil Choksey:

Sir, one is our press release is not there in any press. The publication which we have sent to the exchanges is hardly visible.

Somebody will have to sit with a magnifying glass to read it and second this is if there is any particular kind of a fraud which is

indicated in Q1 and we are taking it to Q2, a small note can be sent out. I understand it de motivates some of the executives

working in the company who might have been fraudulently involved and there is no assurance of any kind which I have heard

the entire call. For some malfunction in my call I could not get on the first question, so my questions have been tempereddown right now, but basically my personal feeling is that I dont think so despite doing a good job to eradicate the past problem

we have done justice to share holder, which is visible by the stock being down 20%. I think we need a little better handling in

terms of future communication and second thing is I understand that we have taken a margin hit because of this 30 crores

fraud, but is it that just because of NTPC order we have guided down on our margins from 10%, because our projects and

products. Our products historically have contributed very well and looking at your order book and right now going into Q4 and

Q3, you may be able to make up, so is it that just because of one past arrear and if you can highlight which division, what has

happened to those employees going forward and then I will come to the second question.

Sudhir Deoras:

See, as we said this malice was found in our particular division, which largely handles boat and yard equipments, so it was

clearly a particular division. As far as the employees who have been found involved in all this, they have been all suspended

pending inquiries. We are not allowing them to take an easy path of resigning and go away, because all details have come outpart of investigation and we have kind of instituted an internal enquiry. We have consulted lawyers that going forward what we

could be doing with these people, because obviously they have worked against the interest of the company and so that is what

is happening and I explained little while earlier that lot of corrective measures we have taken in that division in terms of

merging some of the functions with Jamshedpur, especially in materials management area, in terms of vendor management, in

terms of purchasing, which is a very important thing and we clearly see that huge amount of cost reduction we can bring in by

doing that. It was operating as a separate profit center and yes, I accept that there has been mismanagement in this area, but

we have done lot of things in the last two months and we still believe in the business. We still know that this is a good product

and it is a profitable business. It is the USP for our company, because as we take a big project, which I am talking about, they

dont only require conveyor belts and pressure I the screens and tipplers, they require yard equipments, which are

manufactured by this division or designed by this division. So, we have brought those things under our control and we believe

that in the coming month things will start showing results. Yes, I agree with you Sushil that may be, I take your point that

communication-wise we could have been little better.

Sushil Choksey:

No, sir, the basic reason is I have been associated for many years and now this disappointment is visible in your con call today

that suddenly the enthu, which I have always seen in person or on con calls from the management team it suddenly

evaporated this time and which is reflecting in the stock price because people are taking it on a wrong side, so I want you to be

little fair on, whats happened is history. History is not going to repeat I understand, but at least if we get a little better

geography in my terminology where future of shareholders is concerned would be better off. Say, if some presentation

including some expectations of your, it may be not on margins, but on capacity and other things is put up on your website

would be ideally recommended and second thing, sir, in the past there is one more issue which a lot of people are querying or

it is in the public domain, but public domain in terms of there is some internal discussion at TATAs about Voltas, TATA

projects, TRF and a engineering division of TATA Power, which is in the similar business, because of their size, which they are

elaborating for expansion may have to come together under one engineering company of TATA. Is there any kind of indicationor discussion ever taken place?


35/42


TranscriptionTRF

Sudhir Deoras:

As of now there is no move in that direction.

Sushil Choksey:

No move is fine, but sir, any initiation was done and it has dropped or something like that?

Sudhir Deoras:

No, in this capacity I am working for more than three years, nothing has been discussed that matter.

Sushil Choksey:

Okay. Now sir, giving on a elaborated margin you said the indicative 7% as the total guidance going forward for the new

projects, which is mainly NTPC orders, to improve on margins what kind of a step are we taking with some private sector

orders or some other kind of functions?

Sudhir Deoras:

Yeah, we have to continue to kind of look at the private sector market and the most important thing which I see to improvemargins are that our manufacturing has to push further, because we have seen that the product business brings in good

margins. We have invested money in our plant and our whole idea would be and you will hear little more from me in the

coming months. Let me tell you as of now there is a consulting firm, which is working on product mix. We are doing our kind

of market study that what are the current products, which can go into another industry where we have not gone and what are

those kind of extended product mix which we can do given the equipments and the machine and the investment what we have

planned, because we strongly believe that manufacturing can bring very good margins. If overall you see, now what is

happening to TRF business that we are virtually moving towards product versus project and I am counting my auto application

business as product business, because it is a product business and we are seeing that we are moving towards virtually 50-

50% and I think manufacturing something which will drive further and bring in better profitability and better cost control, so that

is something, which certainly will happen.

Sushil Choksey:Sir, now if I just take you back to the past few calls where the vision 2013 was concerned, you said if BOP doesnt come in you

may slip by one year. Lets assume that you are sticking to 2013 or 14 doesnt matter, but if we have to achieve 2500 crores

auto division would constitute what, 7, 800 crores at that time?

Sudhir Deoras:

Yes.

Sushil Choksey:

BOP would be approximately 500 crores?

Sudhir Deoras:

Yeah, let us hope so, yes.

Sushil Choksey:

And the balance will be MHE 60% for projects and 40% for products?

Sudhir Deoras:

Lets see would that mean in terms of rupees in crores.

Sushil Choksey:

900 crores for material handling and 4, 500 crores for products?


36/42


TranscriptionTRF

Sudhir Deoras:

Yeah, we are moving towards that, may be 350, 400 by then.

Sushil Choksey:

So, basically what you are saying is right now what is sagging your margins as per your call, is mainly material handling

business, contract business, which we have to bid for in NTPC. It is not any other business, which is sagging the margin, so

Sudhir Deoras:

No, this overall margins of this year is clearly this particular division in which we had this huge problem, so that is bringing us

down totally, but going forward what we are saying is that our product business will bring in higher margins. Project business

we are saying somewhere at 7% we are seeing as per the current, you know, last 8 or 10 bids which have been finalized, we

have seen what kind of price at which people are bidding and what kind of margins they are looking at.

Sushil Choksey:

Sir, then can I assume that what you are indicating as a blend margin at 7% is mainly because 7% on project you will do, BOP

may be around that and your auto and auto application business you are not achieving 7% for some reason or you are still

looking for size, so you get better margins than that?

Sudhir Deoras:

Auto application business will bring better margin next year.

Sushil Choksey:

This year is still ramping up happening?

Sudhir Deoras:

Yes.

Sushil Choksey:

So, there are some initial expenses, overheads, which you are not able to absorb for capacity reasons?

Ashim Roy:

Yeah, that is one and then there are lot of acquisitions and other related expenses have been charged off during the year.

Sushil Choksey:

No, that was in the Q1 for the UK acquisition, no?

Ashim Roy:Yeah, Q1 for the UK acquisition, then the balance for York and the next balance expenditure is falling due, so all those things

will get stabilized by the end of this year and definitely ramping up of Triple A will take place, DLT will stabilize its market in

Middle-East and other things, so all these things will add towards a positive.

Sushil Choksey:

Okay, sir, basically you are trying to build in because the worst of past of TRF is visible in this quarter, so you are building a

worst case scenario and saying that in the worst case we will still do a 7% EBITDA, am I able to assume that way or I am

being optimistic?

Sudhir Deoras:

No, are you talking about the current year?


37/42


38/42


TranscriptionTRF

Sudhir Deoras:

Two ways, number one is that the screen is very well accepted. We had a weakness as far as screen quality of TRF was

concerned and we have started getting good screen orders since we have got this technology and so that is going to help us in

terms of improving our profitability.

Sushil Choksey:Okay. My next question, sir, this DLT operation in Sri Lanka and India, the Sri Lankan operation which was supporting the

global markets working with the superior margin I assume in the past, is it that because of the current environment the margins

there or currency impacts have taken a toll on EBITDA or there is something else?

Sudhir Deoras:

Yeah, Sri Lankan operation has a good product, it has got a plant and as I said they used to make higher valuation or higher

quality and higher value of the products like port trailers, etc. Large part of the market was the Middle-East and Middle-East

has just not revived, so we are a little stuck there, so since then what we are doing is we are utilizing their capacity to make

some road trailers what we are selling in Bangladesh and some of the chassis, which come to TATA DLT for further assembly,

but this is not something, which DLT can make money on. DLT will be doing specialized trailers and we still have port orders,

say about little less than 100 trailers in hand. 350 at various stages of discussion, but delivery of these trailers have beenshifted by a quarter, so this is the new markets what we are looking at. Middle-East is yet to take off and when Middle-East

takes off that would certainly help here.

Sushil Choksey:

Sir, if I am not mistaken in the last year for the annual call or the first quarter you had indicated that India trailers were raising

approximately 7 lakh rupees and international pricing for your trailers was fetching ranging from 12 lakh to 20 lakh depending

on what specialty vehicles were there?

Sudhir Deoras:

You are right, DLT trailers.

Sushil Choksey:

Now this Sri Lankan new port of Hambantota, which was built by the Chinese have just come into operation last quarter.

There is a third port, which is now coming up for bidding in Sri Lanka at Colombo itself plus Colombo phase 1 is going for

expansion, is all that not giving you a visibility going forward two years later or one year later for expansion of capacity at DLT

or you think it is premature?

Sudhir Deoras:

No, you see Sri Lanka is a very small market, but even then this year for example we have sold in the first six months 65

trailers in Sri Lankan market itself, which have gone to obviously these new capacities, which are coming up. Chinese dont

buy from us, they bring in their own trailers, but Sri Lanka will continue to be a small market. We need to continuously work on

international market because it is an export oriented unit as far as DLT is concerned. For local market we have another

subsidiary of DLT called DLE, which is in repairs, maintenance and also local markets. So, these are two different businesses.

Sushil Choksey:

How much is the currency impact between York and DLT because of the fluctuation in EBITDA terms?

Ashim Roy:

Sorry, Sushil we could not

Sushil Choksey:

The currency impact on your EBITDA margin for the first half on the international division?


39/42


TranscriptionTRF

Ashim Roy:

Currency impact means Sri Lankan, you see, DLT is not affected because Sri Lankan rupee is monitored by the government,

there is not much of

Sushil Choksey:

No, Sri Lanka-India I am not talking about, I am specifically talking because of York in Singapore, because if that currency

movement you have taken away 3-4 crores also it contributes, no?

Ashim Roy:

No adverse fluctuation is expected, this they have clarified, but there will not be any positive gain also, so currency according

us between US dollar and incidentally York these transactions are all now in US dollar to take care of this currency fluctuation.

Sushil Choksey:

Yeah, but US dollar is also in a wild swing, no in the last 2-3 months?

Ashim Roy:

Yeah, that is with respect to rupee.

Sushil Choksey:

No, wild swing compared to any other Asian currency and not Indian currency.

Ashim Roy:

So, they are transacting there, buying, selling everything is now in US dollar.

Sushil Choksey:

Okay and my last question, sir, I had raised this personally to you. TATA Steel being a promoter it sold some stake in TRF.

May be whatever reason they had for their own balance sheet, is it that TATA Steel is looking at diluting the further equity to

25%, 27% or it was a one off case itself?

Sudhir Deoras:

Not that I know of, but it is TATA Steel which would be the right company to answer this question.

Sushil Choksey:

Yeah, but I suppose, sir, your management would have taken up this issue with Board of Directors at least where Mr. Irani

would be present sometime, right?

Sudhir Deoras:Where, in our Board meeting?

Sushil Choksey:

Thats right.

Sudhir Deoras:

No, nothing

Sushil Choksey:

So, there is no discussion at all irrespective of a promoter selling the stake?


40/42


41/42


TranscriptionTRF

Rajiv Ghosh:

At the PBT level.

Ashim Roy:

PBT level, yes, maybe around 5-1/2%.

Rajiv Ghosh:

Okay, sir. Thank you sir.

Moderator:

Thank you sir. Dear participants please press * and 1 for your questions.

Pritesh Chheda:

We will just take the last one question now.

Moderator:

I request the participants to press * and 1 for your questions.

Pritesh Chheda:

We will take the last one question if there is.

Moderator:

There are no further questions, sir. Now I hand over the floor to Ms. Prerna Jhavar for closing comments.

Pritesh Chheda:

Hi sir, this is Pritesh, sorry I joined in late. Thanks on behalf of Emkay for hosting this call and addressing all the queries of the

clients and the investors and we look forward for better results and all the best for your future endeavor. Do you have a

closing comment, sir?

Sudhir Deoras:

The closing comment is only this that I must kind of specially I am commenting on what little while earlier Suresh Choksey

said, yes, he noticed little less enthusiasm and maybe the way we responded to some of the questions, but the point which we

are trying to say is that we still believe in the business and as I had tried

TRF+Transcript 011110

Documents

Transcript of TRF+Transcript 011110