Transformer & Rectifier India Limited

CMP - INR 216/- Macp INR 285 Cr. Sales 2015 - Rs. 541 Crs Loss at Net level (2015) INR 6.41 Crs

Transformers and Rectifiers India Limited (TRIL) is a company whose fortunes fluctuates wildly with economic cycles. Established in 1994, it manufactures Industrial and Power transformers ranging from sub 33 kV to 765 KV…. The entire sector faced dramatic stagnation for last 5 years.

The breakup of end use of transformers are

Sub 33 KV — Distribution transformers used by Discoms and small & medium enterprises (demand is a function of industrial up cycle and distribution network up gradation)

33 KV to 220 KV — Power transformers used by Discoms, Transcoms and Large Industries (demand is a function of up gradation of state transmission networks)

220 KV to 765 KV — Power transformers used by State Transcoms, PGCIL and Generating Companies (demand is a function of interstate transmission network and power generation and evacuation capex)

There are many unorganized player in sub 33KV segment. And major players up to 220 KV segment and above are: ABB, Alsthom T&D, Siemens, Crompton Greaves, BHEL, EMCO, TBEA India (Chinese company), Vijai Electricals, Bharat Bijlee and Voltamp Transformers. Total industry capacity is about 400,000 MVA and industry wide capacity utilization till recently is about 66%. Total capacity of TRIL is about 33,000 MVA.

The price per MVA and OPM for all players taken a hit during last 5 years and seems to have reached a bottom this year. In spite of huge drop in price of Crude, Copper and Structural Steel, the price of CRGO (Cold Rolled Grain Oriented) steel sheets which constitute 40% of RM cost remained strong during whole year negating any benefit of commodity fall for companies in this sector. TRIL had a large pending order book from PGCIL with very low and negative margins, execution for which have just completed. All the negatives, working together resulted in meagre 4% level EBITDA margin and loss at net level for the company for last year and current year till date.

During last economic up cycle, the OPM was in the range of 15% at its peak (presently it is 5%).

The industry is plagued with overcapacity, intense price competition and problems related to tender based procurements from cash strapped SEBs. I expect any new capacity addition is unlikely in this unattractive sector. With the demand pick up through ordering by PGCIL and State Discoms, I expect price stability will probably come back.

During the tough time of last four years, TRIL ventured into export market and also focused into relatively profitable segment of Arc Furnace Rectifier and got few orders from Iran. It also entered into technology agreement with Fuji Electric Company of Japan in December 2014 for generator step up transformers of higher ranges for sale in India only. The agreement is valid for 10 years. The company has also received a Rs. 400 Cr. order for supply of 300 mid-range transformer to Algeria. Only 95 of these transformers have been shipped so far. During the latest Concall, the company confirmed that from April onwards 30 transformers per month would be shipped against this order.

Earlier their sales mix was 80% Power Sector and 20% Industrial sector. But gradually during the last recessionary phase company increased its share in the industrial segment and presently the ratio is around 55 : 45. Going forward, it may possibly act as a cushion against wild fortune swings.

Currently the order in hand is about Rs. 1050 Crs. and management as per last Concall expect EBITDA margin to improve from current paltry 4% level to 8% level in next one year. But it is pertinent to note that management, on a few occasion earlier, failed to deliver on its promises made in TV interviews. Their last 9 months sale is 328 Cr vis-à-vis 378 Crs in previous 9 months, which is somewhat unexpected but management claims a huge FG inventory has been build up as some delivery got delayed for “short circuit” testing.

Financials of the company presently have nothing worthwhile to discuss (people interested can review it from exchange websites or elsewhere). Company came with an IPO in 2007 at Rs. 465 apiece but I guess it mostly quoted below issue price since listing as market and the entire sector tanked since those days.

Discom capex is picking up as feeder separation scheme, which has been launched about 18 months back is showing traction and reduction of T&D loss has been made mandatory for financial rehabilitation for SEBs forced them to invest in transmission segment. The gradual expansion of order book with possibility of higher margin and export foray are some comforting factors.

Since companies in this sector work with huge operating leverage, I expect TRIL to be an interesting story going forward as an opportunistic investment theme. However, it is to be noted that many a time working capital cycle gets unpredictable as off take of transformers depends on other extraneous factors related to the project for which transformers are being procured. Also, significant devaluation of Chinese currency may act as dampener in the industrial segment to some extent.

We may watch and monitor closely as the story unfolds.

Company latest presentation is attached….

Promoter has pledged 22% of its holding and it it pledged for last 6 + years. Total Promoter holding is 75%.

Disc.: Invested (>3% of portfolio). No trading in last 30 days.


Great post @aveekmitra . I was speaking to a very senior person from the transformer industry and he mentioned that TRIL and Techno are doing well in the lower rating transformer area. Since the technology for upto 220KV is now pretty common the big boys like ABB, Siemens etc are focusing on the 220+ KV segment where the competition (and hence the margins) are higher. Also, the orders are picking up.

However the UDAY scheme for power discoms has not yet started getting traction on the ground and may take a while before actual orders filtering through as a result of healthier balance sheets of the discoms.


Abhishek… Thanks… I have not considered benefits of UDAY scheme, if any, in my hypothesis as it is just launched (Nov '15) and needs state level support for its success…

Feeder Separation scheme is funded by REC and PFC for separating the supply to Agriculture and Residential needs to increase availability of power residential customers, to prevent rampant ground water misuse and to check theft. It was announced in Oct '14 and orders against this scheme is being awarded.

In >220 KV segment, TRIL is gaining some traction;,recently it was awarded a Rs. 134 Cr order for supplying 14 nos. 765 KV 500 MVA range transformers from PGCIL.

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Thanks @aveekmitra for the post. Adding some more details

Sector: There are large companies in the sector including large MNC’s (Alstom T&D, CG, etc.) and multiple others like TRIL, Bharat Bijlee, Emco, Voltamp etc. The entire sector has been in doldrums in last few years mainly due to the following reasons:

a) SEB debt resulting in low capex in adding transformer capacity.
b) Cheap imports: During the period of 2013 to 2015 the procurement clause required Indian companies to use CRGO steel but the foreign companies were exempted from it.
c) Capacity hangover: Most of the transformer manufacturers had increased their capacities significantly but due to the above and also due to UPA2’s policies around 45GW of power generation got added a lot of which remained non functional due to unavailability of fuel. This also resulted in very little power transformation capacity being added.
d) The above resuted in most companies booked orders at very low OPM’s and a lot of strain in their working capital. The working capital cycle across sector ranged from 150 days to 400 days. Capcity utilization fell to 50%.

What has changed:

a) Make in India requirement that only those companies which had manufacturing setup in India can participate in PSU/SEB bidding process. This eliminated the competition from Chinese and South Korean vendors.
b) Government focus on reducing power transmission losses from current 23% to 15% along with UDAY and IPDS. UDAY resulting in SEB debts being transferred to govt.
c) Focus on renewable energy resulting in the requirement of smaller power transformers.
d) All of the above resulting in capacity utilization of 70% to 80% this year.

Why TRIL: @aveekmitra has already mentioned what TRIL does. My personal choice are those companies which are focused on single area of operation. Unlike other competitors who tried to emulate the Alstom pattern of getting into transformers, power station setup, metering solutions, switchgears, turnkey projects TRIL remained focused on the transformers (rectifiers/reactors are very similar in mfg.). It has in last few years upgraded itself technology wise with

a) ZTR Ukraine for high end 765 kV transformer technology.
b) FUJI japan for higher end reactor technology.

both of the above are technologies with limited competition club and only 6 to 7 players worldwide.

Promoters: I happened to meet Jeetendra Mamtora during the last AGM visit. Mr. Mamtora is a technocrat who at the beginning of his career used to repair transformers. Even today his only passion is to design transformers and be involved in every engineering activity. During the conversation it became amply clear that Mt. Mamtora is ready to take risks to grow and move into newer technological areas. In one of his interview (available online) following SEBI guidelines of reducing promoter holding to 75% Mr. Mamtora expressed remorse over high IPO pricing and said that the least he could do was to give the additional 5% to minority shareholders. The management expecting a good FY15 had doubled the promoters salary but when the outcome was not good the increment was rolled back.

Business Quality: The standard business quality template does not work here. The OPMs vary from 2% to 20% depending upon the cycle. Most of the historical ratios are not of much significance. However going ahead I see that the lower OPM orders are all but over. Most of the industry is moving in a phase of over 80% capacity utilization. I foresee OPMs rising gradually. When and will they go to previous peaks of 20% is anybody’s guess. The only good parts are OPMs moving up and the high technology areas where company is generally have OPMs north of 10%. Once UDAY starts picking up (my guess is 2nd half of FY17) the sector should go on full steam.

Disclosure: I have been tracking TRIL since last 1 year and have bought the stocks at various levels from 280 to 180. It forms more than 5% of my portfolio. I also have interest in other stocks in this sector. My views are very likely biased.


Co is talking about getting to 1000 cr topline in FY17. Also, expecting excellent Q4 results.


I had attended a call in May 2016 on Indian transformer industry where Mr. Kaul of Indian Transformers Manufacturers Association gave the participants a brief about the industry. Key points are below:

  • The industry size is around 13,000cr to 15,000 cr and comprises around 700 players. Each MW of power capacity addition requires 7MVA of transformers, and the current focus on power generation would support the transformer industry
  • Current industry capacity is 1500 GVA and the utilization is 40 to 50%. Organized sector forms 75% to 80% of the total
  • Huge orders are being placed by public participants like PGCIL and SEBs currently, but this would still take the industry
    capacity utilization to only ~70% by 2017.
  • Industrial transformers, which form around 15 to 20% of the total production, and as per Mr Kaul there is no demand uptick happening in this space currently
    -Pricing of transformers seems to be under pressure as the SEBs and PGCIL have revamped their bidding process and this has reduced cartel formation as per Mr. Kaul.
  • Working capital scenario could improve as PGCIL is a better client than SEBs


I would like to add my 2 cents here.

I am an Electrical engineer & own a manufacturing unit of small size customised Industrial grade transformers.

Around 5 years back, I happened to foray into the Power Transformer & Distribution Transformer segment to cater to local demand as well as SEBs.

Unfortunately, as compared to Industrial transformer segment, the rules of the trade are totally different in Power / Distribution transformer segment.

The transformer industry suffers from many plagues as rightly pointed out by Anant Jain. I would just like to add a few to those :

1) Although the transformer being a critical component, where emphasis on quality is a must., its pricing decided by the competition & the customers., makes it as good as a commodity product.

  1. There is over supply on the domestic front, as well from other countries specially China.

  2. There is intense competition on the sub-220 KV transformers., leaving any place for margin expansion for the manufacturer.

  3. On Transformers beyond 220KV range, the market has only a few players. But the quantity to support production & make it profitable, is not as high. To add to it., any transformer of the higher capacity requires high end testing facility to be built, which only adds heavily to the initial investment.

  4. Almost all the transformer manufacturing companies have been on the negative profit growth since 2010.

  5. The ROCE of any company, hence, in this sector is very poor.

My personal advice to fellow investors would be to look for profitable companies other than this sector. Many are available.


Thanks a lot for the post Mukesh. That is the feeling I got from the conference call myself. You have covered the points quite beautifully.
Additionally, valuation wise I do not personally find them attractive right now.

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T R I L.xlsx (42.4 KB)
I have uploaded the favorable case expectation from TRIL as per my understanding. The base file used has been sourced from

I have used Management’s projection of 1000cr as the revenues, and assumed EBITDA margins of 10%. Depreciation and Interest as per TTM figures, while tax rate have been assumed at 32%.

I have assumed exit multiple of 15 for P/E and 10 for EV / EBIT. I am not comfortable going above this PE and EV/EBIT ratios as they are higher than that which was seen in the previous upcycle.
At these multiples the expected upside from the current Market prices under the two approaches (P/E and EV/EBIT) are 30% and 59% in a very favorable case scenario which is not exactly mouth watering.
I would argue that the expected upturn in revenues due to the turn in the capital cycle is to a great extent priced in (share prices have more than tripled since Mar 2014).
I would be happy to hear any feedback on the same.



I am more inclined towards the arts part of stock picking., rather than the numeric part.

But, still looking at the excel sheet provided by you., I feel that the following 2 main assumptions made by you are difficult to be realised.

  1. Topline : 1000 cr. ( to be seen )
  2. Operating Margin : 10% ( which looks very unlikely. The operating margins have been in the sub 5% range since last 5 years)

Kindly note : these are just my personal views & can differ largely from the future results.



I totally agree with you…I guess I should have made myself clearer…

I had uploaded a best case scenario for TRIL. The revenues and margin number I used there are as given by the promoter in a recent interview (and I agree it remains to be seen). My point was that even in this very favorable case scenario and reasonably high exit multiple, the upside from current levels is not very high.

I was attracted to the industry initially as I thought it can benefit from cyclical upturn which is to be expected. But the more I read the more I figured how competitive the industry is.

Whenever I am deciding whether to make an investment or not I try to calculate the best case scenario (in my opinion) and the worst case scenario. And in my opinion, for me personally, the upside in the favorable case scenario is not attractive enough to warrant investment.

I was just trying to support your qualitative comments with some quantitative data.


The company reported 51.8 percent rise in total income to Rs 248 crore and operational efficiency improved to Rs 28 crore. The EBITDA margins expanded to 11.1 percent. The company’s current order book stands at Rs 900 crore

Read more at:

Disc : Tracking position

Q1 results from TRIL -

Receivables due for more than 6 months is at 12.54 cr. The company thinks that it can be recovered as the client has now got all approvals for gas linkage.

Historically, Q1 is the weakest. With the strong results, the company is now saying its comfortable to do 800 cr in FY17 (previous guidance was 700 cr) with an EBIDTA of 10% (previously 9%). There is a lot of traction on power transformers from the SEBs. Also, there is a lot of orders from the solar renewables side (15%-18% of the industrial transformers).

The company is looking for a capex of about 125cr and is planning to raise it via a QIP. This capex is for backward integration and related diversification.

The company is focusing on the arc furnace transformers. There are only 4 major suppliers in the world and the company plans to be in the elite club within the next 3 years. The overall market size of the arc furnace transformers is about Euros 250 mn with better margin profile.

Excluding the 3rd party exports business, the split in order book is about 33% industrial and 67% power transformers.


My observations on TRIL Q1 result and concall:

Company has delivered highest Q1 revenue in history of TRIL. They are manufacturing 132 MV transformer which no Indian company done before and it may put them on the same league as the large European players. The EBITDA is around 7.6% and it’s less than Q4 2016 (11%) due to lower sales. The Q1 for these Capital goods company are always low and so nothing much to read there.

However, company plans to raise a QIP of Rs. 150 Cr. As per concall, this is primarily to raise capability than capacity to handle future large transformer business and Arc Furnace Transformer business for export market. So it would be more EBITDA accretive than Volume or Topline accretive. Also, they don’t plan to reduce debt from the QIP proceeds but mostly spend on developmental expenditure.

Management plans to complete FY 17 with Rs. 800 Cr topline and 10% EBITDA compared to Rs. 560 Cr topline and Rs.29 Cr EBITDA (5% appx) for FY 2016. But the YoY improvement in margin and volume is encouraging.

However, to raise Rs. 125 Cr QIP at Rs. 400 Cr. present market cap, the dilution would be almost 24% if the QIP is done at around Rs. 300/- per share. It will reduce promoter shareholding to around 57% from present 74% level.
Also, at full dilution, at Rs. 80 Cr. EBITDA (as management guided) the PAT can be about Rs. 25 Cr max. And EPS in range of Rs. 13 - 15 (max). I used the following assumption to arrive at the figure

EBITDA – Rs. 80 Crs; Depreciation Rs. 15 Cr. Finance Cost Rs. 35 Cr. (aggressive assumption as higher sales may tie up even more Working Capital) … So PBT would be Rs. 30 Crs and PAT can be Rs. 24 Cr. at 20% overall tax rate (if they can deploy fund by then possibly tax incidence can’t be more than 20%) … So, at 24 Cr. PAT, the fully diluted EPS would be around Rs. 13/ - Rs. 15/- … So, currently stock is trading at 20 - 22 PE.

For these types of businesses, increasing revenue exponentially is pretty difficult and cyclicality will give a tailwind for few years to come and company is doing all good things to move up the value chain.

Statutory Disclosure: SEBI Registered Investment Adviser (Regn No. INA100004814). I hold TRIL (<1% of portfolio). No trading done in past 30 days. It is not a recommendation to buy or sell. My comments are for discussion purposes only. It has NOT BEEN recommended to any paid members of our advisory service at


Transformers and Rectifiers posted a stellar set of earnings in what was a turnaround June quarter for the company.

Speaking to CNBC-TV18, Jitendra Mamtora, Chairman of the company, said Transformers and Rectifiers will report profits for the full year and that the company is working at running capacity of 100 percent.

He expects EBITDA margins to remain over 11 percent in FY17. As On June 30, 2016, the company’s orders stood at Rs 868 crore, he said, adding, orders worth Rs 150 crore are in the company’s pipeline.

Below is the verbatim transcript of Jitendra Mamtora’s interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Take us through what the next couple of quarters will look like? This quarter was good but do you expect that positive trend to continue?
A: We have enough of orders. The vision is there; the orders are all confirm orders so we don’t see any let down on the performance in the future quarter, this year quarter, so all the three quarters. It is all lined up till the end of this quarter and it will extend to the first quarter of the second year also and for the August which we have in our hand.

Latha: Is it right that you have Rs 868 crore of orders as on June 30th?

A: That is right.

Latha: That will last you up until second quarter of next year is your point?

A: What I am saying is this Rs 868 crore and the orders which are in the pipeline they will extend to the first quarter of the next year.

Latha: Are you L1, what is the visibility on the order book?

A: About another Rs 150 crore orders are in the pipeline where we are L1.

Sonia: You have made profits in this quarter to the tune of about Rs 1 crore odd can we assume that you will be profit making for the full year FY17 as well?

A: Absolutely.

Latha: What could be the revenue run rate? Would it be around Rs 150 crore every quarter or would you do even better as we get to fourth quarter?

A: It will be much more than that.

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Transformers and Rectifiers (India) Ltd has informed BSE that the Company has been awarded the order for 13 No. of 765 kV Class Reactors amounting to Rs. 68 Crores from Power Grid Corporation of India Limited. This is the first order for 765 kV reactors and with this order, the Company has order for the full range of transformers and reactors up to 765 kV Class. The order is likely to be executed within next one and half year. The said order falls under the normal course of business. The Company neither have any interest in the entity that awarded the order nor fall within related party transactions. With this order, the Company’s Order book as on date stands around Rs. 860 Crores.

The Company continuously thrives to deliver quality products and services and over a period of time has become a leading manufacturer of transformers in the Country.

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See 30% rev growth in FY17; Rs 120 cr orders in 1-2 days: TRIL

Vinod Mason, Director Strategy, Transformers and Rectifiers (India) (TRIL) is confident of orders worth Rs 120 crore coming in the next one-two days. He is also confident of a 30 percent topline
growth in FY17 versus FY16, to around Rs 800 crore.The company’s total orderbook currently stands at Rs 860 crore. The company had made a loss of Rs 7 crore in FY16 and revenues stood at Rs 600 crore.

Below is the verbatim transcript of Vinod Mason’s interview to Reema Tendulkar on CNBC-TV18.

Q: First, some details about this order. Rs 68 crore, what will be the margins you will enjoy and what does it take your order book to?

A: Rs 68 crore is not a very big order for a transformer industry but it is a very significant order because this is the first one for 765 kV reactor which we have got. This order involves seven numbers of 110 MVAr and six numbers of 80 MVAr 765 kV reactors. With this we have now come
at par with any other transformer manufacturer I would say not only in India but anywhere in the world. So, that puts at on a different platform altogether.

If you recall on your channel only I once told you we had signed with Fuji the technology transfer agreement for this reactor. With this we will be able to complete that technology. We will be able to get that technology from Fuji Electrical Company Limited. We had signed for three products at that time. 400 kV reactors, 765 kV reactors and 400 kV generator transformers. With 400 kV reactors we had already taken from them because we had the orders. Now with 765 kV we will be able to get that also.

Now coming to the point on the margins. The margins are okay, it is not bad. It is the first order
we wanted to make an entry. I would say we have gone aggressively or we have gone very low margins. But it is okay.

Q: But you will be making profits?

A: We will be making profits, we will not be doing any business with loss.

Q: But the margins may be lower than what you normally see?

A: I wouldn’t say lower also, it is okay. It is what normally the industry gets it. It is very competitive because we were just about 0.5 percent lower than the second lowest.

Q: What it appears is that this 765 kV class reactors maybe the best in the technology. What kind of an opportunity does it open up for you. Should we see more orders from 765 kV? If yes, give us a sense of the potential in terms of possible order wins?

A: India is the biggest market in the world for 765 kV today. If you look at Power Grid alone today we have total transformation capacity which is already commissioned is more than 1.50 lakh MVA. I don’t think any other country in the world has got that much capacity for that. That is
going to be a prime voltage for transmission specially in the central sector which will continue for in my opinion at least for five more years that is when we go for 1,100 kV. But till that time 765 kV will continue and there is a fantastic business.

Q: Any numbers?

A: Numbers I told you, 1.50 lakh MVA has been commissioned in the last four years.

Q: What it means for you, your company?

A: Our company it would be because if we get we are one of about five players in the country. So, if we get our 20 percent share it should be substantial business.

Q: But the other four players are well entrenched. So, going by this order you said you have bid quite aggressively. Does that mean that as you try and capture this 20 percent market share your margins could be under pressure?

A: No, they won’t be because 765 kV is a limited market. I don’t think anybody is going to cut much on that. We have a good technology which gives us the edge over others.

Q: What is the order book now, total?

A: Total order book today we stand at close to Rs 860 crore after executing the last few months and we expect another few orders in the next few days.

Q: And what would be the potential side of the expected order inflows?

A: I am expecting another Rs 120 crore or something like that in the next few days, maybe in a day or two.

Q: So, what would this take your FY17 revenues in margins to?

A: So far we are much ahead of the last year if you have seen the first quarter. We did 160 which was more than any time we did in the first quarter. Second quarter so far is looking quite encouraging. Still we have the month of September to go. So, it should be o0kay and we are not
going to be in red at all.

Q: So, you will be profitable for FY17?

A: Definitely.

Q: On revenues will it be a single digit growth like we saw last year?

A: It will be much more. We had set a target of Rs 700 crore plus in the beginning but today I can confidently say that we can cross Rs 800 crore.

Q: So, that would be quite significant because your FY16 revenues were just at Rs 600 crore or thereabout. So, compared to that you are expecting a 30 percent growth in the topline?

A: Definitely.


New Order win from PowerGrid:

It is a 102 cr order.


AGM Update: Attaching Chairman Speech15-09-2016 1121 Office Lens.pdf (499.3 KB)
15-09-2016 1115 Office Lens.pdf (513.6 KB)


Updates from AGM:
a) The sector is undergoing revival. Capacity utilization levels have gone up significantly.
b) TRIL is one of the very few companies with across the board power transformer in terms of kV and MVA. It now has technology at par with ABB, Siemens, Alstom and CG.
c) Furnace transformers is a very high EBITDA margin business extending upto 25%.
d) The company is looking at a turnover of 800+ crores this year. Upgraded from 800 crores guidance in Q1 conf. call.
e) Backward integration will help improve EBITDA levels.
f) Within two years the industry capacity will get exhausted. There is no capex happening in increasing capacities in the industry.right now.
g) Across the board the order intake is happening at higher margins. Private sector coming in transmission will help Indian companies.
h) Working capital days will come down. The company will not require additional working capital loans despite an increase in sales.
I) The current order book provides enough visibility upto Q2 FY18. The company is becoming more aggressive in choosing orders and only bids above a certain margin.

Personally the mood from last AGM to this AGM has changed from -ve to to +ve. The management was very optimistic. It is also looking for synergies with private sector and is also looking to increase its export foot print.

Disclosure: Holding. More than 5% of my portfolio.