Thermax is preparing to make Indonesia its base of operations in the South-East Asian market. It has acquired land and will soon begin work setting up a manufacturing plant there with an investment of USD 25 million.
In an interview to CNBC-TV18, Thermax Managing Director and CEO MS Unnikrishnan shares the company's expansion plans and his views on the Indian market.
Below is the verbatim transcript of MS Unnikrishnan’s interview with Alexander Mathew on CNBC-TV18.
Q: A word on your expansion plans.
A: We have already made a plan to create our subsidiaries in each of the South-East Asian countries like in Malaysia, Indonesia, Thailand and Philippines, those will be marketing and service companies. The manufacturing hub is going to be in Indonesia for which we already purchased land and that 24 month period by which we should be ready with our manufacturing commercialised and we would be manufacturing our standard products which means standard boilers, standard absorption chillers, water treatment plans standard size, air pollution control equipments and chemicals which would be sold within the south-east Asian market.
Q: As far as the input costs are concerned, what is the outlook for the remainder of the financial year and how is that going to impact your margins? Is it going to help sustain your margins at the rate that they are right now?
A: We have already seen the decline in steel prices, aluminium prices and all the commodities are almost at a very lower level right now. So, there is certainly a guarantee that we should be able to maintain the margins on the orders that we have got. There is no decline in margins is going to be happening.
Will we be able to get new orders at the prices that we are getting in the market earlier? I doubt because the market will be expecting you to be passing on the reduction in commodity prices in the finished product.
Q: But as far as the Indian market is concerned, we are seeing that demand outlook is better, orders are picking up, so in that sense with the a larger amount of demand, you have that leeway to increase realisations and price to a certain extent. Do, you expect that to translate in this financial year itself or do you think it will take longer?
A: There are certain segments in the industry which is doing quite okay in terms of new capacity creation. Those are the food processing, the textiles, maybe light engineering, beverages, alcohol, you have such kind of orders coming in the market but then nothing happening in the cement sector, steel sector, oil and gas sector, fertiliser, power, these are the ones which are capable of moving the needle. So, even if you have enough and more orders coming from the earlier sector which are B2C sectors, they are smaller in ticket size. So, they cannot make a movement in terms of the needle related to the profitability.