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Jul 08, 2013, 02.23 PM IST | Source: CNBC-TV18

No big orders in system; rupee impacting margins: Thermax

In an interview to CNBC-TV18, MS Unnikrishnan, MD, Thermax speaks on winning their petrochemical order of Rs 1700 crore. He expects the project to be completed in 29 months.

With the rupee depreciation, no easing of the domestic price level is expected.

MS Unnikrishnan

MD

Thermax

Energy and environment solutions provider Thermax plans to complete its latest order win, worth Rs 1,700 crore , in the next 29-months, says managing director MS Unnikrishnan. The order is from a leading petrochemical company for the design, manufacture and commissioning of nine CFBC high pressure boilers.

However, in terms of the industry sentiment, Unnikrishnan says, large orders are not being awarded currently. "It is tough for companies to pass on price hikes to consumers with the rupee fall," he told CNBC-TV18.

Even though margins may be under pressure due to high costs of raw materials such as steel, aluminium and copper, Unnikrishnan says, the cap goods major will aim to keep them in double-digits.

Also read: Thermax uses Private Cloud to manage data security issues

Below is the edited transcript of his interview to CNBC-TV18.

Q: We always thought that orders were difficult to come by whenever we spoke to you. Post the index of industrial production (IIP) figures, you always indicated that there has been a slump in orders as well. You have won a big order of Rs 1,700 crore. Could you tell us little more about that? Are you expecting to see a few more order wins?

A: I had been mentioning in the earlier interviews that there are one-two large projects in the refinery sector and maybe isolated ones in the steel sector fructifying. This is one order which we had following up with a refinery. This is a very special kind of a project where currently they are utilizing the entire electricity and the steam units for the process coming from the refined gas and gas itself.

So, if one were to convert that into entire solid fuel firing we use as a fuel, in every refinery at the end of the refining process, we have got a pure carbon coming on a petcoke. So, we have designed a very special boiler for this particular purpose which should be burning that. As an alternative, it will also be capable of burning imported coal.

So, when we use this in the boiler, the coal, we will be generating sufficient steam to produce the entire electricity need of refinery along with all the heating. So, there are two sides of this particular refinery and the downstream projects where one side will have five numbers and the second will have four numbers of 500 tonne capacity boiler.

This is where the entire work for this including design, engineering, construction, commissioning all to be managed by Thermax and will be completed within a period of 29 months. It is a challenging job but very interesting job; and first of a kind for this country.

Q: Would that mean more margins better than 11 percent, 11.5 percent that you normally do?

A: These are very difficult and challenging times. Not that Thermax has won this order as a lone company; there were multinational and domestic companies which vied for this order. There are hardly any orders of this kind of a size prevailing in the country under the negotiation platform.

Whatever maybe the technical superiority, it is a biased market right now. So, we cannot be sticking on to the margins. So, I do not want to comment on the margins. But let me tell you that things were okay and is certainly a profitable order.

Q: Does the rupee give you a little bit of protection and therefore removes the pressure on billing to some extent as foreign competitors already will have some problem competing on dollars?

A: In domestic market, there is a protection available and the rupee could also give us a competitive advantage in the international market. Both these pluses are there. Negative is nobody is talking about.

The commodity prices for steel, copper, aluminium, which are the raw materials which are used for the boiler are higher. The domestic manufacturers have a price advantage as they do not have to compare on to prices.

Normally in a depleted, depressing market condition the commodity prices would be expected to be eased. But, with the rupee depreciation, no easing of the domestic price level is expected. This could put pressure on the margins of companies in the capital goods sector and equipment manufacturing sector.

Thermax stock price

On October 23, 2014, Thermax closed at Rs 877.80, down Rs 5.25, or 0.59 percent. The 52-week high of the share was Rs 989.70 and the 52-week low was Rs 609.35.


The company's trailing 12-month (TTM) EPS was at Rs 20.49 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 42.84. The latest book value of the company is Rs 169.94 per share. At current value, the price-to-book value of the company is 5.17.

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