Order inflows may not improve much in next 2 qtrs: Thermax

A: I am not allowed to give any numbers specifically. If there was a large order it would have certainly be announced. Just give me some more time to declare it to the board first, then shareholders and then the media.

Overall, over intake for the year had been lower in comparison to the previous year. I have not seen any substantial improvement in the larger project ordering even in the last quarter nor is it expected to be turning around in the next one or two quarters.

We will have to depend a lot more on domestic ordering for the smaller projects and wait for sectors that are very important for us like steel and cement to turnaround or start ordering which I don’t think is going to be happen immediately because capacity utilisation for them are not at a level where they need to reorder for capacity creation.

Q: It is quite likely that you will be starting this fiscal year, FY16, at a lower opening order backlog. Would that then impact your outlook for FY16? Say in FY15 street expects you to do revenues of 8-10 percent at least for your standalone business. Would the standalone revenues in FY16 be comparable to the previous year since the pickup is only expected in FY17, could it be lower?

A: We will open the year with lower quantum of carry forward orders. However, that does not stop us from declaring a better result in the coming year on account of the fact that Thermax has got short cycle project orders, medium-term project orders and also revenue side service orders picked up.

For service side orders anything coming in will be revenue recognised in the same quarter. Chemicals for the operation maintenance side, services of water all that will be very quick turnaround in terms of ordering. Then we have our standard products in heating, cooling, water treatment which are also not very small in size. So, if there is any better pick up in the next year we should be able to have an accretion there.

More importantly, even medium-sized projects will be concluded in the first two quarters. We can part revenue recognise in the second half provided there are orders in the market. Therefore, a lot of this will depend upon how Q1 and Q2 will pan out.

We have capacity and are capable of executing orders at a faster pace so we cannot conclude that we will not be able to improve the results next year nor can I say I will be improving, we are going to wait and watch.

We have capacity and it may be possible but for very large projects even if I get the orders in the beginning of the year it will only have minimum impact on the valuation.

Q: You said that because of the way the environment is, you have had to rely on the smaller ticket size of the domestic orders. What kind of margins are there on these orders and how do they compare with the average margins on the orders you had been seeing until Q3?

A: Smaller orders naturally do give a stable margin because there are multiple numbers. Even if one were to pick an order at a smaller margin, there are other orders to compensate for it.

Smaller orders or medium-sized orders are decent margins. In fact large orders getting concluded at this point of time will have a lower margin because competition is very tough and everybody is in need of orders to keep their factories on.

Therefore, medium and smaller orders give you stable margin and the larger orders sometimes fetch you only lower margin. That way I don't think if orders are coming in, margin will be under pressure.