Eye double-digit revenue growth for FY15: Thermax

But with a 9 percent revenue growth in 9MFY15, Unnikrishnan is hoping to log atleast double digit growth by the year-end. 

Below is the transcript of MS Unnikrishnan’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Latha: The numbers are looking a little better that is because last year the base was not very good. Quarter-on-quarter (QoQ) it is almost flat to marginal lower. In your own words how would you assess the quarter?

A: It is quite satisfying looking at the overall industrial atmosphere in the capital good sector. An improvement of 30 percent on the topline and a double digit profit before tax (PBT) level which was missing for the company for quite numbers of quarters not for the last quarter we improved it in current quarters also I would not take it as anything of the disappointment.

Are we overtly over satisfied, no is an answer for it. On account of the fact that the order intake had been lower than the previous year by a 10 percent not the story for Thermax alone but overall for the industry things have not being panning out too well. On the contrary let me put it this way that our domestic order intake has come down by 42 percent in the current quarter not any major order losses it is purely on account of the fact that there are indeed of larger projects getting concluded or got concluded in the last quarter.

Thanks to the international order intake which is almost a 100 percent more than the previous year same quarter. We have at least a reportable and I do not know whether to call it decent or indecent is Rs 1,228 crore order intake. This is good enough to understand the difficult circumstances we are passing through an industry so that is my overall take.

Balance sheet is kept strong enough and it is very difficult time for money to come forward. We have been able to manage our working capital quite well. The working capital has come down by almost 8-9 percent for the current quarter in comparison to the last year same quarter. So I would believe that we will have to wait for things to turn around in India for the larger industry. Till that time we will have to be happy with what we have currently.Sonia: If the order intake continues to remain week than would that threaten your topline guidance? What exactly is your topline and order inflow guidance for FY16?

A: Thankfully we do not give guidance because this is such a volatile industry it is very difficult to giving guidance. Normally one would ask where to be growing for example the current year the first nine months we are grown by 9 percents so I am expecting that by year end I should be able to touch that double digit growth. This is a rare feet for a capital good industries in current circumstances.

Looking at what I am going to be carrying forward as order intake based on the numbers which are known to all of you next year we will be very tough year. Depending upon how the industry is going to be picking up, at what rate investments are going to happen because Thermax luckily has got long gestation project orders capability and short cycle capability and plus service and the chemical as another business coming into the fore. So, put together if there is industrial turn around, investment turn around next year also in the first two quarters that were to partially turn around we can look forward to a growth that is what I am looking forward too.

That is not the only thing that we are looking forward to because we do know that India may take a little longer time so we are also setting our sites very clearly on the international markets . If you look that in the past few quarters our international order intake is more than the domestic order intake. Last quarter was the same story current quarter also we have done more order intake from the international market than the domestic market.

So, that should continue but not that the international market is a cakewalk and it is an easy task there are challenges in that. However, we are capable as a company technically to be competing against the Europeans, the Japanese and the Koreans to pick orders. It is not an easy task but we are able to manage it.Latha: Would you expect further improvement in margins because that is the positive story in this quarter, 250 basis points improvement? Is the cost of money getting any cheaper?

A: We are not a major borrower of any kind. On the capital account for capex we have not borrowed anything. Working capital is also very limited borrowing we have fairly well conducted that. So our interest won’t come down even if it were to be changing. It is for our customers it will be helping. If the interest rates were to be coming down there could be more projects happening in the country which would mean good order intake.

Margin improvement, I would say understanding the difficulty of conducting business in this kind of circumstances at double digit margin 10.7 percent I do not want to use the word peak but certainly it is a good margin. Our ability to be improving that further will depend upon how the market is going to be performing in the future. If there are sufficient number of orders in the market to be taken in then the competition will not unnecessarily under cut.

However, when there are limited number of orders we concluded weaker of the competition does not have a choice but to be picking orders at whatever terms and price they do get so that is where the margin erosion happens. Whatever could be the improvements done in the manufacturing process the innovation to be done to ensure the process are very efficient company’s like us have fairly well managed that way. So marginally improvement could be there but major improvements can only happen on two counts a market price improvement or a commodity price reduction both we will have to wait and watch.