Will ride FY14 on cement, food sector orders: Thermax

Shaheen Mansuri
Moneycontrol.com

Heavy engineering major Thermax expects its order book to strengthen in early FY14, with much of the business expected to come in from the food processing and oil sectors.

During the December quarter, Thermax did not get any big ticket order from the power sector, which traditionally accounts for roughly 30 percent of the order book.

While the company partly made up for that gap with low margin orders from other sectors, notably Engineering, Procurement and Construction (EPC), net profit declined 20 percent.

While analysts have questioned the wisdom of bidding for low margin orders, M S Unnikrishnan, CEO and MD of Thermax believes it is better to post a small profit than  than incur losses by waiting for large orders at a time when the economy is in poor health.

He expects Thermax to be profitable in the current fiscal with around Rs 5,000 crore of orders. "We have got a wide portfolio which includes chemicals, water treatment and air pollution control. Though there is a general slowdown in power segment, we are not worried as power is only one of the segments in which we operate," he told moneycontrol.com

Even steel and cement companies are adding capacities which will help strengthen order flow in coming quarters, he adds.

Below is an edited excerpt of Unnikrishnan's interview to Moneycontrol.com

Q. After reporting weak set of numbers in Q3, do you see order flow improving in the quarter?

I expect stronger order flow from oil and gas, food processing, steel and cement sectors post FY14. Even power segment which contributes around 27% to our book will gradually pick up in a few quarters. Also, international orders from the European and Middle East markets will further strengthen order flow. We operate in waste water management, air pollution control and chemical segments which help us mitigate risks in a tight business environment.

Q. Despite having installed a 3GW capacity in Maharashtra, there were no big-ticket super critical boiler orders during Q3. Are any bids in the offing?

We are witnessing traction in small boiler orders but there is a general slowdown in large boilers segment which has impacted order intake. The segment requires huge investment by companies and hence there is a general slowdown in super critical boiler market. However, revival in orders cannot be ruled out.

 Q. Will not weak order flows in captive and utility continue to hurt profits?

Agreed, amid a bleak environment, short term outlook is uncertain in captive and utility orders. Key investments decision by customers is at risk of being delayed due to high interest rates. Due to policy decision likely to be announced, situation will hopefully improve.