Thermax Q1: Profit Jumps 82% To ₹109 Cr | NDTV Profit - video Dailymotion

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00:00Hello and welcome. We are in a special conversation with Ashish Bhandari, MD and CEO of Thermax.

00:12Thermax reported numbers that largely on some parameters beat street expectations while

00:17on some others was in line with what the street was expecting. Ashish, good morning. Thank

00:21you very much for joining in. Ashish, walk us through your numbers. Revenues and margins

00:26were tad lower than what the street was expecting, but profits have seen a big jump on back of

00:33a lower base. You want to walk us through what went behind those earnings this quarter

00:39and what lies ahead for the rest of F525? Sure. I would say the numbers have got three

00:46sub themes going on and I'll cover both the orders and the revenues bit and the profit

00:52bit. On the profit side, last year we had one single item which was relating to a lawsuit

01:03here where we had taken a 51 crore hit to our numbers, which is why the profits were

01:10lower last year. If I correct for that, our profitability margins would show that we were

01:17in line and this year as in wasn't that much better. If I take a second parsing of the

01:24numbers this year on the operational front for two parts of our business, both first

01:32one being our bio CNG business, which is where we have set up a new line of business to deliver

01:39bio CNG plants for some customers of ours. We have realized that the engineering that

01:47we need to do needs significant changes relative to the commitments and the designs that we

01:54had previously worked on. So in that business, we have taken a 45 crore hit for changes that

02:00we will have to make over the next couple of quarters on that business on a separate

02:05set of projects where we are executing some really, really large projects. There also for

02:14completely different set of reasons, we have had engineering issues where again, we have taken a

02:22hit between 20 to 30 crores. So both of these negative to some extent surprises have affected

02:32our profitability numbers for the quarter, which has masked strength in many, many other parts of

02:39our business, including our chemicals and our industrial products business, which continue to

02:44go from strength to strength. Even our large boilers business is performing extremely well.

02:51That is on the profitability side revenues, nothing in particular to note our backlog

02:57continues to get work through. I would say there was some slowdown on the revenues because of site

03:03related issues and, and some customer slowdowns, which are more than what I've seen in the last

03:11one year, but they are still peripheral. Some of this could have been election related slowdowns

03:17and that will pick up again, kind of as we go through this quarter in the next. On the orders

03:23front, we were flat relative to last year, my last comment, and then I'll pass it back.

03:28On the orders front, we were flat relative to last year. Again, kind of some amount of slowdown

03:35in February and March, but we are seeing good comeback come in now. And we should post some

03:41good orders and good growth overall on the orders front as the rest of the year gets delivered.

03:47Ashish, thanks, because you've actually summed up my next couple of questions as well into one answer.

03:52But from what I understand, a number of factors that impacted your earnings seems to be a one-off.

04:00Do you feel like going into the rest of F525, earnings will be robust and there should be

04:05significant growth both on top and bottom line? I think what is significant is a relative number,

04:13I guess, but I would expect improvement both on, on bottom line, top line and on orders. Yeah,

04:19and I think some of that will start to show from the next quarter itself. So the one big question

04:26on the orders front, which we have been speaking about, we have been talking about how

04:31we have been delivering orders growth, but the large orders we haven't seen for some time.

04:37In April, which is right after, sorry, July, right after the finishing of this quarter,

04:42we announced one big 500 crore plus order that we received. We expect to receive more such orders

04:49in the rest of the year as well, which would mean that even on the large orders, which are

04:55more kind of drive one-offs, but we are in a period of our company where I would expect to see

05:02frequent one-offs as well. So at least that gives me confidence that even on the order side,

05:08beyond the steady growth that we are seeing in different parts of the business, we will have

05:12good growth on some of these one-offs as well. Right. Also, I mean, there could be an election

05:18impact like you indicated, but does that mean that orders may be lumpy then in nature? So

05:23maybe not in this quarter, but Q2 or Q3 could see, you know, front-loading of some of these orders.

05:29The reason I want to ask you that is because if there are going to be one-offs,

05:33have you been bidding significantly for some of those large orders?

05:37So our bidding activity has gone up. Yeah, our overall pipeline of larger orders has gone up.

05:43And Siddhi, I've always been very clear in sharing that, take a look at our Thermax as the four

05:51parts in which we are now reporting our numbers in. The two big parts of Thermax, the industrial

05:59products, which is where we provide product-related solutions around water, clean air,

06:09clean energy across multiple sectors. So this is not dependent on the large industries or the

06:15large sectors. This sells across the entire breadth of industrial activity in India and

06:21outside India as well. Here we have been seeing consistent strength and we continue to do well.

06:27The portion that slowed down here was the ethanol market and some portion of the Spanjayan market.

06:33And like you said, in my view also, that was election-related slowdown. That is now getting

06:39released and picking up. I do expect good pickup out here. Yeah, the bigger projects are more from

06:45power, steel, refining, petrochemicals, those sectors, which are more cyclical also in nature.

06:52But there also, our bidding activity has now picked up and let's see what our win rates are.

06:58We will see that in the rest of the year.

06:59Rashi, so for F5-25, in your opinion and assessment, and of course, the orders that

07:05you're bidding for, which segment do you think could drive growth in the financial

07:11year and over the next two to three years as well?

07:14I think the Indian story right now is a multi-engine story and I think we should

07:19look at it like that. There is not one sector which should be looking to drive. We have

07:27broad-based demand, which will mean that across sectors, we should see investments.

07:34And not only that, with the larger demand around how do we get water for industrial solutions,

07:40how do we, the norms across are getting tougher. So, and those are happening across sectors.

07:47So, that is driving one more part of Thermax. The only portion that I think that can be

07:52really lumpy, and there is a discussion which is coming very quickly on that, is thermal projects,

07:58where the government wants to put in 80 megawatts of thermal power plants again in a very

08:06accelerated fashion. Those projects can be very big and can be very lumpy.

08:13And if the government does even half of those, I think that is the one sector which we all call

08:19out as particularly lumpy, nothing beyond that. Everything outside should be good broad-based

08:25growth. Shish, it's amazing. You've got so much clarity and thought as well when you talk to us.

08:31But one quick question on margins. Can you share with me a guidance or an outlook,

08:37an expectation of what margins will look like for the rest of the financial year?

08:43Look, I don't think we have been sharing forward guidance, and for good reason. Yeah, kind of

08:50surprises we had this quarter, I really wasn't expecting, but in parts of the business that we

08:56have, that's a reality. That said, if I take these, what the kinds of surprises we had in Q1,

09:03not to repeat, I would expect that our margins will also continue to improve the way we have shown

09:09continued margin growth over the last couple of years. I would expect margins to continue to

09:16improve. One last bit that I would say is that this is also a period where companies like Thermax

09:23have to spend money investing, because we are reaching a period where a lot of new segments,

09:31BioCNG, which is where we took a hit, is an example of a newer segment. Hydrogen is another

09:37example of newer segment. There'll be a lot more similar areas that we are touching as we look

09:44towards the future. And it is important that we continue to invest and not be afraid as we enter

09:51these spaces, because they will come with some amount of uncertainty. But you have to go through

09:56that uncertainty to reach a place where these businesses become a big part of Thermax of the

10:02future. So Ashish, how much have you earmarked for expansion then in this financial year and

10:07maybe the next one too? And also while we're at it, how would you consider funding these expansions?

10:13Because you're right, you can't be left behind and you've got to create all this before the

10:17demand starts flowing in, right? Very much so. Thermax is very clear, we will not bring debt on

10:24our corporate balance sheets. We are a debt-free company and will stay so. In very specific

10:33renewable projects, we bring debt, but that's a project-specific debt, as is the industry model.

10:39At a corporate level, our books will be clean. There is a big discussion within Thermax going on

10:45right now into the extent that we want to build out into these newer segments a deeper

10:52introspection on the kinds of funding that will be needed, the sources of those funding,

10:58and it's a very exciting period in that sense. As we are ready to share some of that information,

11:04we will come back and present that. Currently, I would say there are a lot of very

11:13intense discussions at our board level that are continuously going on. At the right level,

11:18we'll come and share. Right. Also, just a quick update on your new manufacturing facility

11:24capacities. Update on that. What are you going to add? Where are utilizations going to be at

11:30in the first year and any incremental growth that it will contribute to? Yes, very much,

11:35Suvya. In our water business, we added a new capacity with an idea that clean water and

11:45wastewater, both are areas where India's industrial needs and also commercial needs

11:50are expanding rapidly. We started the plant and it's filling up much faster than what we

11:57had originally anticipated. In our chemicals business also, we are putting up new capacity

12:04and we'll continue to add new capacity on chemicals because we are doing

12:09newer things and especially construction chemicals is a big area of growth for Thermax.

12:14We announced a JV out there as well, but there'll be more coming in that space. In our

12:21small boilers, which is what we call as our heating range boilers, we have got a plant

12:26expansion underway and de-bottleneckings in our large boiler business, especially getting ready

12:34for a much bigger pipeline that may happen. So even within Thermax, we are investing quite a bit

12:40and we are also investing in areas relating to R&D, technology partnerships,

12:47variety of new things, which are more back-end today, but in the near future, we expect to

12:54come to the fore and become front-end. Well, thank you very much, Ashish. Good luck.

12:59Congratulations. I know things are tough and of course, there are curveballs quarter on quarter,

13:04but hopefully the next couple aren't too bad. Good luck and we'll hopefully see you soon again.

13:08Thank you, Sameena. Thank you for your time. Thank you very much, Ashish. That was great.

Thermax Q1: Profit Jumps 82% To ₹109 Cr | NDTV Profit

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