Well keep R500 crore for capital expenditure over next two years

Written by Smita Joshi Saha | Updated: Mar 11 2011, 06:07am hrs
Energy and environment solutions provider Thermax is confident of good revenue growth this year, despite rise in raw material prices. MS Unnikrishnan, managing director and CEO, is optimistic about the opportunities for the company especially in the energy segment, which contributes to about 77% of its total revenue. He spoke about the companys revenue visibility in power projects, enquiries from the steel and cement sector and the impact on margins due to rising input costs with FEs Smita Joshi Saha.

Your order inflow saw a dip in the third quarter last year. How has it been in the current quarter

I cannot give out specific numbers but can say that our order finalisations in the fourth quarter has improved over the last quarter. Also, enquiry inflows and tenders from the government and large companies have not slackened.

Where are the enquiries coming from and are they getting converted into orders

We are getting enquiries from the steel, cement, and power sectors and we have been successful in getting a couple of orders from the steel and cement sectors this quarter.

What is the current order book and has there been any project-specific delays from the clients

Our consolidated order book as on December 31, 2010 stood at around R7,000 crore. All our projects are proceeding without any noticeable delays in the current quarter and payment collections are also normal.

How confident are you on your revenue visibility, given the fuel and capital issues faced by power project developers

Power projects may be impacted in the short term on the back of rise in interest rates, coal prices heading north and liquidity in the debt and equity markets. However, in the medium to long term, we are positive on the sector but we will have to consider important factors like land acquisition, environment clearance, fuel and water availability, along with availability of debt and equity.

What would be the impact on margins in the fourth quarter on account of the rise in input costs

Our long term contracts are protected, the impact only would be on the spot prices of structural steel and hot rolled steel. But the total exposure on account of it would be just 10%-15% of the total order value. We should be able to maintain our profitability, give or take 100 basis points.

You have forayed into utility boiler business through your JV with Babcock & Wilcox. When will revenues flow in from this segment

Well, we will start bidding for orders through our JV from September 2011 onwards. Our JVs new plant with 3,000 mega-watt (MW) capacity is expected to be ready by September 2012, and we expect the revenues to start flowing in therefrom.

What is the capital expenditure plan for the current year and where will it be deployed

We plan to spend about R500 crore over a period of two years. Of this R200 crore will go as an equity participation for our JV with B&W. Secondly, we have our internal capital expenditure programme which will consume about R100 crore. In addition, some amount will be spent on an assembly facility for the air pollution control business group in Solapur, Maharashtra.