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 company’s revenue visibility in power projects, enquiries from the steel and cement sector and the impact on margins due to rising input costs with FE’s 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