Thermax is expanding its international operations to make up for missing out on growth in the Indian market.
Thermax is expanding its international operations to make up for missing out on growth in the Indian market. This expansion is expected to make up for some of the drop in the Indian business. As part of plans for localisation of manufacturing in international markets, Thermax has opened its new manufacturing facility in Indonesia with an investment of $25 million. This plant will tap the Indonesian as well as the ASEAN markets for its products business, Thermax Group chairperson Meher Pudumjee said.
The manufacturing base in Indonesia will benefit from the FTA agreement among ASEAN members and help them to get into markets in Malaysia, Thailand, Laos, Cambodia, Myanmar and the Philippines, she said.
Thermax has created an investment hub in Singapore through which it would be investing in these markets.
The core sector in India has been sluggish over the last three to four years, Pudumjee said. There are few orders and a lot of competition, so margins will be under pressure here, she said.
The internationalisation strategy has been in place for the last five years.
In 2013, the share of international business was 26%. It has now gone up to 36% and will go up to 40% in three years, Pudumjee said. Thermax chose Indonesia as it was the single largest market in the region and there was growth, Pudumjee said.
Thermax established PT Thermax International Indonesia in 2014 to focus on Indonesia and other Southeast Asian markets and this facility will provide indigenous manufacturing muscle and services to customers in the region, she said.
The company has a low 2% to 3% market share at present in Indonesia, which will go up to decent double digits, Thermax MD & CEO MS Unnikrishnan said.
“This market has an order intake of $40 million and is expected to double,” he said. The market is dominated by local players and there are some overseas investors but no company similar to Thermax, Unikrishnan said.
The Indonesian facility, situated in the industrial area of Krakatau at Cilegon, around 100 km from Jakarta, will produce a range of standard products — packaged boilers, heaters, steam
accessories, water and waste water treatment, along with pollution-control equipment such as electrostatic precipitators and bag filters.
Thermax has set up subsidiaries for a sales-service network in Malaysia, Thailand and Philippines and will set up another in Myanmar soon.
After Indonesia, Thermax plans to go to West Asia and Africa. Thermax used to sell through agents in the African market but is now setting up its own offices. The first one has come up in Kenya and the second one will be in Cairo, Unnikrishan said. The next port of call will be South Africa.
Thermax posted an 11.3% fall in PAT to Rs 47 crore while revenues dropped by 10.5% to Rs 917 crore during Q1FY 18 at a consolidated level.
As on June 30, 2017, Thermax Group had an order balance of `4,944 crore, up 22.4%. Order booking for the quarter, at the consolidated level, was `1919 crore, up 134.9% compared with Rs 817 crore last year. On a standalone basis, PAT was down 28.3% to Rs 32.4 crore and the company reported a total revenue of `756 core during the quarter, which was 9.6% lower that the same time the previous year.
The order balance on June 30, 2017 stood at Rs 4,530 crore, up 24%. The order booking for the quarter improved to Rs 1,742 crore, up 149.6%.