Pune: Stressed by lack of domestic and overseas demand for capital goods in the absence of large investments, Pune-based Thermax Ltd’s net profit slumped by a fifth to Rs 45 crore in the quarter ended June 30, 2016.
The energy and environment solutions provider has forecast a tough operating environment for core sectors like steel and power over the next 12-18 months. Much of the growth that has happened in the last few quarters has been consumption-led growth in sectors like beverages, automobiles and textiles.
“Capital goods sector will continue to be under pressure for the next 12-18 months. New order flow has also come down significantly as internal environment is yet to show significant improvement,” said Meher Pudumjee, chairperson, Thermax Ltd in a meeting with company’s shareholders.
The order intake at the company fell 6% to Rs 3,701 crore in the last fiscal, which Thermax’s managing director and CEO, M S Unnikrishnan called “one of the lowest order intakes in the recent history of the company.”
Fresh Order booking for the three months ended June 2016 declined to Rs 698 crore from Rs 877 crore.
Pudumjee said the company will look to capital expenses, expand into new international markets for fresh orders and focus more on areas where there is demand to outlive this slow growth phase.
In the current fiscal, Thermax is looking to expand capacities for the chemical factory at Dahej in Gujarat, boiler plant in Indonesia and set up an absorption chiller plant in Sri-City, Andhra Pradesh. All of this will entail an investment of over Rs 400 crore in the current financial year.
“If you look at all the new investments we are undertaking, they are into products and services,” said Unnikrishnan adding, “We are look to de-risk our projects portfolio.”
From about two-third of income from the project division, Thermax is looking more at a 50:50 blend between projects on one hand and products/services on the other by the year 2020.
The company is hoping that the policies announced by the government will revitalise the steel, cement and powers sector, which will then help the company grow faster