In an interview to CNBC-TV18, the company's managing director, M.S Unnikrishnan said in a scenario when the capital goods industry is undergoing stress `in absense of new capacities coming in, it will be difficult to maintain double digit growth in margins.
Thermax derives more than 75 percent of its revenues from the energy segment. Analysts feel issues related to fuel (coal) and increasing competitive intensity (in the BTG space) are an overhang on order inflows and margins for the company in the long term.
Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra.
Q: How exactly order inflows are looking for you in the current quarter? In Q2FY13, it seemed a little subdued.
A: I am seeing a substantial improvement in order conclusion. I am seeing change of sentiments in terms of people calling us for discussions and negotiations in a serious way. Normally, for a slowdown flywheel to catch the momentum back, I would expect it should be anywhere maybe a quarter to two quarter.
I need to be admitting a fact that the booking numbers may not be very high because we won't register orders, unless orders are concluded, contract sign and advances collected. But the activity in the field related to order conclusion is taking a positive stride. I am only praying and hoping it is going to be for good.
I need to say that it looks like there is a bottoming. We should be able to see some improvement in Q4. In Q3, I am not expecting a substantial improvement. Q4 onwards there could be an improvement.
Q: Would you say the worst is over?
A: There are indications that it can happen. There are two factors. The changes that are being brought in the policy corrections by the new Finance Minister, in my discussions with the CEOs of companies, they are not talking as negative as they were earlier. Atleast there is some amount of bottoming in thinking.
Also, the fresh inquiries, which are received, may take maybe six months for fructification. Despite the RBI not acting on the reduction of interest rates, banking community on it own is willing to be considering a reduction in interest rates for a medium to long-term lending. It may not be a big number. Most of them are currently willing to be giving at maybe 0.5 percent lower than what they were offering earlier.
Banks are having sufficient money available with them right now. They are looking forward to better performance by companies. If I look at the first half of the current year, the profitability across the 500 top industries of the country has only improved. It has not deteriorated. Capital goods industry is only one which would have reported very negative results. All others are talking approximately an improvement of near 10 percent in profits in the quarter coming.
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