Thermax Limited
NSE:THERMAX
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2 519.15
5 662.95
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Thermax Limited
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Thermax Limited Q1 FY '20 Earnings Conference Call hosted by IDFC Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from IDFC Securities. Thank you and over to you, ma'am.
Thanks Elisa. Good morning, everyone. On behalf of IDFC Securities, I would like to welcome you to Thermax 1Q FY '20 Earnings Call. I have the management today being represented Mr. M.S. Unnikrishnan, Managing Director and CEO; and Mr. Rajendran Arunachalam, our Executive Vice President and Group CFO. I'll now hand over the call to Mr. Unnikrishnan for his opening remarks, post which we'll open up the floor for Q&A. Over to you, sir.
Thanks a lot, Bhoomika, and a warm welcome to all my friends -- our friends once again for the Q1 earnings call. I already have a feedback that most of you are okay with themselves. Some things could have been better. So let me repeat the numbers another time. The first quarter order intake had been a disappointment at INR 1,216 crore (sic) [ INR 1,217 crore ] versus the INR 1,657 crore (sic) [ INR 1,652 crore ] we could manage in the last year first quarter. This was impacted primarily on account of the fact that there weren't any project orders of substantial nature either from the domestic market or from the international market concluded or registered in the quarter. Not that we lost any major orders, it is all postponement. And the lack of urgency at customers site including in the international market. They immediately conclude orders. So I'm hopeful that some order improvement may happen in the Q2. That's about the order intake. This is -- along with the -- I mean, opening the year with a lower order carryforward has resulted in our order carryforward at this point of time at the end of Q1 to come down to INR 5,250 crores versus last year's number of INR 6,420 crores, an 18% drop in that one. But the positive side is that we've been able to accrete the sales by 30% from INR 1,026 crore to INR 1,361 crore. Both in the domestic -- predominantly in the domestic market, the execution has been extremely good, so 45% more than the last year number. And the international also marginally better at around 9% to 10% more. That's the split between domestic and international in this one. At the EBITDA level, we have been able to marginally improve, whereas at the PBT level, you'll find -- we'll find a 80 basis point reduction. The profit bridge on that why it has come down at the PBT level, whereas the EBITDA it is retained. Then there's a -- treasury had been lower in size in comparison to last year's first quarter. There would have been an impact of maybe INR 7 crore to INR 8 crore -- or INR 7 crores in the treasury side. And one of our business also had a negative in the current quarter, but that's only one quarter because the cooling could not be executing many of the orders after having shifted to Sri City. But this [indiscernible] in the second and third quarters. So we had a negative in the current quarter. Plus, we have made some provisions for -- to China closure part quarter. So we did right now. So that also would have had some negative impacts at the PBT level. Otherwise, it is a -- operations have produced a similar kind of results as last year. Some divisions had been [ marked ] especially the Energy side had been better off in comparison to previous year because you would find that chemicals are -- at both top line and profits are flat. And Environment is marginally lower, minimal impact. But Energy has performed quite okay in the execution of the orders. That's as far as the numbers are concerned. And just to give you a split of how those orders have panned out. Energy segment has come down to INR 814 crore only in the order intake at the Thermax Group level. Environment segment order intake has gone up in comparison to -- on an average, we were averaging out around so maybe between INR 170 crore to INR 200 crore per quarter was the Environment booking in the last 3 or 4 quarters. Current quarter has seen, especially air pollution, control lifting up to a substantially high level. And the Environment has gone up to INR 286 crore for the first quarter. And also, the Chemical order intake has improved, which is a little over -- it's cut back in the current quarter. So it is fundamentally the Energy pack which is the one which has created the slump in the order intake. And as I mentioned before, no major projects concluded. I would say the story if you were to look at it in terms of domestic and international. The domestic order intake had gone up overall, whereas international is marginally lower. But the last year, in the first quarter for -- just to remind you, we had the Sharjah cement for $300 million order registered. So as I mentioned, there are no larger orders concluded -- well, concluded but not registered in the current quarter. And this number which I'm talking about on the order intake is exclusive of the FGD order of INR 470-odd crore which we had [ declared ] to present to all of you 3 weeks back. I think we can account only in the Q2 numbers of the company. That's about the number side. And beyond that, just to report back to you that we have taken a constant decision to close down our operations in China, which we had been talking publicly. Many of you asked me also, why aren't you taking a harder decision? Or what are you going to do with that? Yes. We were initially -- please remember 10 years back when we started it as a wholly owned subsidiary of Thermax. We were very hopeful that we should be able to come to a level of profitability, though it may take time. Two consecutive years we were EBITDA positive and 1 year we had been PBT positive also. But there afterwards, some things started deteriorating over there and multiple reasons for it. Then we thought we'll keep it as a manufacturing. We'd only export out of that, but Chinese products were not accepted everywhere. And on top of that, with the current trade difficulties that they're finding with America, there was a purity duty on. We'll have manufactured and exported all of that to America, but that is impossible. And most importantly, when we went into China, the costs are [indiscernible] almost 7% to 8% available by making in China. It is cheaper to make in China. But maybe my guys have learned a better way. Today, it's cheaper to make the same in Central India. Chinese costs have gone up, but Indian costs haven't gone up. But we've become more efficient in India by which Sri City manufacturing, we are able to make it much cheaper than what we're making in China. So we have taken the conscious decision of closing it down, the manufacturing facility. And we've invested in total $14 million so far in the land and building and machinery. And we will be disposing if off and we'll keep you informed about it progressively once the transactions are completed. And we will remain there in a very truncated fashion to support our customers because there had been more than 250 or 300 Chinese customers who bought our equipment. They need to be provided service and Thermax will never walk away from that. So we will have to keep the service centers going on for some time. And it should break even on its own. By the time, we should be able to hand it over to some agency in order to take care of our customers as far as China is concerned. TBW. Just to report back to you that the transactions are getting concluded in terms of some sales. And the operations, they have started manufacturing in that particular plant also. And progressively, all the employees of the boilers and heater group will move in over there. So it will be a seamless movement between Thermax and TBWES. That being material subsidiary, one of our independent directors has moved into that, and he will be chairing the Audit Committee of the company, Mr. Nawshir Mirza. So that is the TBWES operation. And that makes them qualified. We've decided to keep the same name for some more time because we have been allowed to use the Babcock & Wilcox name. In India It may be very -- I mean, in India, Thermax is a much stronger name than B&W. But in the international markets, where we are allowed to be going in, that we have a brand equity attrition possibility for the company, so we're deciding to keep the name for the time being. We may change it in the future only. The numbers that you're seeing, I need to be telling 2 items that -- or which we have to be declaring which may happen only in the next quarter. We understand that there is a deferred tax credit worth around INR 16.2 crores, which may -- which should have hit the balance sheet, am I correct, Rajendran?
Yes.
Would you want to explain that to everybody?
Yes. So there is a proposal anyway in the, well, Indian budget, which is currently being -- which is currently in the phase of approval, that the turnover, which will attract a lower income tax rate, has been reduced back up to 5 -- INR 400 crore compared to INR 250 crores. So we had created a deferred tax asset in the balance sheet in --- more specifically in our -- within a few years' balance sheet for the losses that had been created -- accumulated losses that are present. This particular deferred tax asset because of this income tax rate change would be -- would reduce, and then an impact of INR 16 crores would be expected in the event that the budget has passed as it is proposed today. And this would happen in the quarter 2. So then, we have reduced certain item in our FS.
Because I thought, okay, we should -- since it's already there as a note, I wanted Rajendran to clarify what is it all about. This is about the -- a treatment of deferred taxes or -- as an asset, which is already there on the consolidated balance sheet of the company holding. That's about the reporting back on that. Yes. Certainly, you may want to know, well, what's happening in the market. A lot of negativity prevailing in the India market spectrum that some of the industry leaders are suspecting, are we headed for a meltdown or a slowdown. And there is certainly a negative sentiment prevailing all through the country, which we've seen in terms of the order conclusions in the last quarter. We've heard [ personally ] with the government continuing, immediately a change could happen. But it is not happening. But it's not that it is so gloomy; based on that, get unduly carried away. Sectorially, there will be investment happening in the country, though the capacity utilization has come down and may continue to be remaining very negative for some more time. But I'm very confident about the fact that in the medium to long term, we need to be having more capacities created because this is a temporary reduction only, in my opinion, barring 1 or 2 industries which may have some difficulties. I am very specific about business. Nobody is currently talking about that -- the refinery inquiries which we should talk about for the past maybe 2 years. One of them is already on the verge of ordering out to EPC people because their discussions are completed by engineers [indiscernible]. And I'm sure they place orders to EPC in the next maybe few months. So it's -- too, I think predicted earlier you will see at least one refinery ordering, where we will also be participating for our equipment. And the second and third refinery also, it has gone to an international consultant [ and like ] -- otherwise, all PNCs is -- would be EIL only. [indiscernible] has taken the order. And there are inquiries already in the market [indiscernible] , and we have received inquiries for it. So they may happen in H2 or maybe Q1 of next year. So there are 3 refineries which are very clearly visible at this point of time. FGD ordering, as we mentioned, we already got one. We also have another one position where we are relevant. But there, the budget is much lower than what available price are given. So will they go for a rebid of it or will they call us for negotiation and conclude the order? That's yet to be seen. Similarly in the cement, greenfield capacities may be limited. Though there were 1 or 2 of them almost on the verge of ordering. They may also take up maybe a break of a couple of quarters before they're finalizing. But the inquiries related to wastage recovery, power generation has got a payback available. All the cement companies in India are considering at this point of time. So one has to look forward to the sectors where there is be some movement happening for medium projects and be after that anywhere in the world. That's the only solution for people like us for the next maybe few quarters. I would say I would even go to an extent of telling 18 months to maybe a 2-year period of time. We're going to be very agile and be present in every inquiry and be competitive or as competitive compared to others. so we'll keep breaking you about the movement, but it is not just in terms of that Doomsday kind of a belief based on some of the newspaper reports happening. [ Know what I mean ]? Something to be optimistic. I want to be realistic. That's about it. Thanks a lot again, and I leave it open for you to be asking questions.
[Operator Instructions] We have the first question from the line of Abhishek Puri from Axis Capital.
Yes. Congratulations for a good set of results. There are 2 things. One, on -- your order book has depleted in the Energy segment after this stupendous performance in the last 2 quarters. Is there a chance that you can really grow in terms of revenues in the next 3 quarters of the year -- for the full year? That is one. And secondly, if you can just talk about your new factories that have started? And can we see the sunk costs being covered in those factories? And why the margins are still lower? They have started to inch up, but why are they still quite low with the [ read of ] historical last 4- or 5-year average?
First and foremost, by executing really well, you will be depleting faster. So ability to perform and grow in the rest of year will be limited. But remember, if there are orders going to happen in the short-cycle items, that's where we are going to be focusing a lot more on. The standard packaged boilers, absorption chiller committals, air pollution control small orders and skid mounted water treatment plants put together, which normally gives us in a quarter maybe anywhere up to -- between INR 400 crore to INR 600 crore and sometimes going all the way to INR 700 crore, the average time for execution of this is varying between 1 month to maybe 5 to 6 months. So we're only at the end of the fourth month, and we've started the fifth month of the current year. So depending upon the order contribution happening, that's where the -- we -- see, the pulse of the market is not as negative as people are speaking. I'm talking about for the smaller investments. Yes, there is liquidity dissipating for various SMEs, but there are [ decent in the balance sheets ] also. So the way I'm looking at it, Abhishek, is that the larger investments, which are that many steel plants what, maybe a couple of billion dollars, or a new cement plant what, maybe $1 billion, or power plants which are billions of dollars for [ clients, I mean, certainly, it's pretty good to ] be coming forward. The billion-dollar-type projects are normally decided by maybe 15, 20 human beings in their country. I mean, I don't have to name them. You will know them. It's not for everybody. They may not be very optimistic, but there are 1,000 of them in your country who normally put up INR 100 crore to maybe INR 500 crore to INR 1,000 kind of size of projects where they look at a little more long term there, the early stages of investment. So the focus is on them. So if they were to be concluding orders, if they have a faith Indian market can consume many things. I'm talking about the sectors like food, food processing, which, even now there are orders which are happening with all the negativity [indiscernible] Indians, Indians are eating a lot more, I mean, like I said, it's changing. They're consuming a lot more of alcohol. So I mean the [ Zuelligs ] are coming in. That's why [indiscernible] [ are getting sick ]. So if you really look at the ground-level realities, there is a medium-size ticket sizes investment going to happen. And certainly, we are going to be there in each of the inquiries and pick those orders if that is practical. I mean, this is dream. And there's a -- now we're making it -- we have been doing it for so many years. Is that action what we're continuing? Then it is possible to have a marginal growth through the year. But yes, it will taper off across the year. And for next year, for me to be having a thing, I need to be picking orders. That's a sector where we were shining, we were [indiscernible] , we have been able to get not-so-good terms but have improved in comparison to the original where we refused to court. It's improved from that front. And you -- you're also able to contain our costs in one order. Second, third also will be possible moving forward. [Audio Gap] place orders. And I mentioned cement and refinery put together should help me out. That's what I'm looking forward to. And any order happening of maybe INR 40 crore and [ over ], we'll be present in all the markets where we are present. And then we will have to be competitive to take the orders and personally make the margins there afterwards. So that's where the question happens. Are we going to be very -- you asked the question, will you go -- will I go back to the original double-digit margins? Well, we're trying our level best, but it does not become practical to accept double digit during one quarter will be reached. But otherwise, it may become a bit difficult. If the market is looking negative, the competition is much weaker than me in terms of the financial stability of organization. So they will be the people to buckle first. So our average prices in the market can come down. So that's the reality. Does that answer your question, Abhishek?
Yes, Unny. Just on that factory part, I mean, the -- you've started 3 new factories in the last year. And how is the turnaround process there and whether we will be able to cover the sunk costs there?
Yes. Sunk costs will be covered. The question is will it happen in the original payback period or will it get prolonged is the question. I'll go one by one. The first one done and commissioned was our factory in Indonesia. Indonesia, I'm happy to say that we are filling orders. Our order intake has been fairly good. It is up to what we expected it to be. At this point of time, I'm carrying forward 90 and odd crore orders in Indonesia. And we have been able to establish, I mean, with what we were a little worried about earlier. As an Indian company going over there, will the market accept us? And will they give us orders? It is happening over there. With that, we had predicted a payback period in that front. The company will become breakeven. We're supposed to be in there faster. We are succeeding [ tremendously ]. Quite obvious. And we are very confident because we could quite really -- maybe that I may end up in the current year such that -- at least EBITDA positive. So there, signs are very positive in that area. And that market is not going down, either Indonesia, Malaysia, Thailand, Philippines. All of them are growing. Yes, I [ did we're ] going to be growing at some 7%. Maybe an average of 4% to 5% is the growth available there, and the investments are happening. So that is a positive sign only. In fact, I'm expecting, as I told -- the current year, we were strong, ended up with a negative only budget, right? But we may even touch EBITDA positive, and so really looking forward to. Coming to the second one about the commission of the [indiscernible] chemical factory, and we have major challenges related to stabilizing the plant. After stability, of course we have been very careful in loading. It is being monitored, but [ we're confident of ] the performance at that particular factory. We have reached up to 700 metric cube per month production capacity as against 1,000 installed capacity. At 620 onwards, it's a breakeven in the [indiscernible] for -- I mean, I'm keeping the depreciation [indiscernible] or [indiscernible] breakeven. So they have already crossed that level. And chemical as a business, the consumer [indiscernible] start a capital expend business. And it is not only in India. In fact, it seems that it's a yo-yo, export [ only in India ] unit and it really -- in fact, I'm expecting with the China America problem, the maximum benefits to come to the [ chemical ] business. The China had been the major supplier for essence to North America. And with the community utilities already come in to go, there is a likelihood that at least one business of mine that can get -- have a positive impact from the trade war between China and America will be the chemical business. So I'm confident that will also turn the table. Third one is related to [indiscernible] chiller. Yes, there in many case, it will do well because the second after closing the China facility, the only facility from which I'm going to be manufacturing chiller will going to be the Sri City. So -- and that business -- although but all the negatives on various other counts of order intake, that is one business where the order intake had been almost equivalent to an 18%, 19% more than the previous year. So that is -- cooling business is really getting warm. So you need more cooling. So that should do better. So we have been very calculated when investing in only selected areas and all 3 of them are going well. I would say here and there couple of quarters, will -- I mean, breakeven can change. That is the answer to shape of that.
We have the next question from the line of Aditya Bhartia from Investec.
Sir my first question is on FGD. It would be great if you could share some details on FGD ordering. What is the quantum of orders that have already been finalized in the industry, how many of them are likely to get awarded in the foreseeable future, how has been the pricing? And how do you rate the contract terms?
For the first batch of FGD in the country got commission quite some time back was done with BHEL for north eastern region for 2 numbers to 50 megawatt from that nomination business, because that's their project they executed it. And then we are in country basic, but that time there was no norms in the world because north eastern corner not very high [cell phone]. Then came in those couple of [ GD ] orders where a part of the originally tender itself, including some of the provision of our plants, which got ordered out to Dusai, if I'm not wrong, [indiscernible] city. Then the government delivers -- many of us are talking to the government telling that this is not the way to do. We have got a new norm created, and there should be some control from the central government as how to -- what technology to get it off for the country. So they have decided to go for bulk handling. That is where you saw the load 1, load 2 and load 3 created, which had 3 companies participating that, in DCC, Damodar Valley Corporation and Neyveli Lignite Corporation. So put together lot 1 got -- of an inquiry came out. Unfortunately, that in the terms of payment, NTPC, we believe the company to make all the bets. They get a 30% retention in the tender. And despite multiple representation made they stuck on to the tender. And we didn't participate in that one. So some orders got geared in that. And to my reckoning, the people who picked the orders in that first lot was AZEK is one company, GE one order is picked up, 1 or 2 of them, BHEL and Larsen & Toubro and Mitsubishi are the people who picked up. And thankfully, though many Chinese were courted, I don't think they were considered in the final bidding. By the [indiscernible] -- in that India ordering out that could have happened, the valuation to my reckoning is near to maybe 6,000 to 7,000 [indiscernible] ordered in that Lot 1. The Lot 2 came in where they agreed to revise the terms of payment to 17.5% retention, though we would have preferred a 15% or maybe 10%, 17.5%. So companies like us also started bidding for it and in that one, one position was made that no company will get more than 3 orders. That's the way it is spread. So if a person is relevant in more than 3, then 2 will get the order. So that is the way it happened. So in the second lot Thermax we came, we wanted one of them. And they would have been -- there is a reverse bidding because there were 4 participants, more than 3 participants, there was the e-bidding in that first quarter, first order. We already have received the order. And electric award has come. So the clock had started ticking. The commercial are going on. And there is one more tender where we are relevant. Where mandatory, we should have been given the order in NTPC one of the sites. But there, it is much about the budget that though we are relevant, 2 others are much higher than us also. But the discussions are on and NTPC when should they retender it or should they negotiate with the third-place order. If that doesn't happen, we go for retrain, no more ordering will happen in the current year. The tender because there are 3 such orders; we had Thermax's order, 2 others also are relevant, but much above the budget, then a couple retending for all 3 of them put together and put into Lot #3. The size of Lot 3 then would be equivalent to around INR 8,000 to INR 10,000 crores. This could happen tendering in some time in the current year. Ordering could we end up for Q4 or maybe Q1 of next year. That's about the FGD. Is that okay Aditya?
Yes, sir. For Lot 2, what would be the rough side, sir?
I may not have the number -- normally, I have all the number, city on number which only we need to drive a nominee really got order. To my reckoning, it could be in the region of around, say, a few thousand -- around 4,000, 5,000 megawatts in the vicinity 17. I will say INR 2,500 crores to INR 3,000, let's say, approximately I'm putting it across. But the pricing you asked the question. It is far superior in the second tender because only decent companies are participating. And many people who are the L1 in the first batch of tendering have become H1 now. So that's an indication, that maybe they [ ought to ] price it properly] [ and places in any case has been priced up ]. Currently, it is a decent in our pricing, let me say that. Everybody understood executing [indiscernible] is not an easy task. So everybody has got decent enough prices. So all those who would get the orders will, at least now in the -- a Lot 2 at least should make profits. How much, I can't declare.
Understood, sir, understood. And sir, in terms of gross margins, we have been seeing some bit of pressure in the last few quarters. Is it largely on account of industry level pricing and desperation by some of our competitors, which is bringing down pricing?
One of the reasons for that certainly because even for areas where -- see we have succeed to 65% of orders coming -- repeat orders from the customers. Earlier days, there was a preference for [indiscernible] of premium. Today, the [ pressure of the backlog ] have go to a level where other players who have cut the price to sell, they will say, we also need to be fair. So you take it at the same price of your competitor. So we have seen the prices dropping. And then in the last 2 quarters, and I think moving onwards for few more quarters to happen. The supplier are also under basic pressure and reduction of cost is practical. There was a time and say, those things weren't too good. The [ feeder ] industry to all of us is steel industry. Because we see 70% to 80% of all what we buy are steel or steel component, made of steel only. And steel companies have a minimum of what they've arranged by the government, give it to them, all of us supported them also. They were [ indirect ]. So they were I think [indiscernible] If you look at it that way, [ C5 ] India and the price maybe 3, 4 years' time after the slump started picking up. And so our specialized steel opportunity that people like us do buy. I cannot comment on automobile, [ grid side or non advertising ]. I'm talking about boiler grade Q space. Everything was [ pricing ] on an average of 10% to 15% per annum and it has become unbearable till last year. Now only in the last maybe 2 quarters, it started sliding down. And I'm hoping, but they don't have too much of orders happening also right now. So all of them have come to a level. So I'm sure moving forward, backlog will be stabilizing. So once -- once they come down by the suppliers who will bring down the pricing. We should be able to marginally improve the profitability. It's what I'm looking forward to. But again, the behavior of suppliers. I have, sorry, my competitors, I can't say. If any one of them ever get into financial crunch, they may want to accept the contracts for cash flow support.
Understood. And in that context, we are not really anticipating a meaningful improvement in gross margins over the next few quarters or year?
I won't say year, because the variance of products that we're creating. Because that's only way -- innovation is only way to improve margins now. See the conventional and commercial places are getting [ old ] when the market is under distress. You've got to have intellectual player only then, which we are better than the competition. So there are what I would call [ other thing ] happening. And new products and introductions, which we would do. How we -- we are an expensive company for most of the products that we supply. How are you able to maintain the market leadership? It's only innovation. So there are also innovation happening, where we can. Some of them may improve the margins. I can't say for the company level, it is a product level, there is improvements in that area also.
We have the next question from the line of Apoorva Bahadur from Jefferies.
Sir, I just wanted to understand on this emission control equipment side, not power. So basically, in industry makes cement and steel and we are saying that internationally, there is a growing [ problem that] probably this could result in higher standards in India as well. So what type of opportunity side do we see over there, what's the technology? And so there some sense on that?
Yes, certainly is. See, the law is applicable to everybody who are burning any [ carbonate ] item, which has got sulfur in that also. So the norms related to sulfur or not are getting implemented in all industries across the country, but they're targeting the larger inventors. So other than the power plants, the next one is cement industry, who was also being as implemented. And luckily, they're not asked for extra time from NGT, the way the power plants have done. So that area we already have a solution that's sort of important solution. For power plants we're giving [indiscernible] technology from America, whereas this is our homegrown technology. We have supplied in the past also very small numbers. Now we are getting inquiries from, I would say, progressively, depending upon how each state is implementing the central law. Three, 4 states have become absolutely clear that they will not allow cement plants to run, irrespective of whether it is imported call or domestic call. They want to put desulfurization in that area. It's already started, and we are getting orders also. But the ticket sales of each order can vary between maybe INR 3 crores to INR 4 crores is already happening, [ immaterial ]. We're getting orders. In fact, I mean, I mentioned to you that my inquiry pipeline for that is fairly good at this point of time. And order intake is also improved. And environment orders have gone up in the [ friction tempo ] in the current quarter in comparison with previous year. All account of the fact that these kind of orders are happening in the market. Similarly, DeNOx knows there are also going to be applicable for many industries. So their products are in the creation within the country. Trials are also going on. But there are -- you can also modify the equipment design. [ I mean, without a pollution policy to meet with them all. ]That is another challenge that we may face. We may have to modify our burners, for example. Low NOx burners are available. They will be very expensive. Many companies have preferred to buy a Low NOx burning system rather than going for pollution control equipment. Because the pollution [ control equipment ] will also consume maintenance costs and service costs for it, whereas they would incur a little higher cost in putting a system in the boiler itself. That means once when we adopted our third quarter value can also go up assuming indirectly pollution control will increase the energy segment valuationals, that is the reality. But implementation happening in the country. Some states have come very strict, others will have to control this. In the industry [ evolution ] will have to do that first and foremost, will be, as I mentioned about these other cement plants. And the captive power plants across the country, depending upon the technology they are going for. In the corn products [ we have seen ] technology they can capture the subsidies in the volumes technology is already [indiscernible] multiplied us. Whereas the demand for [indiscernible] technology or maybe Chinese technology suddenly we'll have to go for [ FGD ]. So there are specifically 100 to 135, 150-megawatt range. Batteries or boilers working in the aluminum industry in the country. And in the [indiscernible], all this kind of non-ferrous metallurgy industry, all of them do have captive power plant, which is very large in size, but they're 100 to 150-megawatt size. FGD's industrial in nature. Where the market price in the country should be around say INR 3,000 to INR 4,000 crores is going to be ordered out in the next maybe few years. So that's a good market emerging. And we are a good player in that one. Not that I don't have competition, but we have a lead there in that area.
Sir, very helpful. Just if you could help me with, which are the states which are getting strict for this implementation sometime on that?
[ Gujarat ]. Normally they lead in the [ provinces ]; they started implementing. Our state of Maharashtra, Karnataka, I think Tamil Nadu also now. Other ones? No, I think in the next maybe 12 months barring maybe -- I don't want to name the states where we may not be really worried about. In fact, if there are some states [ where they have been given -- we have to collect [indiscernible] because that they want to certificate, ] pollution control certificate, whereas I need to give us a certification in my company that we are matching with that. So I think, at least 14 to 16 major states barring 1 or 2 will implement, start implementing in the next 12 month period onwards.
We have the next question from the line of Inderjeet Bhatia from Macquarie.
A couple of questions. One is on these 3 new plants that we have commissioned, is entire fixed cost already in the P&L the depreciation interest cost? Or is it more or less? And how much that number would be, which will come to us here over the next 3 quarters?
All 3 are already in the balance sheet depreciation accounted for. And no interest because the fact that it is accruals of our -- some balance sheet. We don't take any debt for it. And you may find a little more addition happening in the coming year because in the chemical factory, we already cleared the Phase II for increasing the capacity of the [Indiscernible] to 1,000 metric cube per annum to 2,000 metric cube -- 2,200 metric cube per annum. So that is ordered out. So it may be commissioned sometimes in the current year. Maybe in the Q3 or Q4. So that additional value, which is around INR 600 or INR 300 [indiscernible] within expansion. That appreciation will get added for. A very small sum for the size of the company next quarter.
Okay. Second question is on the energy side. Are there any large turnkey orders which are being executed right now, which would get completed or booked in the next remaining part of the year?
The largest order that we had in the carryforward was [Indiscernible] with 160-odd million tonnes per order. We have already revenue recognized good part of it. So 60 plus percentage of that. So the [Indiscernible] online remaining 38%, 40% could be there. That could happen in the current year itself, a good part of already because it's a matter of the ship -- [ 3 assemblers' ] boilers. So that takes a special ship to carry. So once [ radiations are over, the balance will also move out of it. ]And that is the largest order. Second large order would have been from JSW [indiscernible] 300-odd [Indiscernible]. That's the last part of the level we are facing. Most of places are completed transactions going on all the time. There are no other major order under construction right now.
Well, I'm just wondering that in the last -- if you look at last 4 quarters, we have been showing 30% to 50% kind of growth in energy. And on the energy side, yet, if you look at the PBT margin, they have remained again, kind of mid-single digits or high single digits kind of number. So is there no operating leverage kind of benefit that, which is coming through on that side?
[indiscernible] companies do not have operating leverage [ related ] consumer product company. Barring there is only one Managing Director, one CFO, our salaries will get spread across. Otherwise, it's a built to print out maybe in a very specifically engineered products. Engineered product companies do not have substantial that kind of a margin recovery possible when you have improvement on top line. For every order, you will do the costing and negotiate and take the order. Whereas operating leverage kicks in when you got a standard price list for an automobile and all cars sold in the country. The same model will have almost the same price. Or there is a shaving kit that you buy a blade that you buy from Gillette every day and that you don't even negotiate, you just buy it. So there, when you produce more from the same factory, you get a much higher margin. In Engineered products, the spot manufacturing [indiscernible].
Let me rephrase the question. Typically, in a project order as you move closer to the kind of completion, that is when you kind of start to recognize if there are any margins that you've managed to kind of capture during execution because of efficient execution. And typically, companies go more, I would say, conservative on cost accounting and the initial part of the project execution and the margins typically get released towards the later half. So that's not happening? Or you've not been able to kind of get, say, typically, you've been saying that you take a project at a certain margin and then try to kind of squeeze out around 100, 200 basis points because of efficient execution?
If it is a business to what it will -- in that good project, you will release maximum margin towards a large part of the execution, that we also follow that initially one doesn't do because otherwise, we will overbook the profit in the beginning, and we'll be bereft of profits in the end. We have a very conservative policy on that count. But in the last few years since the market was not so -- too conducive, one had tougher competition. And maybe it's time when that can be concluding orders at very low margins and whatever margin that you see are also a lot more improvement than while executing only. But the next question is, can you improve it further? What do you work for? Is the current question when you have to ask for. In a rising market when the demand is good, you will work for margins. Whereas when you're in a depleting market, you don't work for growth, but you will work for ensuring that your factory fixed expenses are taken care of. Because in engineering industry, to get good people is not a easy task, including good workmen. If you lose them, you add them later. So to keep them busy and to get Indians, you've got to have orders on hand. So these are all -- if you look at it from 2011 onwards. In India, the capital industry has been under terrific pressure. You know the companies, all of you who do follow them also. Yes, one of those companies who stood by in the market without having any negativity of any substantial nature. I mean, so now in the quarter, we have been also letting you down once in a way another way. Generally perform well only by ensuring that we ensure that our factories are not full, but at least breakeven plus capacity [ set ]. That's a good way to look at it. So each time, though you may want to get a higher margin, customers have got a choice available and the disparate competition decides the price, not the customer.
We have the next question from the line of Aditya Mongia from Kotak Securities.
I had a few questions. First one was, again, on margin. It was suggested that they were a few bad domestic orders that were bringing down profitability in the second half of last year in the standalone business. Has there been a sustained impact of those bad orders in the margin this quarter also?
Those orders are under execution still. Incidentally, 2 of them were the [indiscernible] order, which I mentioned above. It is -- supplies are going on and they will get completed by Q3 of the current year. Major portion will be over in Q2 [ luckily ]. But there, whatever have been the major overheads are already considered and are accounted for there. We are aware of the fact that [ the orders ] will happen. Second item, which we had as a difficulty last year, if you remember, was 2 quarters, we had consistently negativity coming from our Danish subsidiary. Very happy to say that this first quarter, we had turned the corner around and we had the profits also recorded in the current first quarter. And they will continue to make improving their performance across the year. The shutdown of manufacturing unit over there also of the 2 that we had, and we shifted that into Poland, where there is a cost [ advertise ] substantially available between Denmark and [ Colombus ]. So that -- these are the 2 reasons, if you remember in the previous conf calls, which I had mentioned about in Q4 and in Q3. So one of them has improved. Other one has already accounted for. So the impact I got on the negative side will not be there continuing.
So is the Chinese subsidy still leading to some kind of losses being taken? And side by side, a few overall, could you give me the kind of cost [indiscernible] in this quarter on that account?
China, we've decided to shut down the manufacturing and only the servicing portion. See, I think I -- if I don't mention I want to put it that way. I think it's all been the opening accessible to China [indiscernible] you decided to do that. And I also did mention the $14 million of the [ copy ] investment then, most of it's got impaired across various quarters. And current quarter, we have got Rajendran how many [indiscernible] provided for China subsidiary?
INR 8 crores.
INR 8 crores are the total, which would have been provided in the current value sheet, current quarter value sheet.
Sure. Sir the next question was more on opportunities outside India. So obviously, you talked about the large EPC order on the cement side that you got, and will this -- that will be the first orders of its kind for you in that region. When you think about such kind of opportunities, which other geographies or businesses come to mind wherein one can get a [ leg in ] and then grow the business internationally?
Southeast Asia is a market where there are captive power plants being considered and ordered out [indiscernible], which would mean Indonesia there, Malaysia, Philippines. So Malaysia not much. More of Thailand, Philippines and Indonesia. And isolated margin, Vietnam also. And we are present in all the markets today. I mentioned earlier that we have registered our EPC company in Thailand and are on the verge of registering that also in Indonesia. And we are creating a presence over there to execute as a local company because EPC orders were [indiscernible] of project orders. They won't give it you -- I mean, not everybody may be happy because we're an Indian company who are remaining in India. So what we [indiscernible] present over there because they may want local guarantees, local construction, we taken jobs from you. So that has already moved. That's one market where we're looking forward to getting orders for larger boilers. And also, EPC for captive power plants. Then as an African continent where it is isolated not determine there are regular orders. There's one large group, which you're aware of that where we are associated with it. Those guys are investing in various, for example, post order for the refinery, same group has given us just converted the order for their sugar factory, which is coming -- 2 of them. We got orders for the boilers, fairly large size. But cases are to be established. So we are not registered closely. We're already concluded. So that Africa, there are cement plants coming in various locations. In a year, maybe one of them will happen. Then, as I mentioned, our sugar factories do get established. Then captive power plants for larger consumer product company. So we do -- we already have our office in Egypt. Second one is also in Nairobi. And you got [ P2Ps over there ] [indiscernible] inquires do come, so we're following up that also. South America also sporadically. Once in a while, there are inquiries for very large capacity volumes in Colombia, in Mexico, in Brazil, 3 countries where we have supplied. And there are inquiry once in a while coming from there also. Only challenge in South America versus other places are funding possibility. Local companies will not have the funding capabilities. So they have to depend upon European banking system to support them. So we're actually very careful about accepting orders from there, because we may get an order, but may not get money. So we are very particular about that. These are the 3 markets that we're looking for the medium to large sales projects to happen for the company.
Sure. So the last question which I had was on FGD. Now we've been talking about FGD orders coming from NTPC and other central agencies. Any movement that is happening beyond this subsidiary of customers, [ lesser ] States and private sectors starting to order for you?
Private sector, there are hardly anybody who can leverage the balance sheet to get any money for sitting in. So the government has already passed a rule that for the capital cost, amortization and running costs converted into Paisa of per unit basis, CERC is empowered, BPCL amended of course. That should empower them to go ahead -- but they don't have balance sheet, which can be leveraged further to take loans to execute it. Probably soon when they improve their balance sheet. I'm sure they will go for it. State Electricity Board is a big story. I don't know how they're going to be doing it, because frankly speaking they are the biggest polluters. Because the capacity, which is dependent upon domestic core. And also they're not well-run. Plants are run by the [indiscernible] government only. Ideally they should go for it. Despite even though that signature, I don't think any one of them are today is making any positive contribution, barring 1 or 2 states, no electricity orders having a positive balance sheet. So I don't think the immediate future, one should be expecting them to go. And if at all they go for it maybe for some different considerations, will you be able to execute in time with the cash flow management needed? I don't know. So I will restrain from commenting. Private companies often when they go for it will be one of the strong contenders to be fighting it out.
Sure. If I can ask data point, what is the quantum of order that you otherwise expect to get from FGD, the one which is still not decided?
It is a little too speculative. It's just small numbers. If you get an order, it can be for INR 500 crores to maybe a INR 1,000 crores [indiscernible]. So to say that what I will get. It's a tender offer. It is not a negotiated one. So depending upon what price you've put in the tender and you become [indiscernible]. So it's better not to be speculative on that. Participate in pricing competitor and [ solutionable ].
We have the next question from the line of Riya Mehta from Anand Rathi. [Operator Instructions]
Congratulations on the set of numbers. Sir, I would want to ask on a macro perspective, you're in lot of commentary on the private CapEx deteriorating. And we see some green shoots in some industry. So could you elaborate more on that? In the future, in the short-term, what will your timeline where you see the recovery of the CapEx and how the [indiscernible] industries [indiscernible]?
See I made some comments earlier, not today, but some other day, expecting a total CapEx revival in the India country may not be a conducive or maybe realistic expectation going forward. What happened in between 2003 to 2008 for the world and for India extended to 2011, may never happen again for a very, very long period. During that period of time, everybody invested in everything. And you were looking at what India was doing, and you're investing and creating [indiscernible], recognizing whether you'd be able to market the capacity that you created. Banks of funding also [indiscernible] understanding that's why we had in trouble because ultimately, in any investment, 70% to 75% of the money is from the bank. Only 20%, 25% or 30% maximum will be from the investor. That is why we created the crisis also. Banking crisis [indiscernible] to 2010. That's what we currently pay.[indiscernible] So that kind of an investment cycle if one is talking about, it will never happen, should not happen also in the country. That is why we are so selective for sector-wise. Now if I were to look at, say, cement as a sector. It generally is a local business because it costs you $55 to make a ton of cement. And if one were to get it from China, which has got surplus capacity, it will cost you another maybe $200 to get the cement to India. It's a very long [indiscernible], which means it's going to be always a local business. In construction, we had to catch back in the country from the current problems that we are having. And more also to be constructed, which we need to be constructing. And houses we build for the poor people also, because whether rich or poor, cement is here to make a home. It doesn't recognize that it is for the billionaire or maybe a marginal person, they are all same. So cement consumption certainly will go up in the country. So I could look forward to what is the capacity utilization, that particular industry. And then run after them to get my orders for captive power waste recovery air pollution control. Each cement plant of the current has 10,000 PPD or maybe a 3 million tonnes per annum, can have an opportunity for me ranging between maybe INR 200 to INR 500 crores at a piece. So I'm sure it is going to happen in India. How many of them will happen? Even I can't predict. Whereas in steel I wouldn't be as confident because it costs, as you mentioned about earlier, $450 million to make a tonne of steel and $40 is sufficient for transported from Russia to India. So it can come from anywhere. So there, one has got to look at a little more macro global sector. So that is why I spoke about now, the banks and the investment, be very careful about looking at if we create the capacity domestically, can it be distributed? So that's why you're seeing the larger investments would be very selective [ won't ] happen. And I'm sure a power similarly will domestic lead power, lead domestically. Though we have got a difficulty with the coal-fired power plants in a number of ways, we don't have any other similarly available. And solar and wind put together cannot be running India, the growing India, so we have formal happening, may not happen in the next 2 years, all the current spreads are independent. So that's why I spoke about cycling recoveries or expect selective sector recovery, you should be expecting based on capacity utilization. In that point, now coming to the macro level. Unfortunately, for us, we've also created extra capacity in many areas. In many areas. And as consumption acceleration has come down slightly in the last maybe 2 to 3 quarters, there is a scare that big guys in the country have already started talking about that look current. I'm not naming anybody. Some of the major leaders for the industry have started getting worried and making public comments about were there deceleration in the economy. No, there's no deceleration in Indian economy. But temporarily, there is a consumption reduction. If you want more, since you ask a macro question, this is my answer for it. Capacity creation, the countries based on gross capital formation. There are 3 items in that, there is government investment, there is private investment and there is household investment. The government investment for the past 8 to 10 years, have been constant with the variation maybe 0.5% to 1% only. Second is the private capital investment. It does not come down to the level that you guys are worried about. It has come down from maybe from 7% to maybe 5.5% or 6%. [indiscernible] gone down. It is never a big number in the country. But as the biggest investment in the country is a household investment, it's got a secondary impact, which is the one that has come down by almost 5.5%, meaning 550 basis points between 2010 and 2019. Okay. And why has it happened and what you should be asking. It is on account of the fact that our overall business in the country, despite all that the PPA numbers that we hear about at the consumer price, you also calculate what you are paying for what you're buying earlier as a vegetable or maybe a household purchases, how much is the really gone up? And compare that with the inflation that government is declaring. The money in the hand of the consumer has come down or even if it has gone up, the costs having gone up. It is only for survival level, not for durable purchase, automobile purchase and multiple things, and you don't have money to pay [indiscernible] right now. That is why all this has happened. [indiscernible] I don't go along with the general perception given by everybody. If we are able to put the money in the hands of the consumers more, where you've got surplus money available to have, how far investment done, which will be the white goods, the durables and multiple things of the kind. Here [ you can set form ] then again, it can catch on. There is huge innate but [ unsatiated ] demand in the country. And this is what we need to be doing for the economic revival. I think the government will catch on this, but will take a longer period. That's why it's mentionable. Nothing will improve in a substantial way for a period of 2 years, but in the 2 years now that the investments will happen. Growth [indiscernible] beyond the level. So that's the reality. Is that okay? I'm sorry, it's a macroeconomic answer. It's a real --
I would like to ask. [indiscernible] development for greener energy corridor and their talks about it? Or what do you have to speak about it like what they receive outright?
It will really happen in the country. But the pace at least they are expecting the green energy, we need to make it that corridor. I presume you're talking about the electric vehicle, plus source of energy being green, am I correct?
Yes. Yes. Yes. You're right.
Source of energy being green will continue to be increasing. Though the green energy industry, I'm talking about the equipment manufacturers, the developers are also not in the best of the condition right now for putting in more capacity at a very faster pace. I don't need to be naming companies, the balance sheets of them are already known to all of you. The banking system's difficulty also to fund further. And [indiscernible] from the electricity is produced by them from green energy sources, but there is also electricity boards, and who are not in a position to be making good payment on time. Because of its there is well [indiscernible] between the recovery versus it's reaching up to the banking level. That is a issue number one. Second is on the electric mobility within the country. I'm sorry to say that on one side, we wanted the Bharat VI [indiscernible] 2020 be improve all the refineries and for all the automobile companies that even come with your Bharat VI complain engines. And they have struggled and invested I don't know how many billion dollars domestically and internationally. And with that, once we are ready, they'll say that we'll stop making all diesel vehicles in the country by so and so time. I don't think it is going to be practical because the banks have to get their money back from all those who have taken loans for all of this. And globally also in the most developed countries, I'm talking about larger countries, not some country where the population of 1 lakh people. I'm talking about countries, having population about maybe I would say, 20 million, 30 million. Nobody is expecting electric mobility to be penetrating, doing 20%, 25% in the best sort of countries by 2030. So we're making some statements itself, they're aspirations. So all of us have aspirations, but do we have anything the back up? That's the question. So green corridors will be a success. But that is not going to change in their India. This is my opinion on that.
[Operator Instructions] We will take one last question from the line of Mohit Pandey from Citigroup.
Possible to share the backlog paper, I think that Rajendran shared it but I missed it in terms of Energy, Environment, Chemical?
Yes, Rajendran will give you all the numbers. You want the carry forward or. . .
That's right.
Chemical carryforward will not have a major meaning because the book and bill every month we can get the orders and supply also. [indiscernible]
Yes. So what were the numbers you were wanting?
The carry forward backlog as of 1Q end for Energy and Environment?
Okay. So the carry forward for the Energy segment is about INR 4,500 crores. For the Environment segment, is about INR 678 crores. And for Chemical segment is about INR 71 crores, total of about INR 5,250 crores.
Okay, sir. And secondly, Chemicals is definitely a short-cycle order. So overall, what proportion of the backlog is currently short-cycle, which I think you classify as that is executed in 1 to 6 months?
Okay. So this is only -- particularly for the Chemical segment that you're asking about?
Overall. Overall Thermax Group.
So we would have certain book and bill orders as what we would call it. And that would be, I think, around [ 50 megawatt ] 15% to 20% of our annual turnover. That would be there. And that's the one which we would be looking to bridge when the order book is lower or the order carry forward is lower.
Alright, sir. And possible to share any guidance for the FY '20 revenue, full year revenue?
Unfortunately or fortunately, we never give a guidance for the year because we are in that speculating volatile industry. So predictabilities are not [indiscernible]. We have never given guidance to the market though we dial up with all of you by giving what is known to us and sort of all of you create your own storylines and maybe the number lines.
I would now like to hand the floor back to Ms. Bhoomika Nair for closing comments. Please go ahead.
Thank you very much for giving us detailed responses to all the queries, as always, and giving us a good macro overview. Thank you so much for giving us an opportunity to host the call, and also all the participants for being on the call. Thank you very much.
Thank you. Thanks to every participant for being very inquisitive and giving us questions which will also make us think. And I have to admit, every time I complete a con-call with all of you, I also do think differently than the way I thought when I started the call because you ask very interesting question, which also makes us think. Many of our improvement areas are based on indirect suggestions coming through questions from all of you. So looking forward to continued support, and we continue to [indiscernible]. Thanks a lot once again.
Thank you, sir, and thank you, Ms. Nair. Ladies and gentlemen, on behalf of IDFC Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.