Thermax Limited
NSE:THERMAX
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Thermax Limited
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Ladies and gentlemen, good day and welcome to the Thermax Limited Q1 FY '21 Earnings Conference Call, hosted by AMBIT Capital Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Varun Ginodia from AMBIT Capital. Thank you, and over to you, sir.
Thank you so much, Rio, and good morning, everyone. I hope everyone is keeping in good health. On behalf of AMBIT Capital, we are very pleased to welcome you all to 1Q FY '21 Earnings Call of Thermax Limited. Today, we have from management with us, Mr. M.S. Unnikrishnan, Managing Director and CEO; Mr. Ashish Bhandari, Joint Managing Director and soon-to-become new CEO; and Mr. Rajendran Arunachalam, Group CFO. I will hand over the call to Mr. Unnikrishnan for his initial remarks, post which we will open the floor to Q&A. Sir, over to you.
Thanks a lot, Varun. Welcome, my dear friends, for the last con call that I'll be conducting on behalf of Thermax, and the mantle will go to Ashish. He's already taken over charge. He's only managing. A good part of the current quarter he had only managed also.The numbers are already in front of you, but as a normal practice, let me repeat that our order intake for the current quarter is almost half in comparison to the previous year same quarter of INR 1,216 crores coming down to INR 608 crores, but leaving the order balance at this point of time almost at the same level as last year at INR 5,212 crores, just about 1 percentage lower than the previous year's INR 5,250 crores. The total income has also come down by 52%, INR 1,361 crores coming down to INR 654 crores. But with a lot of efforts taken by the team across the company in every area of activity, even in the lockdown condition, we have been able to bring down the losses to INR 22.5 crore, though we ourselves expected it to be a little more. That is full credit to the entire employees of the company at the PBT level, whereas at EBITDA level, we are at only INR 7.7 crores negative as against a positive of INR 104.5 crores.These are the numbers. But what we have done during this time and what we're expecting related to going forward and specific questions, I would like Ashish to be answering, and I'll support him in case if there is anything specifically that you will want to hear from your -- I feel like -- I mean I need to be adding on something. So I hand it over back for Ashish to take on now. I'll come back to you at the end of the call also beyond that. Thank you. Ashish, please start on.
Unny, thank you very much for sharing your thoughts and helping us with the opening. First, thank you so much to everyone that's listening in. This is my first interaction with all of you. And while we are all remote in our own different places, I do hope that in future quarters, I'll get an opportunity to see and meet as many of you as possible. And I greatly appreciate the time that you are all spending here listening to Unny, Rajendran and I, and thank you for that.Yes. I joined Thermax on the 7th of April, and I actually joined earlier than I had anticipated, and the reason for that was that Thermax, during the COVID lockdown, started to think about what does the future hold, how do you go about the rest of the year and planning for that year. And so the decision was that if I'm going to be the one delivering the numbers for the rest of the year, I should be part of the exercise on understanding what we do through this year. With that in mind, I was there for practically all of Q1 and started to learn and had an accelerated crash course on Thermax from -- in every which way.The way we worked as a team was that Q1, in particular, was a quarter where numbers were secondary. Our primary objective, even beyond revenues, orders and profits, was, first, the safety of our employees. And in that sense, we were, as a team, connected on a daily basis. We were having EC meetings on a regular basis, every second day formal meeting. There was a core group that included the promoters that was meeting every second day as well. And we were reviewing procedures, we were reviewing all critical things relating to the company, managing safety, all of those things. Yes. So we launched an app, which is Thermax-specific on how do you manage. We put in social distancing rules. We worked very closely with governments to make sure that that all of those safety procedures were incorporated. We worked with other companies in the industry and best practices that we could get from other local bodies, et cetera. So a massive amount of time went in just all of April managing all of that.The second bit for us was to make sure that our employees were taken care of. And in that sense, while our revenues went down and our profits went down and we were all sitting at home and a reasonable population was idle, we did not take any drastic action that would hurt the company long term or the employees long term. And that was not just for us, even for our contractors and for employees that were working on Thermax projects through our contractors. We continued to pay them through April and May while the situation was extremely difficult. So there were some costs that were incurred as part of that, but that the company took because that was the right thing to do. And we do expect that some of the benefits for that will start to show up in future quarters, but the benefit for this is beyond just the numbers, as I mentioned.The third thing that we did was we worked to make sure that from a cash perspective, we were protected, which means we were extremely tough on projects that we wanted to undertake. We were very particular about making sure even with customers that had extended credits and had late payments that we were doing what we thought was right from a cash perspective. And that showed up in some of our revenue numbers in Q1 as well, where we were okay to slow down in certain cases, but we made sure that our cash was collected and we are -- we were completely protected from a company point of view, all this time working very, very closely with customers, yes, making sure that we worked with them on all those aspects that I talked about previously. So our cash story in Q1 is perhaps the most positive one from a numbers point of view.The third thing I would say, which is part of the last bucket, is that as we worked with our customers, we also worked with our vendors. We made sure all our MSME vendors were paid for on time, that there was nobody from our vendors' side that was particularly affected because of our lack of payment. And that does not mean that we were overextending terms or doing anything beyond the contract, but anywhere, where MSME vendors were concerned, we continued to pay them on time and making sure that our supply chain was not unduly affected because of us.And for me, somebody who was new to the company, I was amazed by how much we were able to get done in this particular quarter because, in my experience, it is in the toughest of times that the culture and the personality of the company comes through. And to me, in this particular quarter, the Thermax culture and the Thermax people and Thermax values shone through brighter than almost perhaps any other previous experience I would have had. And I share a few examples, and I shared that in my message to the employees as well. Right from when the lockdown happened, there were many of our employees who had PCs that were at their workplaces, but they couldn't go access those PCs anymore. So we had a whole IT and our support staff that was going around while everything was in lockdown, going out and delivering PCs, additional important hardware for all our remote teams to get locked on and work.As we went into May and June, we had some amazing stories on services where customers that had -- that were, in their case, managing essential services because many of our equipment is in food, pharma industries, which were -- which needed to be on 24/7, we worked, in many cases, remote support through remote monitoring, et cetera. In other cases, we managed to reach the site in person, but in almost all of those cases, we managed to support our customers through all the challenges that we had. Our HR teams, our admin teams were working day and night in just managing procedures for COVID. We have had over these last 5 months nearly 80 cases of COVID and more than 60 of those have recovered. None of those have resulted in a larger community spread across our plants. And in one case, which is in Chinchwad, where we thought we were worried about a potential community spread, in July, we shut our plant down for a week just because we didn't want anything untoward to happen, and again, going back to my message of making sure that the safety of the employees was what we put first.So -- and our commercial teams working with customers, making sure cash was collected. Our supply chain teams and our on-site teams getting started in our chemicals plant were all part of essential services. So they got started. We had an accident in our Dahej plant on chemicals, which has nothing to do with us. It was a massive blast in an adjacent plant. And so despite us having all our safety procedures, our plant was shut down for a good period of 2 months. So while all safety lockdowns were in place, we -- the team worked to restart the plant, and we're really, really happy to say the plant is back up and getting back to -- closer to full capacity, all of this managed with all the safety and everything else that we did.So the numbers will show that we were down 50% on orders and revenue, but I will finish with my opening message that this particular quarter was not a quarter of numbers, this was a quarter of the mettle of the company, and there, I think, we've shown that we are as good as it gets.So with that, thank you very much, again, and I look forward to getting your questions and answering them to the best of my ability.
[Operator Instructions] The first question is from the line of Renu Baid from IIFL.
Sir, I have a couple. Sir, my first question is just to understand a bit more, while we were discussing with customers on the status of contracts and projects, in your view, what percentage of the order backlog have we seen significant postponement and reschedulement of these projects, which might be delayed by more than 3 to 5 months and which could potentially have an impact on the execution and revenue booking in the subsequent quarters?
So in terms of orders that have been canceled, the number is extremely small. And actually, there is just one customer with 2 plants, where O&M -- we do O&M services of to the tune of INR 6 crores per year, and that particular contract has been canceled. There are 1 or 2 bigger ones that are on limited goal. And -- but if you're asking for how many of those in my mind will get pushed beyond 5 months, I think our number and our estimate internally would be less than 1%, I would say. So there are couple of projects on hold, but in all of those cases, there are advances that we have, and in some cases, the project is more than 80% through execution. So we are fairly confident that those projects will eventually go ahead. I think the number here is slightly or more than slightly better than our expectations.
Right, which is good to hear. But when we look in terms of the market back, and I understand this is not the market where we should expect order inflows to come back anytime soon, but a few pockets from PSU CapEx or other sectors like FGD, oil and gas refineries, are we seeing some activities on order discussion finalization proceeding and moving forward or the stalemate broadly continues across most of these segments?
No, we are seeing activity, and we are exactly like you pointed out. All PSU projects that were already in progress in oil and gas and refining, they were -- they slowed down, but they slowed down not because the project was canceled or had any other issue, they slowed down just because there were no teams available at many of those headquartered offices to go through that final technical analysis, et cetera, do the clarifications and all of those things. So there were projects that were pushed out, and all of those projects are active again. So there are 2 major projects on the oil and gas side, both with PSUs. And even on the FGD side, we are -- we do expect that the FGD PSU discussions will happen in the next 90 days as the window.Beyond that also, there are a few projects that -- where discussions have started on the larger side where the projects have been held through the execution portion, both in India and outside, but it's unclear whether those are going to go to conclusion or not. I do -- I can say that the PSU-driven projects will continue to go through conclusion once the teams had those respective valuation committees, et cetera, are all full in place. And in that sense, August, the discussions have started again in all of those cases.
Correct. And second -- last 2 questions. One will be on Chemical side, despite operations getting impacted for nearly 2 months, performance was modest, decline was lowest among the segments and margins are fairly strong at 20%. So how should we read in terms of the operation stabilizing and the growth numbers coming back with higher margins. So can 18% to 20% margins be brought sustainable or it's more like a mixed impact here, which is more short-term oriented?
I think you are extremely vigilant to our numbers. There is a mixed impact. And so when our capacity went down to be able to deliver, which shows up in our revenue numbers, the team is focused on exports and making sure some of our critical customers that depend on some of our specialty chemicals were put first in line as opposed to competitive orders that are for more flow-based volumes that we do otherwise. We also had a benefit of lower raw material costs on the Chemical side because oil prices had gone down significantly.So we do expect that Chemical, from a volume perspective, will come back strongly in Q2. In fact, we are limited completely by our ability to deliver and with our Dahej plant slowly coming back to operations. So we expect an overall strong volume in Q2, but our margins will fall from this 20%-odd number that you saw in Q1, but they will still be very healthy.
The next question is from the line of Renjith Sivaram from ICICI Securities.
Good to see improvement in the -- at least compared to what we were expecting. So one thing which I wanted to understand was, how has been the overseas operations? Especially because you mentioned in your PPT that Danstoker has been profitable. So apart from Danstoker, were the others also profitable or you had some challenges there?
There are -- overall, international was slightly less affected than our domestic operations on the orders side. On revenue because of the complexities the whole world went through and our subsupplier chains, et cetera and, in many cases, while our deliveries we could have made, there is revenue to be recognized based on actually commissioning the equipment on-site or providing services. So because of all of those complexities, we were not able to do as much on the revenue side even in international. So on the revenue side, both domestic and international were equally affected.Danstoker, in particular, the challenges that we have had in previous years, where we were optimizing our cost structure, there were also some one-time costs that we had to encounter as part of that larger restructuring effort, all of that is work in progress. And the good news is, Danstoker was profitable in Q1 and because of those cost actions. On -- but ultimately on Danstoker, what we are looking for is to continue to improve the order book and the top line for Danstoker. And that is -- continues to be work in progress. And even as we look at Q2 with all the holidays and, in many, many cases, the circumspection of our customers continues.And also Europe, while it has come down -- come out of the COVID-related lockdowns faster than most of the rest of the world, in some cases, there is a fear of second wave. So many of the projects are still in that back-and-forth side. So we don't expect a significant improvement on the order side for Danstoker even in Q2. So that is our ultimate outlook.Outside of Danstoker, our more significant operations are in Southeast Asia, from our factory and our establishment point of view. There, I would say, our order book is getting better. But because that particular plant is still well below capacity utilization, it will be some time before it will break even, and we are committed to making that work. Yes. So it's not something that we expected or that the plant is significantly different from our expectations. So I think, overall, from an orders point of view, we continue to see a reasonable momentum on international. On the revenue side, I've shared with you that U.S. driven by Chemical was very strong; Europe, I shared my outlook; and on Southeast Asia, I shared my outlook.
And one thing, just wanted to understand gross margins have been better. Is that largely to do with higher mix of services in the portfolio given the lockdown scenario? Or is it largely to do with the reduced material prices -- commodity prices [ being of some ] benefit?
I would say the latter more than the former because services were also affected in Q1 because, as you can imagine, good chunk of our services come from O&M and on-site services, and many of those were shut. Many of our customers have delayed and pushed out purchasing spare parts and things of that nature. So services in Q1 was relatively slower. The improved margin that you see is the impact of Chemical and, overall, the very slight deflation that we could capture. More than anything, from an overall cost basis, we were very, very tight. So discretionary spending, both below the line and above the line, was extremely tight and some of that benefit we saw.
Was there any salary-related or any employee expenditure-related actions which you have taken?
There were no employee reduction-related expenses that we have taken. And I -- as I said, even for our contractors, we were managing salaries for anybody that was working on our sites for April and May. On the salary side, we have taken an action, the impact of which will show in Q2. It showed a little bit in Q1 as well, but it will predominantly show in Q2 and subsequent quarters. Though, to be fair, I think Q2 is a barometer. If things get better, as we expect they will, we will remind some of those salary actions at the appropriate time as well.
Okay, sir. And thank you for putting the PPTs. Will that be a regular practice now?
The PPT, I think that is our attempt to share and to give all of you slightly more insight into our business. So if you will all like it, then based on your feedback, we will do more of this in the future.
The next question is from the line of Venugopal Garre from Bernstein.
My first question is just to understand the progress in terms of activity levels. Now last quarter, I remember you had mentioned that there was INR 500 crores worth of revenues you could not book even though everything was ready because of the lockdown. Now looking at this quarter's numbers, it looks like a lot of that has actually come from last quarter's revenues which we could not book. So does it mean that physical progress in activity in this quarter was low or you probably didn't reach a threshold where you could actually recognize revenues? And how is that shaping up now? Are we in a more normal environment from a delivery point of view?
So slightly complicated answers. If we had said that a particular number from Q4 of last year slipped into this year. In a good chunk of those cases, even though we were at one point 2 weeks from delivery, we were not able to finish those even in this particular quarter. And that was driven by a couple of things. One, many of these were site execution driven, and so the sites continued to not come to full activity and, in many cases, right up till end of June also. And that was driven not just by our ability to provide people, but also, in many cases, the customers themselves had locked the sites down, not giving access to anybody.In a couple of cases -- more than a couple of cases, we wanted to be sure that the payment side of the equation was in balance as well. So we chose to delay. And then there was a third bucket, where the equipment was ready, especially for our plant in Sri City, where our equipment was ready, everything was ready, but the time line between our plants starting up and our ability to get to the port and actually ship the equipment out, because we would recognize revenue once it was on the ship, that could not get completed because there were massive logistical challenges where Chennai was in shutdown, there was lack of movement of goods between the borders and then -- so there were like numerous challenges that came about. So it is not that everything that we said slipped from Q4 into Q1. We were able to ship in Q1 as well.
Got it. Second question is slightly more from a long-term perspective. As you look at your portfolio in India as well as globally, especially things like Danstoker, given it -- you've been running that for a fairly long period of time, profitability has been volatile or, if at all, very low. How important do you think these -- such as -- these sort of businesses, especially Danstoker is structurally for you in the long term. And do you think these businesses can actually be scaled up to contribute meaningfully to profits and -- because we've not seen that in the last several years. So what is going to change now in terms of the profit?
I think before we talk about kind of the volatility of a business like Danstoker or that you have not seen profitability for a long time, I'll actually let -- Rajendran or Unny may know the history a lot, lot better than I do. Yes. I -- my understanding, and Unny and Rajendran, please, if you can share more details, is that until not that long ago and by not that long ago, I would say, 2 years, Danstoker was a relatively profitable business. It is only in the recent past that we went through this particular cycle. And our first focus is on rectifying that cycle and bringing it back to profitability. So Unny or Rajendran, can you please share a little bit of the history on Danstoker?
Certainly. Danstoker was a profitable company even at the time when we purchased it and continued to be making profit. And it also had a loss-making entity, which was Omnikel, which we closed down later, still remain profitable, though the top line came down. Then we purchased Boilerworks, a service company, and from nothing, it was driven up to profitability. So it continued -- as a group, they were making profits. But Boilerworks has taken some project orders, which was not what their mandate was supposed to be. And there, they have started incurring heavy losses, and we shut down those businesses, and it is now merged with Danstoker only for the service business.So -- but by the time we were on a recovery path, Europe went into a negative cycle, and we have not been able to recover totally. Then we realized that continuing in Denmark for manufacturing is not the right thing to do, it is much cheaper for us to be making in Poland. So we went and bought Weiss and that is gearing up now. And you're seeing already the signs of the positive thing happening with the manufacturing shifting to Poland. That's why we are very confident that it should become profitable in the current year and will continue to be improving because our footprint over there in Europe, there is hardly anybody going to be remaining in the European market to manufacture and create technologies of the kind that we are capable of doing. So we have not shifted anything beyond boiler making to Danstoker, whereas in the recent past, we have also taken certain decisions related to other product baskets also to be shifted once they become stable. So we should be -- I mean of course, Ashish will have to take the final call on that. Once we are out of the difficulty, it will be certainly one of our heating and boiler business centers is what we're looking forward.
The next question is from the line of Kunal Sheth from B&K Securities.
My first question is to Ashish. As he sets out to drive Thermax for the next leg of growth, if you can take us through 3 key priorities you have set out for yourself for taking Thermax to the next leg of growth?
Kunal, thank you very much for coming on the call also and also for this question. I'm now 4 months into the company. I am completely abreast and working closely with the team on day-to-day operations. We have also kick-started a very visceral, grounds-up look of who we are, what are we good at, what do we want to be in the future, et cetera. At this point, though, I'm not completely comfortable sharing because it is not completely set in my mind that these would be the 3 priorities that we would have for our business immediately or going forward. So I can't -- it would be improper for me to share something that then in a few months I will change. But if this is a question you could keep for another 3 months during the next call, I would be happy to take this question much further on.Let me though talk about a few kernels of growth stories that we shared with our Board even in this quarter. So while things were going through a fair bit of difficulty, there are a few things that have happened in the last few months that are interesting. The first is our Chemical business, which has -- a disproportionate share of which comes from -- compared to other chemicals business possibly, from specialty chemicals. And this is a portion of the business where we have shown our capability to execute, also a capability to command a reasonable price, fair amount of exports. And all the signs indicate that that the global chemicals industry is looking at India as a particular bright spot, both because of macroeconomic factors and also because of some of these industry-specific competitive dynamics that are happening. So we are seeing strength out there, and we can continue to see strength out there.Then we have a business called TOSEL, which is part of our heating and cooling business, but it's a business where we are doing build-own-operate model, where we provide utility as a service for Tier 1 customers, completely renewable, completely green. That is an agenda which is getting stronger and stronger for many of our customers. And in this particular environment also, our TOSEL business has been able to go international and is seeing strength both in India and outside, where more and more customers are coming and saying, you can execute plans better than we can, you understand some of these complex feedstocks better than we can, you understand efficiency of energy better than we can. And this whole green agenda is something that we are working very, very closely with customers in India and outside as well. So that is something that even in tough times, the team is continuing to work on and continue to make progress with.And then there are a whole host of unique applications. There's a customer in Northern India, which is a paper mill, where we are working with that particular customer to use their solid waste, which is plastics and wet paper and a variety of different kind of combinations of this 2 that the paper industry traditionally just gives away, and then it gets lost and gets burnt in an environmentally insensitive way. We are working with that particular customer to develop a unique, completely Thermax-partnered solution on being able to generate a good amount of heat from that particular paper and then providing an environmentally sound solution that there is very limited emissions and whatever emissions are meeting the highest norms of the industry. So a completely clean solution to an application which previously would have been wasted literally and figuratively.So as a company, the ability of the company to do some things that others cannot, the ability of the company to be relevant irrespective of where the capital markets are and the ability of the company to be relevant as the world goes green is incredible. So how do you find these streams and these parameters and these threads and create what the future growth story of Thermax would be, I think that is the challenge that all of us are working with. And this is what makes it very, very exciting. So Kunal, just some examples today. But hopefully, in time, I can come back to you and answer that question that you have in more detail.
Thank you so much for such an elaborate reply. My second question is, in your investor presentation, you have made one comment that fresh project inquiries are there from core sectors, like metal, cement and power generation. So if you can talk us through in terms of which part of the business or products are we seeing this inquiries for?
So actually, the inquiries and number of inquiries is maximum from food, pharma, chemicals. It is the rupee size of a single project that makes some of these other industries continue to be -- from an overall rupee number seem higher. But the maximum number of inquiries we are seeing are from food, pharma and chemicals. In terms of the kinds of opportunities we are seeing from cement and metals, we are seeing a couple of different kinds of opportunities. The single biggest opportunity we are seeing is in things around waste heat recovery, where plants are looking to implement projects that have relatively short paybacks, but will help improve the efficiency of the plant and will make the plant more competitive as the market improves. So there are some projects of that nature.There were some projects which were on the larger ones here. On the smaller projects side, we are seeing all kinds of things. People -- pharma plants looking to start new manufacturing locations, where they are looking for everything from water, enviro, new heating solutions. On the cooling side, both domestic and internationally, we are seeing many of our customers come back asking again for absorption chillers, but in many cases, again, waste heat recovery-based solutions, continuing on the trend that any time you can marry a technology and a need, but with the environment, you will see continued acceptance from customers even in this market.
The next question is from the line of [ Raja Kumar V ], who is an individual investor.
First of all, I would like to wish you all the best for your assignment, and I would like to also thank Unny for spending more than 2 decades in Thermax Limited.
Sorry to interrupt you, Mr. Raja, but we can't hear you very clearly. Request you to speak a little further from the mic.
Sir, I have 2 questions. The first one is, with all these new initiatives the Indian government is taking in terms of curbing the Chinese imports, I just want to know where does Thermax stand from that standpoint? In what way it will help Thermax, both from short term as well as from the long term?And the second question is, I would like to know whether, like, the way the Alfa Laval is doing -- the scrubbers for the SO2 emission norms that is applicable for all the ships, just wanted to know whether Thermax is looking at those areas as well.
Okay. I'll answer your question partly and part I will ask Unny to answer. The first part of your question in terms of the China impact, the China impact is both on the -- on potential new opportunities and also on our potential supply. On the potential supply side, our overall exposure to China is between INR 50 crores and INR 100 crores, relatively small in the larger scheme of things. And other than a small portion of FGDs, most of it is manageable, and we are actively looking at alternate supply sources where it may be needed and potentially in working with our customers also. And our customers also are being reasonable and proactive as is possible.In terms of the market opportunity and the potential for the future, I would say, in the short term, we are not seeing immediate, like, we have 4 opportunities immediately that we can close in this quarter because of the Chinese impact. But the long-term story is important and relevant. And I'll request Unny to answer this question because Unny has been working very, very closely, not just on understanding Thermax Limited potential, but also with the government and can provide a perspective on Chinese impact on the capital goods sector, not just for Thermax, but for the larger sector as a whole as well. Unny, may I request your support on this?
Yes, certainly, Ashish. Thank you, Ashish. Yes, there is a set of actions being planned and taken by the government of India to ensure that we bring down the imbalance in trade with China. Initially, in public, it is a knee-jerk reaction that we should ban, but we have recognized that it is impractical to be banning import from China. There are certain areas where we need a transition period -- needed for it. So many areas will have a time of between 1 to 4 years to transit from importing from China versus making in India.Coming to capital goods, it is -- boilers are going to be certainly banned -- not exactly banned, there will be a fairly high-ticket size import duty going to be coming in, and also electrical equipments are also included in that. There is a list of 300-odd items, which are already with the government where import duties will be fairly high, where they won't be able to compete with Indian companies in India. So that's very sure. When is it going to be implemented? As early as possible. I would expect it to be done in the next maybe 3 months period, maximum. But you will be allowed to import from China still on a special license basis, which you're going to apply for.So coming to that, with that, there is certainly domestic capacity available for virtually every capital equipment, including supercritical boilers. So I think we will not get directly benefited on account of the supercritical boilers, which will only be for 2 other companies, BHEL and Larsen & Toubro. But the smaller boilers, waste heat recovery-oriented power plants, Thermax will be beneficiary. Air pollution control, Chinese were making inroads into the private industry, but not for NTPC tenders. There again, they will not be able to come in. So Thermax will certainly be a beneficiary.But I would look at something totally different at this juncture that a lot more of investment is expected to come to India from -- where people are -- currently, people are talking about electronics-oriented item. It will also be process equipments in the future. China is incidentally one of the largest process equipment manufacturers of the world. In fact, the credit has gone up by almost 4x in the last maybe 10-year period of time across the globe. So a part of that will come to India because there are capabilities.So these are the areas where Thermax will get benefited. And whenever anybody is going to be setting up capacities in India, everyone -- most of them will be needing either a baby boiler or a larger boiler. They'll certainly be needing a water treatment plant, will be needing chemicals and, of course, when you've got any combustion equipment, air pollution control. So directly and indirectly, Thermax will be beneficiary for it, but give time for it. Don't ask this question to Ashish next quarter how much did you get from this. He will need time also as it picks up. That's it. Thank you, Ashish. Please continue.
Unny, would you also -- on the Alfa Laval example, specific to enviro, I'm not aware of Alfa Laval's products, specific...
Alfa Laval has bought over Aalborg. It's a boiler company, which is specializing in marine boilers. So on the marine boilers, where you use heavy oil, which is got sulfur content, desulfurization is a product specifically needed. And that solution is already available to them. That is why it is supplied by them. But that is not needed, especially for India. Let's look at it that way. We have not encouraged. In fact, furnace utility is totally banned in India for boiler application or maybe genset application equivalent of that at this point of time, unless it's inside a refinery. So I don't think that is going to be making any difference. It's a very expensive technology in comparison to what we provide when it comes to industrial level boilers. And please remember, India, predominant part of small or large capacity of the boilers are solid fuel combustion, either coal or biomass, very less oil. And going forward also, we're wanting to discourage the utility of heavy oil. So it may not have any substantial impact in India. Is it okay?
Yes.
The next question is from the line of [ Kashyap Kartik ] from Table Tree Capital.
Sir, from a food, pharma and chemicals, especially in the pharma and chemicals, given the craziness in the market, are you seeing large -- I mean what's the usual ticket size? And what do we supply to the food, pharma and chemicals? And if you could just focus on pharma and chemicals. And where do you see -- which region do you see? Do you see the West ordering more? Do you see the South ordering more? So if you could just give some color on the pharma and chemical sector, please?
Could you repeat it color on the food and pharma sector from what point of view, which geographies projects are happening or...
Yes. So from a Thermax -- sorry, sir, I'll rephrase. So from a Thermax perspective, you just -- you had mentioned in the -- previously in the call that there's a lot of inquiries and CapEx going on in the food, pharma and chemical sector. So if you could just elaborate, a, what kind of products do we usually supply to the food, pharma and chemicals, and more for pharma and chemicals? And two, from which regions are you seeing this -- a lot of pharma and chemical exposure? Is it via the South or is it West? If you could just throw some color on that from a Thermax perspective.
Across the country. We are seeing this across the country. And in terms of the kinds of products we supply to these industry, it's actually across our portfolio. So you will see -- let me start with boilers here, almost anything that you need to do on the -- whether you're producing steam or heat or some sort of, again, heat recovery-based solutions, et cetera, you will need something from our portfolio, not the very large boilers, but our medium- and small-sized boilers you will need in many of these cases.Our absorption chillers are very good, and there's an application that is -- that we've talked about previously, which continues to be extremely strong, which is around vapor recovery and using the heat from the vapor recovery and for a couple of customers even the moisture from that vapor recovery, and driving both water and chilling-based solutions from that. All of these also require water solutions, both from an incoming water treatment point of view and then affluent treatment at the other end when you discharge the water.And increasingly, in the chemical industry, the zero-liquid discharge is an area of interest. Many of our customers are also interested in rooftop solar on the industrial side and continuing to look at blending different kinds of energy sources to come up with more efficient and cleaner energy overall. So I would say, [indiscernible] industry, across the board, we have projects. And of course, every time you have heating solution going in, invariably there's an environment-related byproduct and a solution on the environment side also that gets bought either along with the boiler or separately as well.
Unfortunately, Ashish doesn't have access to that data which is -- those guys are sitting in Pune. I'll just help him out just to give you a color on this. Of the orders registered in the first quarter, approximately from the domestic market, INR 130-plus crores has come from these sectors which he mentioned about for our products. In that, the largest is a heating, which is around, say, INR 55 crores; and air pollution control and cooling follows with INR 28 crores, INR 21 crores, equivalent of that. And if you have to take -- just to take the INR 130-odd crore into, the largest is going to be, say, drugs and pharma; and food and beverages, number two; and chemical is third. That's the way it is seen that way.So you -- we answered in details about what all is needed. You may want to know ticket sizes because I heard that word. So the smallest ticket size for an order could be a small water treatment plant worth maybe INR 20 lakhs, INR 25 lakhs; the largest could be, in any of them, for a pharma company, a boiler could be as high as maybe a few crores rupees. That's it, right? And it is spread across the country, as he mentioned about. It is not that one South or maybe North. It is a fairly well across the country. Unfortunately, he is sitting in Delhi and I'm in -- our guys are in Pune, so that data is with the team over here, that's why. Okay? I was just trying to help him.
Sir, just a follow-up question to both of you. In terms of, when you're seeing INR 130 crores per quarter, has this been the run rate over the past 2 years as well? Or has it suddenly increased? And what do you see over the next couple of years as well? If you could just give us that time line view, that will really help us kind of see if this is giving a delta or is it just BAU that goes on every year?
Frankly speaking, this is something -- I'm answering because you asked for the past years. We had, for the standard products of the company on a quarterly basis, baseline orders, the lowest being around, say, 200 and the highest being around 550. That's a range that we moved around. So this 130 is not an example at all for that purposes because I only -- he's given only the -- for these 3 items. Standard products will go to n number of -- 22 other maybe different sectors. In these 3 sectors, I may not have the readymade number, but I can vouch for it, it is almost equivalent to pre-COVID days, almost equivalent to. It's not a surge that we are seeing the number. That number will happen only once all of them start investing.We were expecting no orders to happen in the month of April. Frankly speaking, no orders in April is what we expected when the lockdown happened. People were not even aware will -- are all of us going to survive, including you and me, equivalent. And then April, May, June. So April, lower number doubled in the month of May, and I think it went up by another 70% or so in the month of June. And July is further improvement. So what he mentioned about in the beginning is that despite the COVID fear. See, in the month of August, when we are talking on 13th of August versus if you were to look at what was in the minds of all of us, including all investors, CEOs of companies in the first week of April is, will be survive? Because some of us also spoke in public forums that -- in webinars, public forums and webinars, that countries will fail, companies will fail. I've spoken that way. That was the perception all of us had. Today, none of us are talking the same language. So in that kind of a negative scenario also, these industries were investing is what Ashish meant by that. Take it that way.And we will certainly -- we are seeing -- pharma companies were -- we are aware of the programs were announced. I'm not naming anybody. At least 3 to 4 of them have already announced their investment plan, not small numbers. One group has already talked about almost INR 1,500 crores worth of investment. In pharma, it's quite larger size, which will mean in INR 1,500 crore kind of a sizeable investment, Thermax can have an order intake of not less than maybe INR 50 crores, not -- sometimes, if they were to go for a captive power plant, it can even be more than that, I would think. So those kind of things are going to happen as you're going to move. So he was giving you an indicator which are the sectors which still gave orders in the most difficult and unexpected time. It's the answer.
The next question is from the line of Sujit Jain (sic) [ Sumit Jain ] from ASK Investment Managers.
Yes. Actually, there is no question. This is just to thank Unny. We have benefited from the interactions with you. We're going to miss you and -- as well as good luck to Ashish.
Thank you. Thanks a lot.
Thank you.
The next question is from the line of Rushabh Sheth from Karma Capital.
Yes, my question was more broader and I kind of heard partly and my line just dropped in some of your replies earlier. In terms of -- if you needed to reimagine Thermax -- and why I tell you I ask you this question is, we're seeing a high level of technological obsolescence in industries which supply...
Sir, I can't hear you. I don't know about the others, but your [ voice is ] in and out quite...
Rushabh, request you to use the handset if you're on a speaker.
Is it better? Can you hear me better?
Much better.
Yes. So just to kind of -- if you -- as an outsider, if you kind of want to sort of reimagine Thermax, considering that there has been a high level of technological obsolescence in terms of the capital goods industry in the last 5 to 10 years, and it's evolving very rapidly in terms of what the kind of technology the world needs, what would you -- how would you reshape Thermax? So clearly, there was a Thermax which was much more energy-focused, high -- large boilers and all that. If you kind of look into the future and see the evolution of technology, how would you imagine...
Rushabh, I'm really sorry to interrupt, but we can't hear you. There's a lot of static on your line.
Okay. I'm sorry. So maybe you can take your next question. Maybe I can come at because I don't know if there's an issue with the line. But I just wanted to ask Ashish about how you can kind of -- how do you reimagine Thermax in the new world?
Okay. I think -- look, it's the same question and the same answer in some senses that what I had answered previously as well. I appreciate the question, and I appreciate the importance of the question as well. My first few months with Thermax have amazed me with how many technologies Thermax has that is relevant to where the world is going in the future. And if you look at our R&D portfolio and some of the public news clippings and others of what all the team has worked on from a technology point of view, it is quite impressive. That said, what does it mean for us for the future, is there a change in PAT, or is there a small shift, et cetera, I would please request if you would give me some time to come back to you, not for any other reason that I am going through that exercise and would need to share something that I didn't say based on deeper analysis and discussions or otherwise, this particular path was not right.Yes, but suffice to say that even in the examples that I shared, and you take a look at the businesses that Thermax is in. Water -- clean water, clean air, need for energy, need for green, Thermax touches almost every one of these long-term and very, very important themes and that are relevant not just to India, but to the world at large.And in the example that I gave you for -- on the paper industry, as an example, the idea is not that you redo your entire manufacturing plant or something, it is ultimately a challenge on application and to be able to modify and learn new applications. So you modify your equipment. Heating will be needed in every which way. It is -- if you're not doing it of coal, you will be doing it of a different raw material, a different source of -- a different fuel source type. So modifying, learning, working, applying, bringing technology to be able to do that is a fascinating exercise that Thermax can do better than anybody, in many cases, better than anybody.How do we continue to walk that technology capability? How do we continue to enter new spaces on adjacent technology? How do we enter new spaces completely that are continuing and are relevant to the vision that the company has of conserving our resources, preserving our future, which is, I think -- gives us a very wide spectrum of businesses and technologies that we can work with? Please give me some time, I would say.
The next question is from Mohit Pandey from Citigroup.
Sir, my question is more to do with the activity levels that we're seeing in July and the first 10-12 days of August. So sir, both on the domestic supply chain and execution at project sites, fair to say that they are back to, say, 85%, 90% of pre-March levels now? Or how are you seeing things?
I would say not 90% yet. I would -- my number and our number would be closer to 75%, both on the demand and on the supply capability side overall. There is potential that before we end the quarter, we may be better. But with all the uncertainty, maybe will be worse as well. So it's too tough to predict anything even a month out. We can just say where we are in the trend that we are going on.
Okay. So sir, on the supply side, if you could give more color as to where are the bottlenecks coming up?
The bottlenecks are of 3 different kinds. One is related to where our plants themselves are located. So for example, our plant in Pune, where Pune still has a significantly high amount of cases that are coming in. And that is true for many of our sites as well. We have not been able to ramp up to full capacity. We are well below capacity. But that is because we are being extremely careful as well because you don't want to be in a case where 20 people working in a particular small subunit are all affecting COVID and then they go back homes and they're affecting a larger population. So we've been very deliberate in terms of how we are operating and how we are bringing things into place, both here and many of our operating sites as well.The second is the availability of labor. And migrant labor, as Unny mentioned, is coming back as well. But it is not there entirely where we want it to be, but that is getting better and better with each passing week, I would say.And the third impact is the impact that has happened on our sub-vendors. So in many cases, our sub-vendors, they have been limited in the ability to supply to us, et cetera. In a couple of cases, we have -- and we've actually done a very deep-dive of all our sub-vendors, understanding who has any critical issues, where there may be issues relating to manpower or financing, et cetera. So we are working very, very closely with our sub-vendors.In general, across the board, I would say, numbers are getting better, which is what I said here, where we finished Q1 at an average number that was in the 20% of capacity utilization. And if you take -- and the 20% to 30% was also driven largely by our chemicals plants. Now we are getting -- currently, we are closer to 75%. And maybe by the time we get to September, the number may be even better. But very difficult to say where things would be even a month from now.
Okay. The second question, is it possible to share the revenue and EBITDA number for Danstoker for the first quarter?
Would you repeat the question, what -- for -- what specifically for Danstoker?
Revenue and EBITDA number?
Okay. Rajendran, would you -- I have the numbers in front, but I think it will be best coming from you, if you don't mind sharing?
Sir, we don't give the numbers of [indiscernible] to that extent.
We normally give up to the segment level, not individual small entity level. We have not been giving that so far.
The next question is from the line of Shiva Sindhur from ZEN SECURITIES LTD.
So what I understand is most of your orders are -- about 60% orders are from other segments. While I understand the pharma, FMCG and the chemical sector orders going up, but can you briefly describe about others? And my second question is, sir, what are the key monitorables that you would monitor from here on for the sake of noticing any order pickup sometime in the future. That's all from my side, sir.
Look, on the first part, I would say -- and I think that was a question that had come from Renu right at the beginning as well. Where if I -- if we look at our existing order book for -- or the orders that we booked for Q1, some of them were just even outside of these 3 industries where we have been reasonably consistent and closer to pre-COVID demand. Even in other sectors, there were some projects which were very close to finalization even at the end of Q4 of last year that's been through. We do get fair amount of services revenue and O&M revenue, which is of a continuous nature. So you will continue to see those as orders also continuing to show.As I had mentioned previously also, there are applications around waste heat recovery, around a variety of such projects that are continuing to happen even in this environment. And finally, even for large projects that are PSU-driven, as an example, we are seeing activity, and we are continuing to move forward on. We do think in the next 90 days, decisions will start to happen because the interaction with the customer has also started in earnest, but it will take time because some of these are very, very detailed and complex discussions that are going on.And in terms of your question around what metrics do we monitor, we monitor a whole host of metrics. So first, I think, from a just the health overall, we monitor currently even outside of the orders and when business will come back, we monitor cash very, very strongly and very diligently at a weekly level. So that -- because that is a good barometer of the overall health of the sector and is also, ultimately, the single barometer of are we doing things that are making sure that our business continuity is not compromised in anyway. So that is the first metric that we look at even when we look at the sectors and other things overall.And then we monitor our overall platform on CRM, which is our entire opportunity universe, but specifically, what projects are moving to what we call as our working and buying platform, which means -- which are getting to final negotiation and where we see customers ready to make decisions. So I would say, all 3 of our numbers with each of these months are starting to trend and improve. They are -- as Unny said, they are not where things were last year, but the numbers are definitely getting better and better. The question now is both on how much of what is in the working platform goes to final negotiation in the remaining portion of this quarter? And even if it slips into next quarter, perfectly fine, but we would love to see that -- those projects going to final conclusion. And then the second bit, which is open, is in cases where we have some amount of competition, what kind of pricing pressure we will see on some of the bigger projects and what our competition does. Both of these are open questions in my mind right now.
Okay. Sir, just one last question. So somewhere in the middle I lost connection due to poor network. So if you have commented anything on CapEx or if you have not commented previously, do you have any comments on your capital expenditure sometime in near future or sometime maybe in next one year?
So capital expenditure will be tight. We will be extremely tough with cash, and we'll be extremely tough with CapEx. The places where we will spend CapEx on, and we will spend in those areas, are in places where we see continued -- where our long-term business is of importance and relevance. So in areas, especially around digital, where we think we, as a company, have to continue to move, become more and more digital and where investments are relevant and needed, we will do investments in technology. We will continue to do small investments in making us greener and staying continued on our long-term plan of reducing our carbon footprint as a company. Those we will continue to invest on. Everything else, which is discretionary in any form or fashion, which is not absolutely mandatory from a safety perspective and continuity point of view, those we will be tougher on . And I don't think immediately, we will be -- at least, I don't anticipate that we will be increasing our investment in opening new plants or anything of that sort. At least, that's not the plan that we have currently.
The next question is from Renu Baid from IIFL.
I do just have a small follow-up question. I think most of them have been already done, but just wanted, if possible, can you share what is the update on the Dangote order or project? Has it been fully completed? What is pending on the project? And update on the FGD orders, which have been under execution. That's it.
So on Dangote, the project is still not completely finished. It is still going through execution and will continue to go through execution for portions of this year.
Would it be possible to quantify as in what proportion of the billing is left? And have all the shipments been completed or only the supervision part of the order is left?
Both are continued, and the numbers are available. Rajendran, would you mind sharing on Dangote, specifically the remaining schedule and only your advice on whether we share this level of detail or not?
This level on Dangote and a big project, normally when they ask you to give, see, what is pending now, Renu, is the last part of items, which are like instrumentation, some items are there, which is unfair to send it right now because the boilers will be commissioned as and when they're ready only. So there could be damages to that, safekeeping of that. The overall amount is near to INR 100 crores is what is pending to be built in the entire project. That is it. And otherwise, all the equipment which is sent from here is put on to the foundation. They can be commissioned as and when their side is getting ready. Then supervision is being done wherever there is work done also. We have a team of people over there. That is it. As far as -- we have sufficient advance available. Financially, the project is very safe. We have sufficient advance available, and -- but still they continue to be paying also.
Right. So the 4 dispatches and other things, which were stuck in the last quarter, everything has been done in 1Q itself?
Yes.
Anything specific on FGD orders?
The FGD orders, the 2 big ones that we have continued to go through execution. No particular red flag as such. We haven't hit a couple of our major billing -- next billing milestones on those either. But nothing to report at this particular point in time.
Sure. Broadly, the shipments and the site works for these projects should commence by the fourth quarter or next year?
I think fourth quarter. And the shipments and the value revenue realization will go into early part of next year as well.
We have one last question in queue. We take the last question from the line of Aditya Mongia from Kotak Securities. We seem to have lost the line for Aditya. Well, that was the last question in queue. I would now like to hand the conference back to Mr. Varun Ginodia for closing comments.
Thank you so much, Rio, and thank you so much, Ashish, for patiently answering all the questions from the analysts. And best of luck in your role ahead. And thank you so much, Unny sir, for answering all the questions over all the years that you have been an integral part of the analyst community in Thermax, and we wish you luck in your new role. I will hand over the call to you to give closing remarks. Thank you.
Thanks a lot, Varun. And I'm so happy that in -- when I'm around, Ashish was able to take all the queries and questions. And for somebody who spent just about 4 months in the company and that too not in Pune, from work-from-home equivalent, I'm so happy that I'm handing it over to an able hand who will take this company to the next level.I have taken this special opportunity to be thanking each one of you. My learnings about the market, the market expectations, how to benchmark with other organizations have come from each one of you. And the challenges -- [ you can share ] the questions that you've asked me, though I would have answered spontaneously, it set me thinking there afterwards and which is what has directed me to do many things in the organization. It is not the query from a Board of a company or from a customer because after all, the sustenance of an organization depends upon how we are able to perform for our shareholders. And our shareholders -- we've got only one shareholder who holds 62% equity of the company, whom we meet, in any case, regularly on a daily basis. You represent the minority shareholders of the company. Apart from that, even otherwise, as an entity, I depended upon each one of you to be giving me the stakeholder feedback and which has certainly guided me for 13 long years to run the company. I'm so happy and got enriched.Some of you may want to know also, am I -- what am I going to be doing. So I thought it's only fair on my part to be letting you know that I have already joined the Boards of KEC International and Kirloskar Brothers. I may be on the Board of a couple of more companies, not too many, 1 or 2 more maybe taken up. I am supporting ASCENT Foundation of Mr. Mariwala, Mariwala Foundation for medium and smart small scale companies to scale up, supporting them, mentoring them. Plus, I'll be taking up teaching, which I will let you know a little later because it can't be at this point of time and last part of conclusion, in one of the higher education institutions of repute in the country, something to do with the research I'll be doing also. And I'll be around for all of you to be like a good friend to each one of you. And that indication I want to pass to each one of you to be my good friend going forward also. I'll depend upon you for your opinions and ideas also. Thanks a lot, once again. Thank you.
Thank you very much. On behalf of AMBIT Capital, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.