Thermax Limited
NSE:THERMAX
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Thermax Limited
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Ladies and gentlemen, good day, and welcome to Thermax Limited Q4 FY '19 Earnings Conference Call hosted my Motilal Oswal Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nilesh Bhaiya from Motilal Oswal Financial Services. Thank you and over to you, sir.
Thank you, Steven. Good morning, everyone, and welcome to fourth quarter and the full year FY '19 earnings call for Thermax Limited. Representing the management, we have with us, Mr. M.S. Unnikrishnan, MD and CEO; and Mr. Amitabha Mukhopadhyay, Executive Vice President and Group CFO of Thermax Limited. I'll now hand over the call to the management for their opening remarks, post which, we can open the floor for the question-and-answer session. Over to you, sir.
Thank you, Nilesh, and warm welcome. Good morning to all my dear friends. Thanks a lot on a very difficult day for you to be joining for a con call. Of course, the results are already in front of all of us. Continuing and expected in terms of the policies and possibly better days for the industry to prevail. Let me also introduce the new Group CFO who will be taking over from Amitabha from 1st of June, Rajendran, who had been with our company post his double graduation from BITS Pilani way back, and had been in the corporate finance and will run the finance operations of the Chemical business and the power business. Then he was for a short while with Tata AutoComp and later, he was CFO for Gabriel, from there he has come back to us 2 months back as a designate CFO, and now he is taking over from Amitabha on the 1st of June. So Rajendran?
Yes. Good morning to all of you. Happy and delighted to be joining on this call. Thank you.
Thank you, Rajendran. So we'll go by the same sequence of our normal deliberations starting with the results for the quarter. And in this quarter, I'll also talk about the full annual business numbers. So for the fourth quarter, the order bookings had not been to our expectations. It has come down to at the group level, 1,173 from 1,604, a drop of approximately 27% from the last year. However, in this number, the international order booking has improved by 22%, whereas, the domestic has had a sharp decline by 43%, not that we've lost any major orders in the country. It is that, that in the domestic market there have not been any finalizations worth speaking, barring for the standard products that is the starting point. This has brought the order balance of the company by almost INR 400 crores between last year opening and current year opening. Last year, we had INR 5,800 crores ordered backlog when we got into the new year. Current year, it is at INR 5,400 crores. Certainly increasing the challenge to have a growth given for the coming year. However, on the revenue side, we're very happy that for the first time in the history of the company, we have been able to cross the mark of INR 2,000 crores and the income for the company in operations have gone to INR 2,037 crores, and overall total income for the Thermax Group has notched up to a level of INR 2,126 crores, it's a 43% jump. More important for us at the management team is to see that we are able to scale up substantially when orders are available. And then orders are going to be happening, Thermax today is capable of straightaway taking to a INR 7,000 crores to INR 8,000 crores without any difficulty, without any addition to be done or line dancing done as indication from that. On the profit side, for the quarter, at the EBITDA level it has gone up from INR 116 crores in the last year to INR 205 crores, which is a 28% jump. At the PBT level it has improved by 25% to INR 195 crores. But for the quarter also, there is a drop of approximately 1.2% in the EBITDA level and 1.4% on the PBT level.And I'll move into the yearly number and I'll give an explanation as to why the profits have come down, I owe an answer to all of you also. Let's move on to the full year number. For the year FY '19, our order registration has come down from 6,441 to 5,694, a 12% drop in the overall order intake. Though it is better for the first 2 quarters, third quarter was slightly lower and fourth quarter certainly has pulled us to this kind of a level. As I mentioned earlier, there had not been any major order losses by the company either in the domestic market nor in the international market. There is full of postponement and with the sentiment is going to be improving in the next quarter onwards and expecting whatever would have been postponed in decision-making should take place in the Q2, Q3 and we should be able to see at least a better order intake in the current year in the second half, that's my expectation.Order balance, I already spoken. Coming to the revenues for the company, we've had a good year where the operating revenues have gone up from INR 4,392 crores to INR 5,886 crores, a 34% improvement and at the total income level, it has gone up from INR 4,602 crores to INR 6,123 crores. And again, this is an all-time high in the history of the company, though we had a good year almost similar to this way back in 2011, '12. This is the highest number that we know so far in the year, a 33% improvement in comparison to last year. And the profits are -- EBITDA has gone up from INR 441 crores to INR 518 crores, an improvement of 17% and the PBT level has gone up from INR 420.12 crores up INR 500.9 crores.Now the reason for the drop in profitability is predominantly on account of -- are negatives of Danstoker Group in Denmark, in Europe, where we have almost equivalent to a minus 19 plus total loss in the current year and it's a swing of maybe around INR 20 crores, INR 29 crores on account of Danstoker. And the power business where we've had a substantial improvement in the income, almost 40-plus percentage, the profits are almost the same on account of 2 of the orders which had -- we expected the margin improvement. On the contrary, the margin shrunk in those. And those will extent for maybe a quarter, maybe another quarter of those 2 orders, but that may not impact for the full year profitability for next year, but current year it had an impact. I'll also give you the segmental performance, which are already declared and the results just to repeat it.Our Energy business has grown up by 37%, Environment has grown by 19%. Chemical has grown by 14% in the full year. And the profitability, Energy segment has come down from 8.1% to 6.7%, impacting almost 1.5% and the entire trend can be attributed to these 2 items, which I mentioned about Danstoker negative, and the power division's profitability coming down with the profits remaining at the same level. Environment have seen a very good year. Apart from the top line going up by 19%, their profitability has improved from 4.2% to 6.8% and major amount being contributed by the air pollution control business and the stability and the improved performance of the water business.Chemicals, the profitability is almost constant. Last year, we were at 15% and current year is 14.9%, a marginal drop, but I'm expecting it to be improving in the next year. That's about overall numbers.Very happy to inform you that we have been able to revise the operations of TBWES. We have started manufacturing in the new plant of TBWES. It's almost reaching to a normalcy level over there. We have completed the recruitment of workmen who were already, I mean, the erstwhile workmen, many of them will come back. We have the entire engineering staff and the technology staff, plus manufacturing and supply chain management team moved in over there to the factory and they're taking charge, and it is running at fairly good capacity at this point of time. But a lot more can be done over there. We have got spare capacity available over there.Similarly, we have informed Stock Exchange about Thermax's purchase of the 49% equity of SPX Corporation from a private equity firm in Germany. So TSPX, a subsidiary, started way back in 2009, Amitabha? '09, '10, has now become a 100% subsidiary. That subsidiary has done a INR 60-plus crores top line under marginal profit in the current year. We also have carryforward orders of INR 60-plus crores, and they continue to be a 100% subsidiary of ours and we'll be continuing with the supply of air-cooled condensers and the intention being the process cooling business of Thermax and will work parallelly and create technologies and take it to the market. That's about SPX.China update is that we have virtually discontinued manufacturing over there, barring the last portion of some of the remaining orders, a substantial manpower reduction has happened. And we're currently looking at ensuring that progress will be closet up and all necessary impairments related to that were already taken in the previous year. So it's only the premises which are there for a very good factory and the land, and which possibly we'll have to dispose of before we taking the next level of decision related to that.A promise on Danstoker, we've had a fairly good order intake in the services business and standard product. Just to inform you, the losses occurred on account of the fact that we have taken some challenging project orders, which we have discontinued now. All those project orders are 100% completed. It's ended the warranty statement, I don't expect anything negative to happen any further. However, the orders that we received from the standard products and the services should ensure that ongoing year, we should be able to record a profitable year for Danstoker Group also.Overall, these are the information for you. And now I'll leave it to you to ask me specific questions, so that I can answer. Thanks a lot.
[Operator Instructions] The first question is from the line of Sandeep Tulsiyan from JM Financial.
Sir, my first question is pertaining to the margins on Energy segment. Although you've highlighted the key reasons why they were down, I just want to understand since we are consolidating TBW 100% now on. So this full year 140 basis point drop in margins, how much would you assign to the consolidation effect of TBW and how much would you assign to the low-margin orders that we have because that can probably get worse?
Sandeep, thankfully the consolidation hasn't added any negative impact of substantial nature, very marginal. The drop is purely on account of the Danstoker consolidation as well as the power division's 2 orders, which I mentioned about.
Understood. Secondly, on Danstoker, what was the reason for having the margins at such low rate and why do you expect it to revive, is it because the competition has come down for Danstoker? Or you have started taking orders in a different category like more standardized order versus the project orders? If you could throw more light on that.
Yes. Certainly, Sandeep. See, Danstoker Group has 2 companies. One is Danstoker. Second is another company we purchased separately known as Boilerworks, which work under the umbrella of Danstoker. Danstoker per se is a company, which manufactures standard package boilers and supplies it to packagers, who supply it as full product to our customers over there.And there it is fairly well under control. Though once in a while margins can go up and down, but not to the extent that has happened. Boilerworks also ideally a services company, but had an ability also, we expect it to be executing projects.So those are the retrofitting and revamping projects of older captive power plants, which for the first time we allowed them to be taking after from losses when they became profitable. We thought they'll be able to manage it. So they've taken 3 specific orders, but each one of them as booked, we had margins available sufficiently decent.But as they were executing, we understood that they were incapable of retaining the margin. On the contrary, we've had the back charges coming from the site because of the delay or equivalent of that. That is where things have gone wrong. We supported them to ensure that all 3 projects are concluded, but we just closed on the entire project activity there afterwards and including the people moving out of the company. So it's a closed chapter as far as projects are concerned.However, Boilerworks continuous to be delivering services to customers, which are pure services. So where you do an inspection of a plant to ascertain the life of the plant, but if there is any equipment to be supplied that they have to purchase directly, that is where we've gone wrong. So that part is taken off and whatever remaining is going to be profitable. Now coming to Danstoker. Danstoker also had margin pressure, not losses, but margin pressure. That is why we have purchased new manufacturing facility in Poland where the manufacturing cost is almost 1/3 of what we pay in Denmark, and there we are accelerating the manufacturing and most of the Danstoker, Denmark manufacturing is now shifted to Poland. So the margins are going to be improving there also. That is why I'm confident about the fact that we should be able to look forward to. I'm not telling in 1 quarter. In the year, we will have a fairly decent reportable profit because the orders that we've taken so far, new orders that are coming in have good, decent margins. Decent is European decent margin, not Indian decent margin.
The next question is from the line of Aditya Bhartia from Investec.
Sir, my first question is a fairly macro question. Just wanted to understand how different sector is shaping up? How are you seeing inquiry levels over there? And how do you see the industrial CapEx cycle panning out over the next 3 to 5 years?
Aditya, for the past 4 to 5 months, there had been an absolute slowdown in the larger industrial CapEx in the country. However, the small amounts continue, which I'll come to later. Whatever we were expecting in many of the sectors did not happen. For example, say last year, if we are going to look it, 14% of our order intake was still from cement industry. Thank God, because it is more of waste heat recovery orientation rather than fresh capacity addition or the newer projects happening. We were lucky enough to be getting the steel project last year, so another 14% came from the steel industry. So in the current year also, I'm expecting cement to continue to be investing. They are not unduly worried about the change that could have happened or anything, so they continued placing orders. Even today, we have more inquiries from cement industry for waste heat recovery based power plants. Now one thing that we're seeing as it changes, every cement plant in the earlier past went for a captive power plant, minimum with 100% of the captive requirement. Many of them went for even 200%. So that they could wield and sell power. That trend seems to be moving on. Not everybody is keen to have extra capacity available. They will go for barely whatever is 100% requirement at the peak load. And many of them are also having renewable purchase agreements done for the RPO obligation of this. So the capacity in the cement plant waste heat -- sorry, the conventional boilers of captive power plants are coming down. However, another standard move is no cement plant is getting finalized without a waste heat recovery anymore. So everybody is feast upon the fact that RPO is there and they can almost generate 30% to 40% of the captive requirement by capturing the waste heat which otherwise they are throwing out. That's the trend. So that it continue in the current year, too. With the -- a continuation of the government expected, we are expecting the road bucks to -- and construction generally to pick back and cement demand can improve. So I am expecting cement should continue the ordering in the current year. What level, I cannot comment on that. Steel, I'm sorry to say that many of the processes related to integration after the NCLT process are still pending. I think courts should be a little more active in concluding issues. Even after that happening, I'm not expecting any of them to be putting up the plants in the current year. Though the government has already made a master plan. If you remember, one of the meetings I mentioned about to increase manufacturing from maybe 130 million to 300 million. The plan is already there in place, money is to be found. So most of the steel companies have come out all right, and their balance sheets are decent enough. So post consolidation, we should see an improvement in order intake in the steel industry, which will not be in the current year, certainly not. I don't expect anything to happen in the current year. You could have an isolated order of may be for the sponge iron equivalent happening, which had happened last year also, but current year literally only is going to be happening.Now coming to the oil and gas, it's a total 0 in the last year, even for us also. And I continued mentioning that EIL has got the contracts for the engineering. They also fought at the first level of inquiry, but there is no discussions happening by which I confirm that the order will get concluded in the next maybe a quarter also. I'm expecting at least 2 of the refineries to be concluding the orders in the second half of the current year. Now globally, there was a glutton investment related to refineries. However, I'm seeing that there are 3, 4 of them at the budgetary level across the block for refinery capacity expansion despite the fear about EVs coming in, the oil companies are clear that ICE engines will continue for at least a decade more and they need that capacity enhancement to be done. So that's about that. It will be active in India as well as abroad wherever there's an inquiry going to be happening in the oil and gas sector.Thankfully, we have withdrawn from the main power industry barring for the fact that for the FGDs of the -- flue gas desulfurization system. In the first batch, Thermax did not participate because the terms of payment were not conducive. You remember, I've spoken 30% retention we will not bid for. After we are bringing it down to 17.5% retention, we started bidding for it.I shouldn't declare it as an order, but I'm happy to say in one of the tenders are the L1. So we are yet to be concluding the contract and collecting the order that we'll give us around INR 475 crores, but we are active in that sector. So I'm expecting the bulk tender to be getting concluded in the current year though most of them are above the budgets made by NTPC, they have to spare more money to place orders for it. And they're also under terrific pressure from NGT to go ahead with that one. So we should have some numbers reported progressively in the current year. At least, I'm expecting minimum 2 orders to come to Thermax, that should take us to maybe a INR 1,000 crores of order booking from this particular sector in the current year. There, I'm quite confident we should be able to because all those small companies are weeded out, thankfully. And it is only the serious players who do understand what needs to be put for FGD. That what's I'm talking about GE, Thermax will be there and Larsen & Toubro will be there, Mitsubishi will be there and maybe SGX will be there marginally. These are the players going to be.So I don't think anybody will kill each other in this level. At least decency should prevail in prices and Thermax should look forward to get -- taking orders because these are the largest sectors. Fertilizer, I'm not expecting anything in the current year, there is nothing pending anywhere for expansion.However, the new sectors which are evolving, as I mentioned about, may not have anything to do with the governmental pressure on food processing. Food processing irrespective of whatever FMCGs may be complaining about their top line has not increased, it has not come down, I'm sure. They are not getting the rate of growth that they expected. But we are seeing the investment continuing over there. Even today, my largest sector of inquiries both in terms of numbers as well as for the value is food processing. There are inquiries on chemical sector, textile factor is there, engineering, light engineering, drugs and pharma, agro-based industries and hospitality. This put together, irrespective of whatever may be the quarterly impact on the balance sheet which, of course, a lot of them will have to talk about that automobile, we'll say that turnover is -- growth is not visibly equivalent. I would expect all of them to be concluding us contracts and I would expect that by standard order booking should only improve in the current year, standard product order book intake should improve in the current year. That's about, Aditya, my take on how the order booking is going to pan out in the current year.
Okay, sir. That's really helpful. If you could also guide us as to how Dangote order is progressing? How is the profitability been in that order and what proportion of that order would still be pending?
Dangote, as far as we are concerned, of the 14 packages, we have completed up to the hydraulic test and assembly in our assembly unit at Mundra. So far, they have -- we've recognized almost 50-plus percentage of the revenue against that particular contract.And the first shipment has already reached over there, and 50% of them are also on the ship and it is sailing. And of course, the transport is not an obstacle, we had to only put a jetty and put it on the back.In fact, whenever we meet up with the analysts, all of you together, maybe we'll show a video film showing how great the work our team has done. So it has already started sailing. So the balance 50% or 48%, which is remaining right now, some more sailings are happening. But now with the monsoon onset they'll be very careful about cross sea sailing may not be recommended for special cargoes because just to let you know, the height of each of the boilers could be as high as maybe a 4-storeyed building. That going in the middle of the sea in the monsoon with winds reaching to maybe 180 kilometers per hour, may not be very safe to do.Only if you go coastal shipping route, basically, you will be remaining within 20 nautical miles of shores of all the countries to reach over there, which will be 2x lengthier and expensive also. But some of -- in my opinion, a 20%, 25% of them, we see remained in India, but completed from our side. But will move only in the month of September, that's my understanding on that. But otherwise, the work has gone on very well. They have also given a standby letter of credit for the balance payment before making the shipments from there. That's about Dangote update. And margins on Dangote, it is better that I don't talk about in public. I need to negotiate with Dangote for more orders. So let me say that it is a decent, good order, let's say that. It's more in terms of name for the country because the kind of work that they've done, no other company in the country has been able to manage it and I don't think anybody will never do it also. So it should help us, but it'll gear us up about taking up similar kind of orders for any refinery anywhere in the world. Just to let all of you know about it. As a single seam refining, this is the largest capacity of a plant in the world. You will be surprised, you won't believe that only in America or North Sea will have such refineries, but Nigeria has got the -- so far the largest was the Reliance, a single line. This is now even bigger than the Reliance as a single line refinery. So when we supply such a complicated 14 equipments, energy equipments for a plant like that, it will qualify as you doing this kind of job anywhere in the world.
The next question is from the line of Renu Baid from IIFL.
A couple of questions from my side. First, I think, you did share your outlook in terms of order flows and investment momentum. But if we look, the opening backlog has been lower and weaker. How should one look at the growth outlook in the energy segment in specific? FY '19 you've done far better than anticipated, so would FY '20 be a year of consolidation for you? Or you think a growth is still possible?
Well, everything is possible, Renu. Last year, our domestic order intake has been marginally 1% more than the previous year, in that not a great shift here. Whereas international is the one which has hit us by almost 28% in the project order intake because we had 2,700 plus total order intake in FY '18. It has come down by almost maybe INR 800 crores, a 28% drop was there and that's because previously we had convert the order intake. I agree with you, Renu, that if I slice it to -- first, we have projects and the products. Project order finalization in the country in the next maybe 10 months available to me, we'll struggle to reach to the same number as last year, but at least on projects I'm talking about.In product side, I'm not expecting it to be coming down. So what if at all there is a challenge in projects I should be able to take care of that offset it by the product order bookings. And if I have to look at the past 45 days of order intake or order conclusion and discussions happening. It is indicative of the fact that things can become better for the product business for company even the domestic market in the current year. And with the election results which are almost formed in our minds, I'm sure the positive sentiments you guys have already made it more than 40,000, I mean index is what? So I hope that, that positive sentiments will prevail in the purchasing community also. So product business should offset the project negative for the country. So I'm expecting that put together we should be able to possibly do better. International, I feel certainly we're doing better than the previous year. I'm very confident about it. Because last year in any case number [indiscernible] about the Dangote. And even if without any specific projects, we are already moving into Southeast Asian market with our options of getting Indonesia and Bangkok -- Thailand for taking the captive power project as well as boiler projects over there and air pollution control. So that should give us a fillip to me for -- in terms of order intake. And when I look at the overall inquiry pipeline that we've created by opening a lot more offices, which I mentioned last year about Egypt and Kenya, and at Turkey. We have fairly decent pipeline of inquiries available for the standard production of the company and that should help me to be better in the project -- product order booking on international. We have done all the moves, but what happens for captive goods companies is that not everything is in your hand. So we can do a lot more of the things we've done. Now we're waiting for things to be shaping in terms of order conclusion. I'm hoping I should be able to better order booking in the current year. Now coming to consolidation, certainly, I agree with you. When you open a year with INR 400 crores lower order carryforward, even to do the same number as last year, we should do at least maybe an 8% to 9% better than what we have done in the current year in terms of our activity, which is Thermax capable of -- which I gave you the first answer. INR 1,000 crores in the quarter. Certainly, I can do as much as it needed.The market should favor me, I will certainly to improve the -- can improve. Let me say, we're capable of improving and we'll continue dialoguing with you, letting you know about what's happening in the market, that's my answer, Renu.
Right. Given the current market environment, we can expect a lower single-digit growth in turnover for us in FY '20?
It's what one should be expected.
Sure. So second question as in you did mention that on the Energy segment there have been problems with 2 projects. But when we look at optically the number quarterly run rate of INR 1,700 crores in terms of revenue and still margins of 8%. So is it that these orders -- 2 orders which you mentioned, we are not making any money? We had done some provisions also during last financial year for some of the projects, so how should we look at the margin profile of this segment going forward? Should we expect that margins of 7 -- at least 8% should revert back or FY '20, '21 will remain challenging? And also aligned with this, FGD orders would be part of the Enviro segment, right, and not the Energy segment when we look at FY '21 in terms of execution?
I know very weak challenges in those 2 orders for the remaining portion in the coming year also but that is not big enough to be impacting in any substantial way on the bottom line, number one. I'm expecting further improvement in my margins in the current year for my heating business as well as the cooling business and even the boiler and heater business, which is the largest business of the company. So their ability to improve in the current year should be able to offset the negative of the current year, at least to a certain extent. And going back to an 8% is a possibility and I'm working towards that, that's the minimum I'm committing to myself also.
Okay. And Amitabha sir help us with the split of the order inflows and backlog for the group in terms of Energy, Environment, and also the mix between domestic and international?
Current quarter order intake for Energy segment is 1,903 -- 1,903.
Renu, you want for the quarter or for the full year?
Both.
Both. Renu you want too many details.
You can give the annual numbers, we can compute the others or you give the quarter. We have the previous quarter numbers. Either will work.
Okay. Annual numbers is 4,476 crores order intake, out of which domestic is 2,806. International is 1,670. Environment segments full year 741, of which domestic is 600, international 81. [indiscernible] division full year is 415, out of which energy is 183. International is 232. And in total 5,636 which 3,649 for domestic, 1984 for international.Coming to the order backlog. In the Energy segment, we have a backlog of 4,793, of which domestic is 2,972, international 1,820. Environment segment is 525, of which 471 is domestic, 54 is international and Chemical, which is not a backlog-based business, the backlog is INR 52 crores, of which domestic is 15, international is 36. At a total level 5,370, domestic 3,458, international 1,912. Thank you.
The next question is from the line of Viraj Kacharia from Securities Investment Management.
So my questions have been answered. Just a few more on the engine control opportunity, if you can just provide some color in terms of Lot 2 and Lot 3 where we are with respect to NTPC ordering and also with the states gencos and the private sector? And you talked about the overall consolidation and there are a number of players participating in those orders. So how is the pricing trends now versus the Lot 1, and what is kind of the margins one can see in this business?
Almost second lot is almost getting over. There were 6 plus 1, 7 different size. One is the Damodar Valley Corporation, others were NTPC.And the prices have frozen and open now for all of them. And some of them are also awarded. The first 3 of them got awarded, and the balance they are waiting for a decision to be taken at the NTPC or DVC level because none of the orders are now going at the budget that NTPC or these people have kept. They normally keep a INR 40 lakhs to INR 45 lakhs. In fact, the CERC document which says that at INR 30 lakhs to INR 33 lakhs per megawatts for a standard type and then there is a small scope added up to INR 40 lakhs is what is available. But as average quoted price of each of them in the current tender has gone up to INR 70 lakhs per megawatt.There has been 1 case that has gone to INR 111 lakhs. Of course, that is because of the additional scope of work involved.So at that level NTPC has got to provide for extra projects funding for it, that's why there's a slight delay in that. We tried retendering one of them last time when they fell the price up a little more, they cancel the tender and retendered. Instead the price is coming down and the tender price have gone up. So I don't think they will opt for a retendering, they'll have to find funds only.So that is only one which is delaying the decision. Otherwise, it will be awarded the moment they have that internal discussion and decision taking place. I don't think -- though it maybe 25%, 30% more than the budget. I'm sure, they will have to release that kind of money, they have to be buying FGD.So in that, Thermax has got a role to play. Now your question is, the parties who were L1 in the first batch are those in H1 in the current batch, so that is an indication of whether there'll be profits or maybe there are margins because those who've underquoted and without understanding what is the way to provide an FGD, they've learned and they've started quoting proper prices currently. So if the prices are to prevail at the same rate, there will be profits available in the business, just about. I'll not comment. There'll be profits available, but in a tender like this where there 5, 6 very serious, good companies available, nobody can do a profiteering in that one, but you can make a profit, let's say that. I can't classify they're good or bad, that's the way it is going ahead.The next part of your question is related to the non-NTPC state electricity boards. Well, nobody is even currently thinking about coming out of the tender because unfortunately, barring one of them, all electricity boards in the country are with the leaking balance sheet and highly leveraged. Their ability to mop up the funding at this current level and go for new FGDs currently is in suspect, unless otherwise, there is an agreement between the central government and may be the NGT and all put together. We need to put them up, that's for sure, to ensure that the country is protected from the pollution. But we have to find out wherewithal where is the money going to come because they won't have any ability to be mopping up this kind of fund nor will any lending agency, especially the public sector, the banks will not be able to fund them in any of this. So that is where -- I'm not expecting anything to happen in the same sector though their overall cumulative working capacity that is the install capacity is much more than that of NTPC, which means the market size could be very high, it will not be funded at this point of time.That's the answer from my side to that.
Okay. Just 2 more things. On the NTPC for Lot 2, any idea by when do we expect approval from them? Is there any time line we have from the interactions with them? And for Lot 3, is there any activity in terms of tenders or anything which already have been rolled out, if you can provide color on that. And secondly, you mentioned about some of the L1 players in the Lot 1 are now H1 in the Lot 2. So is there -- now from your interactions with NTPC, are they some of the projects which are on the possibility being retendered because of the kind of margins or the kind of aggressive pricing, which wasn't in Lot 2? One more thing that I think probably some of the projects may have probably be retendered.
First part is that Lot 2 decisions will have to be taken by them. But the budgets for overall Lot 2 will go up by 30-plus percentage because 30% to 40% they will have to provide for. Of course, there will process for a negotiation because government will be insisting upon it, if you're exceeding the budget, you might as well call the party for negotiation. And get a little lower price, but that can't happen because I do know the costing and the pricing where is for company of our stature, so I know that there is no margin available for negotiation with anyone of us. Whether it's Thermax or any of my competitor for the current quarter price. So it's a matter of at the Board level and possibly the ministry level. They taking it up and then going ahead with the investment plan. So how long will it take, with the government going to be repeating and I hope the minister also will be a repeat. If a new minister is going to happen, then of course, it can take a little longer period of time. So in the current year, I would say that between end of Q1 and ideally Q2, one should have most of the decisions declared and gone ahead with it, that is the point number one. Now Lot 3, is there any discussions going to happen? My feeling is no. Immediately they will not go ahead because if the Lot 2 were to have a saving for NTPC from the original budget, then they would be very easygoing in terms of investing. But since they've got to be mopping up additional funds to set this up. And in their opinion, the compulsion from NGT or the Ministry of Environment, they would say that we will complete the first lot and second lot, and then only we'll go over with the third lot. It's my current anticipation because NTPC's next plan is to go for more thermal power plants or maybe solar power plants is what they're intending to do. So -- but they'll be compelled to do that, so there'll be interventions. And I'm sure some NGOs will go to the courts and we'll see all that now happening
On retendering, sir, for a Lot 1 project?
I don't think retendering is in the offing. There is one of them which got retendered, but that they've got a price higher than what the earlier original one itself, so NTPC will be wary over retendering anything.
Okay. And private sector, sir, what kind...
Private sector there are only -- hardly anybody who has got a balance sheet where they'll want to even look at it as a possibility, but they're discussing with us. All of us are discussing with the private players. You know who are the names. I'm not taking any one of them right now. Will they have additional money available? So it has got to be -- because most of them are defaulting on the loans, they've got the shares already pledged. One company already gone and you are aware of that, it's taken over by banks in northern part of India. We are in beginning as I spoke about. So unless those resolutions are going to be reaching, NTPC is a healthy company and the state government players and the private players are almost in the same boat now. So there it may take -- but all of this will happen. Be assured of the fact that, Viraj, all of them will be compelled to do that because of climate action requirements by the countries as far as United Nations and the UNFCC Charter will compel India and China to go for it and China is doing it at a faster pace. They've done maybe, I think, they have exceeded almost 50% of their plants are with FGD right now. That is right.
On captive power, is there any trend now in terms of them doing the CapEx for this FGD and NOx or in...
Discussions are on for the existing ones also, there are. But they're always taking to the umbrage that we are always using Indian coal, which doesn't have too much of sulphur. So then there are expressions that we'll be banning from importing coal. So nothing has reached a level where they're compelled to do that.We are having smaller orders coming for smaller entities from cement industry, which we are executing also. It's already on.
The next question is from the line of Renjith Sivaram from ICICI Securities.
Congrats on the good set of numbers. Sir, is there any medium sized orders which you are expecting in the next 6 months which we should be aware of? And also recently, [Indiscernible] India has got this Mongolia order Exim Bank funding. So like Dangote, will you be also looking at that and also Sonatrach order L&T got. So will you be looking at those opportunities there and get some orders?
We are looking at all opportunities all the time kind. Exim funded ones certainly we'll be participating also. But there are no major ones currently under discussion level or maybe even technically in formation level of specification of the size that you're currently talking about anywhere in the world that we are participating. There are orders which are of double-digit type of numbers and early triple-digit numbers, INR 100 crores, INR 150 crores, INR 200 crores projects are there. But everything else is sort of INR 500 crores, INR 1,000 crores, other than the air pollution control, which I spoke earlier, there are -- that nothing is annual, either in India or anywhere of the markets that we are operating at this point of time.
Okay. So what should be the order intake range that -- will they be flattish? Or you are seeing some kind of a growth from these levels for FY '20?
Our expectation, we should better it than the previous year. Will that be marginal or major will depend upon windfall orders. Normal orders, or the kind that we normally do take, will ensure that we reach up to the last year's number. Windfall orders, which are -- they're going to be in the market because I've never seen in a year that nothing has happened, and especially with the government continuum going to be almost assured at this point of time. That is first some of the areas where the volatile investors will go ahead and set their plants, but there's going to be order finalization. They may not get in the middle of revenue recognition yet.In the international market, Indonesia is also having a continuum. I hope you're aware of the fact that we have taken a better setting at the factory, and now we are opening an office, and as per our license source, the EPC, which I think is under granting right at this point of time. We will have order conclusion happening in that part of the world in Southeast Asia also for captive power. There, the captive power will not go to very large size on the initial part. We will not participate and there could be 100-, 150-megawatt, they will do it. But at 20-, 30-, 40-megawatt of the kind of we've done in the earlier parts, we'll be repeating over there.So these are the kind of moves taken. And what happens in project ordering? What you may see will get concluded in the quarter can be delayed by 1 year also. There are -- some windfalls will happen, but only you're anticipating, it's only a budgetary offer. All of a sudden, the investor takes a decision, I want to go ahead with that. And this is a very positive thing, when 2 of the growing markets of the world, there's a continuity of government, both Indonesia -- and imagine, if Indonesia had a government change. It would have taken maybe 1 to 2 years for them to come to a normalcy.Now it is whatever they have done, all projects are going to continue. The plan is going to continue. India is also the same thing. Imagine that one of the parties told that if they were to come back to power in India, they'll abolish [ BTIO ]. Do you remember? So that's in the process of planning for the national projects. So thank God, all the national projects they did endorse will continue. So that indirectly helps me because cement companies in the country will feel nice about that, road ordering is going to continue, so cement consumption is going to be improving. So certainly, those were in the borderline to finalize order for -- in cement industry is to continue that way. So these 2 indirect political actions are going to be helping our company to have larger projects to be concluded. So what will be the impact of that? Let's wait for at least 3 months, how it's going to be happening.
Okay. Are there any other industry apart from the cement and the -- like, anything which we have to be aware of? Because last year, tire was an industry where we saw this growth in ordering. So is there something like that which can happen this year also?
I would say that dairy was an industry, which did very well with the government support for 2 financial years. There were 12 projects where we have also had I think half of them coming to us. The current government will have to be supporting that a lot more, dairy and dairy products. And food processing, it's a -- inquiry levels are very healthy at this point of time. But there, I don't know whether there's a blockage related to the order finalization. Sometimes what happens is this kind of information which comes from the news area that FMCG top line's tapering or maybe like consumption facts in the news overall that people get scared about it. The investors I'm talking about. Otherwise, consumptions are really -- concerning the country can only go up. So I hope that, that sector also should do well.Textile industry is only doing a selective investment in the last few years, but some of them are under terrible pressure for water scarcity right now. Though it may not be an expansion in the textile industry. Textile industry consumes a lot of water. And one by one they are being told to recycle the entire textile effluent, and they may not be given freshwater. So anybody who wants doing a line balancing will have to go for a water recycling plant. Water recycling plant for the textile is very expensive because that is more than the effluent treatment, recycling.So that's an area where we created expertise. There's a new product also created by the company for multi-staging operation. So I'm expecting that we also should be investing in the current year. Now how much will that size be? Put together, the smaller investments related to water recycling plant in the textile industry can be between maybe at INR 2 crores, maybe at INR 8 crores to the value that is possible.So those are the newer evolutions happening like the way I mentioned about the other industries, that's about tire industry last year. So there are segments. Dairy is one segment, food processing another segment, and textile is another segment where I'm hoping things will be picking up in the current year.
The next question is from the line of Apoorva Bahadur from Jefferies.
Lavina here from Jefferies. Sir, I just wanted to understand. Do you think from a broader perspective, as Thermax is looking at increasing its export share in revenues, do you think, in general, margin profile will be flat with some downward bias? Because overseas projects do tend to have lower margins than Indian projects, more from a general perspective not specific to this quarter. I'm talking about 2 years, 3 years, 4 years.
Lavina, from my past experience, we do make, on an average, a little better contribution in margin from international products and project space. There are isolated instances of things going wrong, but otherwise, per se, 2 reasons. First and foremost, all Indian companies, including Thermax, they ensure that they do a better job than what they do domestically for international projects because we are all scared of what -- and always our attention is at a level above than what normally you do for international.And the choices of material availability are far superior for international projects. We try to say to our customer that I'll get, for example, a component to be purchased from Taiwan or maybe there are countries of that kind of -- third world countries. Let's say Indonesia. Nobody in India will want to buy an Indonesian component or a Thai component before. And we've seen that when you do local project executions, sometimes we can get a higher efficiency. Like we completed a project for Sharjah Cement. We've just commissioned a 40-megawatt power plant. Through confirmation, we found that it's cheaper and faster to get fabricational structure done in Dubai than doing it in India. And it's the same Indians who go there and do the building. Only when they reach the -- leave the shores of India, they'll do a better job there than over here. And somehow, there are international standards made by them for quality improvement.Similarly, I have experienced or having done similar kind of work from Thailand earlier and Malaysia structural and [indiscernible] there. They're far superior that way. So it is not -- and you can execute contracts on time. The commitments are really met. And it costs us for such kind of project management is far superior outside than in India, even delay projects somewhat. So between the reach -- if you really ask me, overall, barring where you lose money, if you go for the -- become very aggressive at the time of quoting and taking an order, then certainly you had it. And especially when you go for larger projects in competition to either a Korean company or a Chinese company, they don't have concept of a costing of Indians who would do that. So when they are under threat, if you come under pressure and take an order in competition to them just because you want our top line, then you had it. But it was a normal phase. Most of Indian companies are making money in the international projects. But of course, once in a while, that can't happen also. I'm not trying to deny that.
The next question is from the line of Aditya Mongia from Kotak Securities.
I had a few questions. The first one was on the FGD opportunity. Sir, just want to kind of check with you that if you just focus on the opportunity from the central sector in terms of ordering, is this opportunity equivalent to maybe close to INR 8,000 crores, INR 9,000, INR 10,000 crores of ordering over the next 2 years, every year?
No, because -- and this won't have the money to -- or even put all of them. Then they [ lack ] focus really on the investment, every year [ INR 8,000 ] dividends. They do in lots only. The Lot 2, which is already ongoing, is around overall put together maybe an INR 8,000 crore overall. But if you ordered out in the current year-end, buildings spill to next year, I honestly don't know. But I think, it should be over in that only. And the Lot 3 could be a little bigger because there are supercritical of existing wall, so there, the sizes could be a little bigger. So it could be INR 10,000 crores. Will they go for it immediately? As I answered to somebody else earlier -- I think somebody asked -- Viraj or somebody asked me about that, but I did give an answer. That they have to have an asset allocation between pollution control and capacity enhancement.All the money available to NTPC in the next 5 years are to be focused only on FGD, then all of them can go through. Then the numbers that you spoke is right. But I presume they also need to be repaying the loans that they take. So they would enhance power generation capacity both in solar as well as in the convention area. So they may not have a steady 8,000 ordered every year. They'll wait for the current batch to be over, then execution reaching almost the concluding stage, then they'll go for more plant. So in my opinion, there'll be a lull for 2 years after the current year. Then again a pick-up. Unless the state government gets funding and that area with component.
Got it. And these orders uptake to the revenues for you should not be gross margin relative, right? They should not be affecting the margins of the overall company as much.
Well, to make those margins one has to struggle. That is what we have experienced so far. That most of the larger energy projects also undertaken whether or not huge margin has been concluded. While executing with diligence, you try to improve with a couple of percentages. So same thing as to the turnover here.
Got that. Sir, the second question was more on the Southeast Asian market. So you're talking about what started as a boiler market for you, now becoming a market for captive as well as pollution control? It could be great if you could give us some kind of market size across these segments, and what kind of business are you doing at this point of time and what it can become over time?
We have succeeded in getting good orders for the heating products, started picking air pollution control also and water also, isolated orders are taken. Now we are gearing up for doing all the standard products to be done over there. That means heating, cooling, air pollution control and even water standard plants to be made. And the size of that market, just to agglomerate across the entire Southeast Asia, could be marginally even bigger than the Indian market size as it remains today. So in our understanding the size of that market is near to around, say, INR 2,000 crores to INR 3,000 crores, bearing between a good year to bad year. Where currently we may have a very marginal market share was in the country like India, in that we have got an average 30% market share and for cooling, we have got an 80%, 85% market share. So if I were to take that, we are targeting for the products of the company in the next 5 years $100 million to be created from there and for other projects, kind of $100 million to be created. There is a market size available over there. So doing the products, we already created the first factory. Now we need to have assembly capabilities created there for water which we are looking at progress, indeed.For other projects, we needed separate registration because those countries have different kinds of rules. Though ASEAN is okay for products to be manufactured and sold, for doing additional contracting lower than when you are locally registered. And in many countries, you need to have up to maybe 40% local participation in equity holding dividend. So we had to overcome that also. So we may not be very comfortable having an EPC company as a partner of ours because there's an adjacent manufacturing, there's the technology of the company, needs competency.So there, we are trying -- through the rules there, we don't have to be diluting our equity, barring maybe a -- minimal to be given to somebody who will help us for conducting business over there.So we are intending to be setting up the project entities, one in Thailand and second one in Indonesia. We are at a fairly advanced registration of the company, manning has just started for that one. So maybe an effective organization there in the second half of the current year but we have started within that Indian support taken for it.So that should -- that is the one, which will take me to the $100 million projects also that comes from there. So that is what we are currently anticipating for that particular market. Does that answer your question, Aditya?
Yes. Well, actually, I have one more. Sir, so this is on the other business that you talked about that you would want to have a presence in the processing market, which, obviously, what I'm sure is a much larger market size versus the conventional that you had always -- talked today. And in terms of revenue relatively as a company in that segment and the kind of market size that it's showing today?
I didn't get you. You're talking about process cooling, process cooling.
Yes, I'm talking of cooling, right.
We want to do only in India at this time. We are not going to go outside India. Though we had an intention to be looking at inorganic route for that, we have tried not -- we have not been able to get the right one. Because there, the technology is just in evolution here in India. That's fairly advanced stage in Europe. So we have that in mind. But currently, we are pursuing only in India. The dry cooling, they have active cooling and they have cool condensed. They have 3 other product lines that they have currently started. We have designed on our own and started also. But our technology input or some kind of support coming from a good, advanced company will help us to accelerate it. So currently, it is aimed at India only, but it's a good market. So I cannot seize -- give a size of the market because a lot of them are conversion of the existing plant. In the steel industry, for example, for saving water consumption by 30%, we can go for adiabatic cooling. So it's hybridized. It becomes a project to be done. Whereas for maybe any kind of a cooler that may be part of the air condition plant, the dry cooler, and so having a cooling tower sitting on top of the building and [indiscernible] throwing the water into the industry water. But if you're doing dry cooling, save water. So it is cooling in a different manner. This is more of a concept to be brought in the country, we just started doing it.
The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.
Good set of numbers.
Thank you, Bhavin.
Unny, a couple of questions. If you can you highlight the reasons of why the CFO, Amitabha, is resigning?
Oh, 100% you should ask me. Amitabha has now become a, what, counsel or so. There is a problem in chartered accountants and they do any of their qualifications. They'll compare, which is better. So he has become a legal consultant also. Here are the events that's interesting, branching out to start something on his own for quite some time as an advisory for various things which he's planning for. This has been open for quite some time. So he continued with that and that somewhere he told me, allow me to move in at a time when there is sufficient runway available for me to lift off. So I didn't want to have -- he, landing at the time when there's no more runway left for him. So the right day is for him to start on as independently. And he certainly have an association with Thermax also. So he's not moving out of Thermax to another CFO job. Does that answer your questions, Bhavin? Or you want it to be heard from Amitabha himself?
No, no, no. The second thing is why we will seek currently, and maybe as you highlighted, low single-digit growth and some improvement in the margin? But it will help the order flow, which actually dropped from INR 1,500 crores, INR 1,600 crores that was INR 1,200. Are you seeing actually pick up and going back to the INR 1,500, INR 1,600 levels in maybe second quarter onwards and then we can see an acceleration in the growth in FY '21 to probably a mid-double-digit kind of a growth?
You are right on that you will see Q4-equivalent number prevailing in Q1 also. Because I don't expect that in the next, maybe, 30 days' time we'll catch up for the sluggishness of the market. So the reversal to take place will be going to H2, whereas I would see Q1 similar number, Q2 could be better, could be better, but that again depends upon how quickly is a reversal going to happen. I mentioned about Indian market, how it retracted. All of you are aware, we had been talking in private also on that. And that it had been dragging for the past 4, 5 months. And for it to catch back to the same level for the domestic market, I would give them a quarter, 2 quarters.International markets, we need to look at factors beyond that what you're talking about. Indonesia was a market that we're targeting to set up a factory also. Imagine that it has a government that changed over there. Then it would have [indiscernible]. Thankfully, to help us, continuum is happening there. So there, I'm expecting India, Southeast Asia, and there is stability even in Malaysia, everywhere, there's stability over there. All of them are growing at maybe between 4% to 5%. That should help me with the [indiscernible] having improved. So that's as far as the Southeast Asia is concern. Middle East, is again on war clause. So oil prices have now turned positive because Saudi is having extra money available at the current levels of income, but I think they divert their money for ammunition than maybe for putting more refinery [indiscernible]. So there, I'm not expecting inventory happening substantially. Though I'm seeing some positive, which I did mention a couple of quarters back, that both in Kuwait and Oman, there is a revision in terms of investment happening. We have presence over there. But we will compensate for the kind of heydays that we had of Saudi Arabian economy really going up, I can't currently say on that. So because of this, Middle East, I'm not expecting a great improvement. Though last year was a bad year. So it may remain as a marginally better year.Then comes to the African continent, I am expecting things to be better enough right now. Because South Africa, with all the negative that they had -- Amitabha, the pace is now back to good base and a good leader and that there is really capacity creation over there. So that should happen. And after setting up a Kenyan office with an 18-member staff over there, and locking people on board, I'm seeing that they're not only operating for Kenya, they are doing for multiple countries across that nearby areas also. Inquiries, I mentioned, then improved. [ Lucky ] presence should help me to improve order intakes on there. But I'm not seeing any very large projects in that part of the world similar to Dangote. Dangote, itself, has set up sugar mills for which there are discussions going on. A couple of more cement plants anticipated to happen. So those are the areas that I'm looking forward in the international market.Danstoker, the negatives [indiscernible] but maintaining project to be done in that part of the world and we have proven again entry in there. Indians are incapable of managing projects over there. Though I'm not sending Indians from here, but those people themselves, they don't have a concept of controlling the faults that Indians would do. Thermax or any Indian company are used to taking an order at breakeven and then improving the profitability while executing, but at the very best capable of taking an order at breakeven and losing money while they are executing. So we have to be very careful. And that's where we are curtailing. So that should also improve. So my order intake, frankly speaking, the last 2 quarters had been very good in the European continent. Those are decent orders.So overall, that is giving me confidence that I can marginally improve my overall order intake. And if short cycle orders were to be happening properly, for me, to give a single-digit growth, is not out of bounds. Yes. But it was challenging them things to be done in the current year. Is that okay, Bhavin?
Yes. Just last, one clarification. For the year, when we had INR 94 crores of one-off expenses, there is a large INR 110 crores of deferred tax. Is there some one-off element in that as well?
You're further correct. Both of them are one-off only. Both the sides are one-offs.
Both the sides are one-offs. Okay. So the reported product fee is to continue because we expect extraordinary expenses and the extraordinary deferred tax cancels itself?
So it's not offset, they can see each other. So it does not continue, that loss, regular business number, they're regular numbers.
Okay. So that INR 29 EPS that we saw is a continuing EPS number?
I cannot comment on how much shareholder should earn. Market should be [indiscernible]. It's okay. I think it's a -- I'm expecting, in any case, earnings to be improved only. It should be improving, not...
Sir, my question was on FY '19, the reported number...
That is to remain the same only. That's the same only. There's no corrections for those. There's no adjustment to the EPS. Am I correct, Amitabha, it's only an adjusted EPS? Correct.
The next question is from the line of [ Kashyap Kartik ] from [ Table Tree Capital ].
Sir, a couple of questions. One, from absorption cooling. I know Thermax doesn't declare individual Energy segment numbers, but on the absorption cooling and heat exchanger numbers, you're typically seeing those global companies, being Alfa Laval or Danfoss, there is a related cyclicality, the gross margins are very high, 45% to 50% margins. If you could just give an industry overview on the absorption cooling and heat exchanger business because we hardly talk about that. And if you could just explain the industry and how -- why are the gross margins so high in this business usually? And if you could speak a little about Thermax as well, that would be great?
Yes, one example to give you what you mentioned was Alfa Laval equivalent. They may create heat exchangers, which will go into any industry, any process industry. And we also do buy from them for some of our products and including for cooling. Now absorption cooling is nothing but producing chilled water from heat energy. That's the product. So that is not made by any of the names that you've taken. Now this chilled water can be used for air-conditioning of building or can be used for process cooling. So this is an equipment of a different nature.So this competes against the conventional chillers. Okay, the chiller market, just to give you the overview, the global cooling market is approximately $105 billion. And there are approximately $4 billion or $4.5 billion for centralized chilling plants, which goes into factories or into buildings like where you're sitting currently. Of that, around [ $780 million to $800 million ] is absorption-based cooling, and the balance around $3.3 billion or $3.4 billion is conventional electrical chillers. We are not in the electrical chillers. Those are managed by companies like Carrier, [indiscernible], Trane, Mitsubishi. Cooling companies do that.In absorption cooling, there are 4.5 Indian companies active in there now. One is Thermax for so many years, an 80%, 85% market share, and Voltas and very recently, Kirloskar Group have started doing that. So that is a market in India. Globally, the leaders are 2 Chinese companies, one is Shuangliang is the largest manufacture in the world right now, based in China; and second, BROAD. And there were Japanese who have almost come down to a very low level right now. So that's about the people who are operating.Thermax is a technology leadership foreign company in that one, in that, virtually, for the information, $701 million, half the market in China, that's why we ended in China. But we have not found it very easy to operate over there, that's why we're compelling our operations. So the market that we're going to be operating for absorption chillers in the world is that -- around $300 million to $400 million. In that, we already have a double-digit market share, one of the very few Indian companies having in an engineering product, and global market share are the same. So we are selling it everywhere in the 70-and-odd countries.This market is growing because there is a consciousness related to capturing the low-potency heat in any manufacturing premises and converting it to usable energy. So one of the applications of absorption cooling were they can use the chilled water for their processes. But if there is no air-conditioning requirement or a chilling requirement in the process, absorption chiller won't be sold. And in that, people look at what is the payback versus an electrical chilling. So the pricing of the energy that is whether how you price electricity versus waste, waste energy. The waste energy comes from thermal energy, that is coal, oil and gas. So that is what makes it run.For example, in the country, let's say maybe you run Indian air conditioning, you can go for gas. It will be much cheaper because gas is available there. In Saudi Arabia, it can be converted on shale gas, cheaper. In India, there is no gas available. If gas is sort of has been available in India, all the buildings in Bombay, which you're sitting -- where you guys are sitting right now should have an air-conditioning using absorption chillers only, if gas is available. If you can do that, currently, you're all paying electricity charges of approximately anywhere from INR 10 to INR 14 per unit of electricity. If only gas were to be made available in Bombay, all the buildings that basement should be having only absorption chillers. If gas is available. We're importing gas and the price is somewhere INR 30-and-odd. It is not viable. If gas were to be of India available at [ KG ], which is supposed to come into Bombay, we would have sold maybe 100 chillers in Bombay City in a year. So that is it. Is that okay?
And one last question, sir. From a refining CapEx perspective, just on -- one of our competitors has won a lot of orders in the Middle East and they're kind of doubling their order book and most of the other companies are seeing a lot of refining tenders sort of going in because of BS-VI and MARPOL regulations. So all in that, even HPCL, BPCL, Reliance are investing a lot in the [indiscernible] the affected regulation. So, just if you could give your view on what's really happening in the BS-VI, MARPOL and a lot of refining cases, both in India and Middle East, and why Thermax has not been able to kind of garner share? Because almost every other capitalist company is saying we are seeing a lot of traction in the refinery CapEx, and therefore, we are seeing a lot of orders?
I will not be able to comment on what others say, but let me clarify it to you. India has decided about BS-VI, Bharat VI, sometime back, and all the refineries were asked to enhance their cleaning capacity, that's their refining capacity with this incorporated on that front. And the tenders have started coming out in the year 2016 onwards. Thermax has received almost 60% of all those orders, and many of them are executed. So all of them are ready to be producing BS-VI-compliant diesel by 2019. October was their date. I think it may be pass on by a few months. So they're all on in India, and Thermax benefited also in the previous years from these orders.Gulf countries haven't decided because that point of time. So India by far, for information, is Euro 5, we were operating at Euro 4. Instead of going to Euro 5, we've decided to jump directly into Euro 6. That is what Bharat VI is all about. Now the Gulf countries and refineries are already operating at 4 only, 4 to 5 or 4 to 6 is what they were to be deciding. And as they go for it, there is the EPC companies from India who will do the entire EPC. But there are very specialized equipments needed for this, which are the heat exchangers, related to that is what Thermax will go for. So that certainly -- we are already prequalified with all the names that you may have in your mind right now to Kuwait, KNPC to -- around Kuwait, we're qualified for it.As the when they are awarded EPC contract to XYZ companies, when they have to go for this product, they'll buy from us only, including the Indian EPC majors. So that's my answer to that.But it's across the globe there, so I'm assuming refinery happening, no. In fact, we expected 8 refinery expansions in the world, not even 3 of them got ordered in the last year.
Got it. And sir, the refinery investors are primarily focused in the Middle East for now, for the next 2 years basically then?
Will they put money -- will you as an investor put money for maybe $8 billion, $9 billion, in Middle East with the current war clause going on? It's a question that were asked to us. A lot of projects were announced, but -- Saudi Arabia is going to have 1 expansion. But currently, the attention is not on expansion of refinery. It's my understanding. But see, there are a lot of information floating in the market related to the refinery expansion. Forget about the local issues in the Southeast and Middle East, the biggest issue for the refinery investor in the world today is what is the rate of movement of electric vehicle in the world? The EV, for it to move at a faster pace, and nobody can predict it because the way the climate change is happening, warming is happening everywhere in the world, there is so much pressure to curtail oil refining itself. So investors, and then it's like in India coal-fired power plants are needed. We know, we need a lot more of power plants, but which bank is willing to fund them as an Indian bank? Indian banks are hesitant to lend money to fund for power plants. International funding, this is a -- there are a consumption of 100 financing institutions in the globe who has taken a position that they shall not fund any coal-fired power plants anywhere in the world. Similarly, there is a worry related to refining in the future because of which, there are no -- laxity of money for refineries. This is definitely why American get all those money, particularly signing on the checks at this point of time, though there is a need for it. So that is the #1 issue to be solved before refining investment to happen in many countries. That's the reality.
We take the next question, which is from the line of Abhishek Puri from Axis Capital.
Congrats for a good set of results, sir.
Mr. Puri, can you speak a little closer to the handset please. Your voice is not audible.
Yes. Is that better?
Yes. Now it's better.
So, 2, 3 small questions, actually. First on FGD, I think you have spoken a lot about it already, but just wanted to check because a couple of competitors from your industry have been talking about 60,000-megawatt-plus of ordering this year. And the tenders, this is already out from states, PSU companies, NTPC, et cetera? Would you take that number closer to this? Or will it be much lesser than that?
I would go for a 1/3. I'll divide that by 3x to say that the realistic number is closer to that. And I'll give my reason also, don't mistake me. Even now there is, other than NTPC and very few, anybody having positive numbers created on the profit side of the balance sheet, and many of them are over leveraged. And this is one item when you put in an NGT, even decrease your [ generation ] rate unit of electricity also. Whereas, there is an operating expenses. So that means there is a burden of x paisa per unit of electricity generated. Why I'm not giving the -- what are the number of paisa is on account of the fact that varies within plant to plant and I don't want to be quoted to that number. So at that level, it is a burden on the existing companies to have it in their balance sheets. So adding on that base, at electricity board, I think is a dream at this point of time. Yes of course, a new, safe to government electric where they have one piece of different nature to have CapEx added on the plant. It can happen. But that will be very limited. But somebody has to fund it. So when the funding is going to happen? So NTPC have got funds available and they are -- they want to be an example for their country. So they will continue doing this. But that's going to be calibrated more other than them putting all of them in one shore. So they have gone for Lot 1. Lot 2 is under finalization. Lot 3 also will happen there afterwards. That is my answer for it.
That's very clear. On the water business, you I think highlighted in the annual report also last year that you were very optimistic about the order inflow in this segment. Environment segment does not show the growth, which we were expecting for. So what has gone wrong? And are there any orders in the pipeline that we are looking at?
Yes, there are orders in the pipeline. In fact, in the last quarter, we had a setback in the order intake because we expected a lot to happen. All of them were postponed for to current quarter. As I mentioned, there are no order losses. Order finalization suffered a little in the -- towards the end of last year in the water area. They're also kind of products that we will see. Water projects are happening in the same sector a lot -- municipal sector a lot more, but we don't participate in that. I hope you're aware of the fact that we exited the municipal business 4, 5 years back.
Right. And lastly, sir, on the tax numbers, is there any further deferred tax, which can be availed from TBW consolidation?
Whatever could be possible is already availed at this time.
Okay. So we should get back to the normalized rate of 35% to 36%?
You are right. Absolutely, right.
And Last question on the balance sheet as well. The investment in subsidiaries and joint ventures has gone up by another INR 120-odd crores. Despite taking the impairments in some of the subsidiaries. What would this amount pertain to and which subsidiaries there we would have funded?
We bought over the joint venture portion. So that is some fairly closer to the number that you indicated, buying the 49% equity of our American partner. Then for Southeast Asia, for -- we have invested for the company's we started. I don't know if I said anything, which is -- oh, that's the loan given to us. Sorry, not an investment, is it put an equity or a -- investment, okay. For the Danstoker Group, for the 3 coming out of the current problems, we have to put in some more investment, approximately EUR 5 million is something we have invested into that. Those are the numbers.
Ladies and gentlemen, due to time constraints that was the last question. I now hand the conference over to Mr. Nilesh Bhaiya for any closing comments.
Thank you, Stephen. Thank you, everyone, for your valuable participation. Thank you, sir, for providing us the possibility to host the call. It got a bit elongated. I request you to make the closing remarks.
Nilesh, thanks a lot. Thanks for hosting it so well, and Stephen for steering it also. And the kind of question that you asked, but I know all of you are well-wishers of ours and are wanting us to be doing good. So let's hope that the market condition in our domestic market improves in the current year and a lot more projects should happen.I am an optimist for hearing the election results that things are going to be really happening in India, and in the markets that we operate also. So let's hope for an improvement, at least towards the second half of the current year, in the negative sentiment, and let's look forward to a great year in '21 and a decent year in the current year. Thanks a lot.
Thank you. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.