Thermax Limited is a prominent global provider of engineering solutions that focuses on energy, environmental issues, and industrial infrastructure. Established in 1966 and based in Pune, India, the company offers sustainable solutions across various industries by providing innovative products and services related to heating, cooling, power generation, water treatment, air pollution management, and renewable energy.
Operating in more than 90 countries, Thermax serves sectors including power, steel, cement, chemicals, pharmaceuticals, food processing, and infrastructure. The company is organized into three main business segments:
- Industrial Products – This includes boilers, heaters, chillers, and systems for pollution control.
- Industrial Infra (EPC & Large Projects) – This segment covers engineering, procurement, and construction for projects related to energy and environmental concerns.
- Chemicals – This area focuses on water treatment, construction chemicals, and performance coatings.
Thermax is dedicated to promoting clean energy transitions and sustainability through innovations in areas such as waste-to-energy, bio-CNG, heat pumps, and green hydrogen technologies. With a strong emphasis on research and development, the company is continually expanding its global presence while assisting industries in improving efficiency and minimizing their environmental footprint.
In this article, we are going to cover the Q3FY25 earnings conference call summary that was held on Feb 07, 2025. Let’s Begin:
Overall performance
Q3 result is below expectations because of revenue misses and execution delays.
Orders were ready but customers were delayed in pickups which in turn impacted revenue.
A very strong Q4 was expected by the management as the backlogs were going to be cleared during Q4.
500 crores of revenue were not realized in Q3 due to project execution delays. And 60+ crores in profit was affected due to these delays.
Order book
Orders are expected to surpass INR 3,000 crores in Q4.
Export orders have increased significantly, with one of the best quarters ever in Q3.
Business Segment Highlights
Industrial Infra (Large Projects, FGD, Bio-CNG, Services)
The Maithon FGD project caused an Rs 16 crore loss in Q3 due to additional costs. But no further losses are expected from Maithon in Q4 as it nears completion. And some pending claims from customers (like Tata Power) may bring positive cash flows in Q4.
No large projects (above INR 100 crores) were booked in the last three quarters. Because the company intentionally avoided government projects due to profitability risks. But one large order (INR 200+ crores) was booked in January; more are expected in Q4.
Thermax has invested INR 100+ crores in Bio-CNG, but the industry struggles with profitability. Plants are stabilizing but operating below expected efficiency. The management needs Government intervention (like ethanol pricing) to make Bio-CNG viable. Hence the company is waiting for regulatory clarity before taking new orders.
Services & O&M business grew steadily with 10%+ margins generating quarterly revenue: Rs 125-150 crores. Thermax is investing in expanding service offerings, as it provides high-margin recurring revenue.
Industrial Products (Heating, Water, Air Pollution Control, Export Growth)
In this segment, the company’s order book grew 40% YoY, while the backlog increased by nearly 30%. The Export orders for standard products hit a record high in Q3. Heating solutions, water treatment, and pollution control equipment are performing well. The Margins are inching towards 10%+ and could expand further in FY26.
The company secured an INR 1,000 crore export order in Q2, and Q3 also saw high export traction. Export revenue is expected to cross INR 2,000-3,500 crores in the coming year because there is a Strong demand for boilers, water treatment solutions, and pollution control systems in international markets.
Chemicals Business – Weak Q3, But Q4 to be Strong
A large portion of the INR 500 crore revenue miss came from Chemicals, impacting margins for the company. The orders got delayed but were cleared in January, which ensures a strong Q4.
Thermax is also investing in Construction Chemicals, Flooring (Vebro partnership), and Water Treatment Chemicals. The company acquired Buildtech to strengthen its Chemicals portfolio. In this segment margins were temporarily lower due to expansion costs, but profitability should return to 16-18% levels in Q4.
TOESL & FEPL (Energy Business – Renewable & Utility Solutions)
In this segment order intake was slower this year, but Q4 is expected to see INR 50-100 crores in orders. TOESL (Thermax Onsite Energy Solutions Limited) operates on a 10:1 capex-to-revenue ratio, meaning INR 1,000 crores of pipeline orders in the system. Business remains highly profitable and Thermax plans to expand it further.
FEPL (First Energy Private Limited) site was hit by severe floods in Chennai, impacting execution & revenue. The company relocated the plant to a safer zone to prevent future disruptions. The company aims to invest in FEP over a longer timeline to improve profitability and IRR.
Future Growth Areas & Strategic Initiatives
Thermax is now open to supply supercritical boilers (~INR 2,000 crores per project). However, it will avoid full EPC contracts to reduce risks from civil construction and cost overruns. The market for these projects is huge, but Thermax will be selective.
The coal Gasification project depends on government incentives, and commercial viability remains unclear. Heat Pumps: Gaining traction, expected to become a INR 200-300 crore business in 2-3 years. Strong potential for decarbonization solutions in industrial applications.
Question and answer session highlights
how has the exports done for us? Because for last 2 – 3 years, we have not seen much traction on exports when we look at the annual reports. And whereas for many of the people in the power side, exports have done pretty well.
I think from the order side, our numbers have picked up also. You saw Q2, we had announced INR 1,000 crores for an export project. This quarter also — on the export side, we have done reasonably well on standard products, which is the Industrial Products portion.
Q3 was one of our highest products – highest portions ever from an export perspective. And even from a balanced perspective in the numbers that we share with the analysts those numbers across the portfolio we have shared. And you will see in Industrial Products and in Industrial Infra of our orders balance, exports is a higher share than it has ever been in the past, I mean, in recent history.
can we expect the INR 2,000 crores range what we have been showing for the last 4 – 5 years, we can materially cross that figure of international revenue, including exports?
INR 2,000 crores, which is about 25% to 30%. I think that’s about the range that you can expect. So INR 2,000 crores to INR 3,500 crores, that’s the range you can expect.
on the order pipeline: Both the base orders as also the large project pipeline and specifically in the context of you saying that you’re actually seeing a fairly large pipeline of projects, which probably is the highest, as you said in the last couple of years. So, if you could just highlight both on base orders, how are they shaping up, plus your optimism on the large projects with segments and which markets are kind of driving it domestic or overseas?
The management says growth has been moderate, with single-digit increases instead of the mid-teen growth seen in previous years. The Q4 is expected to see double-digit growth, but it is still below past performance levels. New product launches are contributing to expected order growth.
The Private capital expenditure has been decent but still below expectations. The ethanol sector, which previously drove strong orders, has slowed down due to financing delays. January saw improvement, with some long-pending ethanol sector orders being finalized.
Despite a strong pipeline, order finalization was slow due to project design changes and delays. However, power, steel, cement, refining, and petrochemicals are now seeing a revival in orders. January saw a breakthrough, with an INR 200+ crore order finalized and another major deal expected soon.
while you highlighted the losses that were there in some of the projects but there is a larger piece, which is TBWES (Thermax Babcock & Wilcox Energy Solutions Limited). If you could just help us understand
TBWES has been doing extremely well. Yes, TBWES has been turning out. And you can see that here, it’s got 8% profitability, a reasonable backlog.
TBWES also had its biggest project, where we also took a big loss again for a government customer, HRRL, which was also to the tune of INR 14 crores and a negative that was on top of a negative INR 12 crores that TBWES had taken last quarter.
Despite all that, TBWES is turning profits and its backlog is very nice. So TBWES should have a good few quarters coming up. Sorry, your next question.
if you can speak about two other sort of products or technologies that we were looking at beyond the bio-CNG piece, which is coal gasification and heat pumps. While in our probably previous interactions, you mentioned that both these projects or products would need some bit of government support, without which commercial sense is not yet prevalent, given that what we’ve seen with the budget and the government stance, particularly the central government stance towards capex.
Where in the overall picture now, you see these technologies sort of picking up for you, particularly, is it — has the timeline moved away from one year, two years to maybe five years from now?
Coal gasification is dependent on government. Heat pumps, absolutely not. Yes, heat pump is a product. The first one is a project and a capability there off as well.
On coal gasification, the government has part of its kind of incentives to the industry. Last year had floated projects in Category A, Category B, Category C. Some of the winners of those incentives have also been announced.
There is one partner out there, who in Section C has won a project based on Thermax’s technology and capability. And even in Project Section 2, there is someone who is looking at Thermax as a partner for what is being looked at.
I’m still not sure on the commercial viability, though, which is why we are not talking about it anymore and whenever things clear — and any of these projects achieve commercial closures, then we will come and share success.
There are also discussions with the fertiliser ministry and others that are continuing. But I would say, overall less than 50% probability.
Heat pumps are starting to take off. This was just a baby. And it’s completely product-driven. We see tremendous potential for this. We want to make this business, I think last quarter, what we call as Sustainx portfolio, we crossed INR 50 crores on the product side, which was zero previously.
We want to make this business much, much bigger in the future. This has got fair amount of application-based selling but the applications are across multiple industries. The savings to the customers are also quite substantial. And our capability from a product side are differentiating. So it’s a reasonably profitable product set, which we look to grow.
What can it be in a couple of years? It could be I think INR 200 crores, INR 300 crores worth from zero now, but products take some time to establish. You don’t go from zero to INR 1,000 crores or INR 500 crores instantly. Every year, more people get used et cetera, et cetera. So that’s the roadmap. But we are very happy with what the product is doing for our customers. Some really good success stories.
Given the pulls and pushes going on right now, should one think about FY ’26 in terms of revenue, profitability and order inflows?
We won’t provide outlook for that long. Q4, I have done just because I needed to give a very clear understanding that Q4 — Q3 was a bit of an aberration and would like to see Q3 and Q4 looked at as a conjunction and fair amount of confidence for Q4.
As we go into next year, I will share some directions, and I will share some amount of portions around it. Internally, especially on the projects, we can see on the product side, we have shown that we have increased our backlog. We have continued to show strength out there.
Chemicals also while on the revenue side, we had a bad story, which also will reverse in Q4. Yes, we expect Chemicals to be a very good story for Q4. Overall, good growth for next year as well.
TOESL continues to be decent. FEPL, where we have had quite a few losses this year. We expect those losses to come down substantially next year, though even next year would be a loss-making unit for FEPL with breakeven the year after. So that then leaves on what can you expect on the project side?
And there, we are working with some amount of puts and takes. Overall, my net-net expectation is a good year next year based on the overall pipeline that we have. Lot will depend on whether we are able to bring some projects in Q4 back into the mix, which will set something.
And I’ll share with you one part, which is important, which is in these large projects, we have close to INR 80 crores to INR 100 crores of base cost setting, which means we need INR 1,000 crores worth of projects to take that base cost and get divided and some of it is corporate overhead and everything.
So I’m including all of that. We need about INR 1,000 crores worth of projects out here, which means we need about in a year, INR 250 crores to INR 300 crores, which are basically, continuously coming in that we are able to execute through this portion so that the base cost portion gets taken care of. So while the project itself, what remains, may have reasonable amount of profitability, I need this base cost to get covered and which means I need project inflow.
And for the last three quarters, we have had no projects inflow here. So if the project inflow reverses, which means I can get a base cost that is taken care of, then I’m reasonably okay with my profitability for next year.
But if I can’t get new projects and I have to go work this base cost in addition to everything else, then I potentially have a challenge.
So I’ve shared with very, very openness kind of everything that we are working through. Overall, the pipeline looks decent. For the first time, we have a reasonable amount of bigger projects. And we want to start seeing that work this quarter itself, and start to show success this quarter. As I’ve said, this quarter, I expect what we are planning for is revenues and orders north of INR 3,000 crores and profitability north of 10%.