The Hindu Business Line : Thermax aims to hold margins around 15-16%

Mr Prakash Kulkarni, MD at Thermax, said that the company is increasing its total capex from Rs 120 crore to Rs 170 crore. He also sees H2FY07 margins at 15 per cent levels and aims to hold margins at this level. According to him, the company has a good order book on hand and therefore, they should try and maintain the margins.

Excerpts from CNBC-TV18's exclusive interview with Mr Prakash Kulkarni:

Could you start off by splitting your order book between energy and environment and what sort of margins you have in both?

In H1, there is a growth of 179 per cent in the energy segment and 46 per cent in the environmental segment. So the split would be almost 70:30 as far as the consolidated order book is concerned. Most importantly, the operating profit margins have improved from 14.3 per cent to 15.7 per cent. Therefore, the net profit has improved.

Could you explain the extraordinaries — you have seen an accounting provision on diminishing and value of investment and some financial obligation. Could you explain why you made those provisions and whether they could be recurring in future?

Our consolidated results were showing much lower profits than it was showing in Thermax balance sheet and this time, since we have handed over ME Engineering — which is a UK subsidiary — to the administration, I think we have to take the diminishing of the investment done there and on behalf of ME Engineering, we have given certain guarantees of comfort letters etc to the bankers. So to that extent, though that they are not yet accrued but in anticipation we have made the provision and that is where that Rs 23.1 crore of provisions have been made from the profit of Thermax Ltd.

Do you think you will be able to hold margins for H2 between 15 and 16 per cent?

Expenditure is seen growing from Rs 49 crore last year to Rs 87 crore this year.

So will you be able to hold margins at these levels?

It will be our aim to hold margins. We have got a good order book on hand and we can plan and therefore, we should try and maintain the same.

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