On July 19, 2018, the Company has completed the acquisition process for the equity shares held by Babcock and Wilcox India Holding Incorporation (B&W) in Thermax Babcock & Wilcox Energy Solutions Private (TBWES). Accordingly, TBWES has become a wholly owned subsidiary of the Company. Further, on February 25, 2019 the company entered into a share purchase agreement with Thermax SPX Energy Technologies Limited (TSPX), Mutares Holding-24 AG and Balcke- Duerr GmbH to acquire the remaining 49% stake in TSPX at a consideration of 2 Euro. This resulted in the Company acquiring control of TSPX. Accordingly, TSPX has become a wholly owned subsidiary of the Company. Pursuant to the above, the results of TBWES and TSPX which were earlier consolidated on 'Equity' basis have been consolidated as a wholly owned subsidiary. Consequently, the financial results are not comparable to that extent.

• Sales were up by 44% to Rs 2073.67 crore. The value of production for the quarter too was up by 44% to Rs 2128.36 crore. As sales stand lower than value of production for the quarter, there is inventory built up which will get liquidated in coming quarters.
  
• Strong upside in sales was largely due strong growth in revenue of Energy business. Segment sales of Energy business jumped up by 54% to Rs 1718.35 crore (or 82% of sales). Similarly the segment sale of chemicals was driven by 28% to Rs 102.54 crore (5% of sales). However the segment sale of environment was down by 2% to Rs 267.74 crore.
  
• The consolidated EBIT was up by 36% to Rs 184.86 crore as all three business segment register higher profit. Segment profit of Energy was up by 22% to Rs 136.76 crore largely driven by higher sales as its segment margin decline by 200 bps to 8%. The segment profit of environment, despite marginal fall in sales, grew by strong 44% to Rs 31.06 crore facilitated by 370 bps expansion in segment margin to 11.6%. The segment profit of Chemicals jumped by whopping 558% to Rs 17.04 crore albeit on low base. The jump in segment margin of Chemicals was largely due to higher sales as well as whopping 1340 bps expansion in segment margin to 16.6%.
  
• Contraction in operating margin to the extent of 140 bps to 8.2% was largely due to higher material cost. The material cost (as % to sales net of stocks) was up by 580 bps to 60%. But the staff cost was up by 240 bps to 9.6%. And the OE was down by 200 bps to 20.8%.
  
• The EO expense for the quarter was Rs 2.03 crore (against nil in corresponding previous period) towards impairment of tangible assets of TZL.

Yearly performance

Consolidated sales were higher by 34% to Rs 5973.17 crore. Segment sales of Energy business was up by 37% to Rs 4799.47 crore (or 79% of sales). Similarly the segment sale of environment and chemicals was up by 19% (to Rs 828.30 crore or 14% of sales) and 28% (to Rs 415.11 crore or 7% of sales) respectively. But with 130 bps contraction in OPM to 7.7%, the growth at operating profit was restricted at 14% to Rs 457.44 crore.

The consolidated EBIT was up by 20% to Rs 440.22 crore as all three business segment register strong growth in profit. Segment profit of Energy was up by 14% to Rs 321.77 crore largely driven by higher sales as its segment margin decline by 140 bps to 6.7%. The segment profit of environment grew by strong 96% to Rs 56.72 crore facilitated by higher sales and 270 bps expansion in segment margin to 6.8%. The segment profit of Chemicals was up by 14% to Rs 61.73 crore facilitated largely by higher sales. The segment margin of Chemicals contracted by marginal 10 bps to 14.9%. After accounting for higher other income, lower interest (as % of OP) and lower depreciation (as % of OP), the PBT was up by 19% to Rs 500.98 crore.

Share of loss from JV was down by 96% to Rs 1.07 crore and the EO expense for the period was Rs 89.54 crore against nil in corresponding previous period. EO expense for the period was toward impairment of goodwill of Rs 87.51 crore in Thermax Netherlands and tangible assets amounting Rs 2.03 crore in TZL. Thus the PBT after Loss/profit from JV and EO item was up by just 3% to Rs 410.37 crore. The taxation (net of deferred tax) was lower by 49% to Rs 84.94 crore and thus the PAT was up by 41% to Rs 325.43 crore. Profit attributable to non controlling interest was nil for the quarter compared to a share of loss of Rs 1.01 crore in the corresponding previous period. Thus the net profit attributable to owners was up by 40% to Rs 325.43 crore. After accounting for other comprehensive expense of Rs 21.72 crore (as against an income of Rs 27.03 crore) the total comprehensive income was up by 17% to Rs 303.71 crore.

Subsequent to the acquisition of TBWES, as part of organizational restructuring the Board of Directors and Shareholders of the Company, have approved the transfer of Boiler & Heater (B&H) business of Thermax Limited to TBWES on a going concern basis through slump sale. The consideration for the transaction will not be less than the book value of B&H business. In view of expected business synergies, available order book and current and expected performance of B&H business, management has assessed the carrying value of investments in TBWES in standalone financial results and has accordingly reversed the earlier impairment loss of Rs 111.84 crore. Further, deferred tax assets amounting to Rs 94.13 crore have been credited/accounted in the consolidated financial results on the basis of assessment of probability of deductibility of brought forward losses and depreciation of TBWES against future taxable profits.

TBWES & TSPX become wholly owned subsidiary of the company during 2018-19 subsequent to acquisition of balance share from JV partners. Pursuant to the above, the results of TBWES and TSPX which were earlier consolidated on 'Equity' basis have been consolidated as a wholly owned subsidiary. Consequently, the financial results are not comparable to that extent.

Order intake & backlog

Consolidated order backlog as on March 31, 2019, stood at Rs 5370 crore, 6% lower than Rs 5689 crore as end of last fiscal ended March 31, 2018. Of the Rs 5370 order backlog energy orders were Rs 4793 crore [ Domestic Rs 2973 crore; International Rs 1820 crore]; Environment orders were Rs 525 crore [ Domestic Rs 471 crore; International Rs 54 crore] and Chemical orders were Rs 52 crore [ Domestic Rs 16 crore; International Rs 36 crore].

Order intake for the fiscal was not to the expectation of the company. Consolidated order intake for the year was Rs 5633 crore, 12% lower than Rs 6380 crore in 2017-18. Last year's figure comprised some sizeable orders including a single large export order of Rs 1000 crore, a trend not witnessed during the current fiscal.

The consolidated order intake for the quarter ended March 2019 stood down at Rs 1157 crore (Rs 1599 crore in Q4FY18) while that of Thermax standalone was Rs 717 crore (Rs 1256 crore in Q4FY18). Orders finalization has got postponed and the sentiment might improve in coming quarter.

Other developments

During earlier years and in the current period, the Company has received demand notices/show cause-cum-demand notices from the Excise department covering period from June 2000 till June 2017 for Rs 1383.51 crore (including penalty but excluding interest not presently quantified) These demands are of excise duty payable on inclusion of the cost of bought out items in the assessable value of certain products manufactured by the Company, though such duty paid bought out items are directly dispatched by the manufacturers thereof to the ultimate customer, without being received in the Company's factory. The Company has filed an appeal against the said orders received before CESTAT, Mumbai. Based on independent legal advice, the Company is confident of the issue being ultimately decided in its favour and accordingly no provision has been considered necessary.

Board of Directors has recommended a dividend of Rs 7/- per share of face value of Rs. 2/- (350%) which is subject to approval of meeting of shareholders.