MUMBAI, December 25: Thermax -- previously a baby-boiler company held privately by the Aga family -- boiled up the stock market after it went public. Initial euphoria over, it started cooling down on the news that the company's fresh order book is shortening since last year.

The recession in the capital goods industry has not spared even a strong company like Thermax, which reported a 8.5 per cent drop in sales to Rs 200.47 crore with net profit shrinking by 25 per cent to Rs 15.60 crore during April- September 97.

Currently, the company is executing pending orders and profitability level is likely to be maintained for the current year, according to a analyst. However, only a recovery in this sector can help the company next year, which of late has shown signs of recovery. The recent currency crisis in the South Asian countries may also affect the company, which receives sizeable orders from this region. However, Thermax has not been caught unawares and is well prepared to tackle the crisis. While lower tax incidence should help the company, capital costs will be pruned by postponing investments like the setting up of a new plant for manufacturing smaller vacuum absorption chillers (VAC) or expansion of its corporate office.

To offset slump in the domestic market, the company is focussing more on exports and is setting up a subsidiary in Mauritius to explore business in the neighbouring countries. Besides, a Thermax subsidiary, renamed Thermax Engineering Construction, will undertake specialised on-site project construction.

A market leader in energy and environment sector, Thermax, which made concerted efforts in innovative incineration and waste water treatment technology, manufactures a wide range of boilers, fluidised bed technology, vapour absorption machines among others. It has several joint ventures to its credit -- Thermax Babcock & Wilcox, Thermax Fuji Electric, Thermax Energy Performance Services and Thermax Culligan Water Technologies.

It recently launched a new line of air-conditioning systems that does not require electricity and are most suitable for centralised AC systems for big establishments like hotels, hospitals, offices and commercial places.

Thermax recently made its debut in the captive power sector by bagging a major order from Arvind Mills.

Its strength lies in providing complete energy and environment management solutions to its customers. Apart from a strong brand equity for its boilers, the company has a strong service support network. Since major clients for boilers are from process industries such as paper, sugar, fertilisers, cement, pharma etc, the weak commodity cycles affects Thermax too.

Perhaps at this stage, the company's unique proposition for energy saving may click well with the industries because it saves costs.

If this trend picks up, it could provide a necessary salvage for Thermax, which is in dire need of fresh orders.

Thermax's share, which went below its IPO at Rs 165 recently, attracts diverse opinion.

According to an analyst of a leading investment firm, the company is a very strong one with a clean and professional management and it would be an opportunity, for those who had missed out, getting this share through the IPO. One can accumulate this stock even if it declines further for long term investment.

"The stock is getting corrected from its past levels of huge premium, since the floating stock is very low at 25 per cent and there is activity only when some FII reports some deal," says Aditya Srinath of SSKI adding that the share is fully priced.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.