Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA+/Stable/Crisil A1+’ ratings on the bank facilities of Thermax Ltd (Thermax).

 

The ratings continue to reflect the healthy position of Thermax in the energy, chemicals and environment space, diversified product portfolio and geographical presence (which lends stability to its revenue streams), and robust financial risk profile. These strengths are partially offset by exposure to cyclicality in end-user industries and modest operating profitability owing to intense competition.

 

Consolidated revenue rose ~11% on-year to around Rs 10,641 crore in fiscal 2025, driven by strong order book execution, especially in the Industrial Products and Industrial Infra business segments. Meanwhile, the operating margin increased to 9.6% in fiscal 2026 from ~9.4% in fiscal 2024, led by stable commodity prices and other costs.

 

Operating performance in H1FY26 was affected by delayed execution of orders in the industrial infra segment and lower realisations in the chemicals segment with overall revenues contracting by 3%. Recovery is anticipated in the second half of the year primarily due to order completions, culmination of previously deferred orders and steady performance in the industrial products segment. Operating profitability moderated to 8.6% during H1FY26 from 9.6% in FY25 on account of cost overruns following delayed execution, higher fixed costs post commissioning of additional capacities in the chemicals segment, and sequential rise in input costs. Crisil Ratings expects Thermax to register 9-10% annual revenue growth over the medium term on account of expected recovery in industrial infrastructure and chemicals segments, as well as continued traction in industrial products. Led by the revenue growth momentum, stable input costs, completion of pending low-margin orders and the gradual ramp-up of operations at the recently commissioned Jhagadia plant will help sustain the operating profitability at 9.5-10.5% over the medium term.

 

The financial risk profile remains robust due to the company’s net debt-free status, healthy debt protection metrics and strong liquidity. The debt levels have steadily increased over the years (Rs 363 crore as on March 31, 2022; Rs 1,758 crore as on September 30, 2025) led by the company’s increasing investments in its renewable energy arms—First Energy Pvt Ltd (FEPL) with its target to deploy 1 GW of hybrid renewable energy solutions over the medium term, and Thermax Onsite Energy Solutions Ltd (TOESL). The gearing was moderate at 0.34 time as on September 30, 2025, and is expected to remain below 0.4 times over the medium term despite the company’s focus on renewable energy solutions. The debt protection metrics are expected to be comfortable, with interest coverage ratio likely to remain healthy over the medium term. Cash and liquid investments were healthy at over Rs 2,800 crore as on March 31, 2025.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Thermax, and its subsidiaries and joint ventures, as these are in the same business.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Robust financial risk profile

The company has a net debt-free balance sheet and healthy networth of over Rs 5,052 crore as on September 30, 2025. The capital structure has remained comfortable in the past, with total outside liabilities to tangible networth (TOLTNW) ratio of less than 1.5 times over the past four fiscals. The debt protection metrics are robust along with healthy cash accruals. Investments in renewable energy solutions, in its subsidiary FEPL and its special purpose vehicles (SPVs) over the medium term, will be met through equity infusion or internal accrual and long-term debt. Hence, the financial risk profile will remain steady over the medium term. The liquidity is adequate, supported by cash surplus of over Rs 2,800 crore as of March 2025 and moderately utilised bank limits.

 

Diverse product portfolio and geographical presence leading to stable revenue stream

The product portfolio comprises boilers, waste-heat recovery systems, cogeneration plants and absorption chillers in the energy business; and water-treatment plants, air-pollution-control equipment, and water treatment chemicals in the environment business. The company is a leading player in several of its product segments, such as vapour absorption chillers, low- and medium-capacity boilers, and electrostatic precipitators. Besides, Thermax has been steadily increasing its global footprint with 30-35% of the revenue coming from the overseas market over the past few years. While the Industrial Infra and Industrial products segments contribute over 80% to its revenue currently, Thermax has been increasingly investing across the green energy sector, focusing on expanding its presence in the solar, wind, biomass and waste to energy and has outlined investment in its subsidiaries—FEPL and TOESL—over the medium term. That said, scaling up of FEPL and TOESL and the need for incremental investments will remain monitorable.

 

Thermax, through acquisition of 100% stake in Buildtech Products India Pvt Ltd (for Rs 72 crore in October 2024) and 51% stake in TSA Process Equipments Pvt Ltd (for ~Rs 71 crore in February 2024), will strengthen its water and tunnelling portfolio and expand its offerings.

 

Prudent working capital management

The net working capital cycle has been around 40 days due to prudent collection policy and inventory management. Despite having exposure to large turnkey projects, receivables have remained at less than 120 days in the past due to careful selection of projects and tight control on collections. This has also led to low dependence on working capital debt.

Key Rating Drivers - Weaknesses

Exposure to cyclicality in end-user industries 

The engineering and capital goods industry remains susceptible to business cycles; slowdown in overall infrastructure spending and absence of large orders may affect the operating performance. Historically, the domestic market has led growth for Thermax, while increased focus on the international markets exposes the company to commodity price fluctuations given fixed price contracts (especially in its project business). That said, order book of Rs 12,300  (as on September 30, 2025) across end-user segments provides robust revenue visibility over the medium term. Timely completion of the orders will remain monitorable.

 

Modest operating profitability due to intense competition

The company faces intense competition in business segments such as low-capacity boilers and packaged water treatment plants. Hence, the operating margin has largely remained at 7-9% in the past. While it increased to 9.6% in fiscal 2025 from ~8% in fiscal 2023, it is vulnerable to volatility in input prices owing to fluctuating commodity prices. The company has taken several measures to reduce input costs, such as centralised purchasing of raw materials and components for all divisions and global sourcing, back-to-back placement of orders for components and prudent hedging of forex (foreign exchange) exposure.

Liquidity Superior

The liquidity of Thermax is supported by expected annual accrual of more than Rs 650 crore over the medium term, and cash and equivalents of around Rs 2,800 crore as on March 31, 2025, which is expected to be sufficient to meet the capital expenditure (capex) requirement across the group. Despite increased debt levels over the past three fiscals, primarily in FEPL, Thermax has net nil debt. Bank limit utilisation was 48% on average over the 12 months through August 2025.

ESG Profile

The environment, social and governance (ESG) profile of Thermax supports its already strong credit risk profile. The thermal power sector has significant environmental impact in the form of high emissions and water consumption. The sector has a significant social impact because of its direct bearing on the health and wellbeing of its workers and customers.

 

The key ESG highlights

• The company’s Scope 1 and 2 emissions and energy consumption intensities have declined by ~36% and ~6% year-on-year to ~3 tCO2e and ~10 MWh, respectively, per Rs crore of revenue. This is largely supported by an increase in the share of renewables in the energy mix to ~43% in fiscal 2025 from ~5% in fiscal 2023.
• Thermax’s lost time injury frequency rate at nil for employees and 0.11 for workers is lower compared with the peers and there was no instance of workforce fatality in fiscal 2025.
• The company’s turnover rate has declined by ~3 percentage points to ~12% in fiscal 2025. Though, it is still in line with the peer average.
• Thermax’s governance structure is characterised by ~67% of its board comprising independent directors, two-women directors and extensive financial disclosures. 

 

ESG is gaining importance among investors and lenders. The commitment of Thermax to ESG will play a key role in enhancing stakeholder confidence, given shareholding by foreign portfolio investors and access to both domestic and foreign capital markets.

Outlook Stable

The credit risk profile of Thermax will remain stable over the medium term, backed by healthy balance sheet and large cash surplus.

Rating Sensitivity Factors

Upward factors

• Healthy double-digit growth in revenue and improvement in operating profitability to over 12% on sustained basis
• Increased diversity of revenue in terms of products, customers and segments
• Sustenance of strong financial risk profile, with TOLTNW ratio of less than 1 time and superior liquidity

 

Downward factors

• Decline in market share also impacting business performance; operating profitability below 6% on sustained basis
• Major debt-funded capex or acquisition leading to significant moderation in credit metrics
• Material reduction of liquid surplus due to high dividend payout, share buy-back or capital reduction.

About the Company

Pune-based Thermax was incorporated in 1966 as Wanson India Pvt Ltd and went public in February 1995. It began operations by manufacturing packaged boilers but subsequently diversified its product portfolio, which now includes packaged and custom-made large boilers, cogeneration equipment, air pollution-control equipment, water- and waste-treatment plants and chemicals, and absorption chillers. Thermax has traditionally focused on turnkey projects for large boiler systems, water- and effluent-treatment plants, air-pollution-control systems and co-generation plants. It also pioneered the vapour-absorption cooling plants segment in India.

 

During the first half of fiscal 2026, revenues came in at Rs.4,631 crore and  profit after tax stood at Rs.271 crore. Against this, the company had recorded revenues of Rs.4,796 crore and net profits of Rs.307 crore during the corresponding year-ago period.

Key Financial Indicators (Consolidated)

Particulars	Unit	2025	2024	2023
Total income	Rs crore	10,641	9556	8250
Profit After Tax (PAT)	Rs crore	627	643	451
PAT Margin	%	5.9	6.9	5.5
Adjusted debt/adjusted networth	Times	0.36	0.29	0.21
Interest coverage	Times	9.57	12.76	19.52

 

Any other information: Not Applicable