Thermax Q1 FY27: Revenue Growth, But A Sharp Hit From Project Overruns

Thermax reported a mixed start to FY27. Operating revenue for Q1 FY27 rose to Rs. 2,303 crore, up 7% year on year, supported by a healthy backlog and steady demand across multiple end markets. But profitability fell sharply. Profit before tax dropped to Rs. 42 crore and profit after tax fell to Rs. 22 crore, down 80% and 86% respectively.

Management attributed the weakness primarily to a one-off project cost overrun provision of Rs. 91 crore in the Industrial Infra segment. The CEO described the affected project as a legacy government contract, part of a category the company has consciously stepped away from in recent years.

The quarter in numbers: Backlog strong, earnings weak

Despite the profit shock, the order engine remained intact. Q1 order booking increased 2% to Rs. 2,809 crore, while order balance rose 23% to Rs. 14,045 crore. Management said the improvement in order balance was driven by better performance in TBWES, Industrial Products and Green Solutions.

A key operational issue also impacted the quarter. Management said around Rs. 300 crore of finished goods inventory could not be shipped, particularly to international customers, as high shipping rates and customer decisions to delay equipment pickup disrupted deliveries.

Segment performance: Industrial Infra dragged, Chemicals improved

Industrial Products remained the largest contributor to segment sales, but margins softened. Q1 FY27 segment sales were Rs. 1,058 crore with segment PBIT of Rs. 64 crore (6.1% margin), versus 8.3% margin last year. Management linked the impact to higher input costs and lower export sales.

Industrial Infra was the main source of earnings pressure. Segment sales were Rs. 814 crore, but segment PBIT was negative at minus Rs. 71 crore (minus 8.7%), compared to a 9.9% margin in Q1 FY26. The decline was primarily due to the Rs. 91 crore increase in estimated cost-to-complete for a specific project.

Chemicals delivered a clear year-on-year improvement. Segment sales increased to Rs. 230 crore, and PBIT rose to Rs. 26 crore (11.2% margin), supported by higher volumes and a better product mix.

Green Solutions continued to report losses. Segment sales were Rs. 245 crore and segment PBT was minus Rs. 17 crore (minus 6.9%). Management said FEPL recorded an unexpected loss due to approval delays in Tamil Nadu and carrying costs, while Bio-CNG also remained loss-making at the operating level.

Order book: Green Solutions surged, data centres gaining traction

Order booking was led by Industrial Products at Rs. 1,394 crore (up 8% YoY). Industrial Infra order booking fell 24% to Rs. 863 crore, which management attributed to lower demand. Green Solutions order booking increased sharply to Rs. 382 crore (up 149% YoY). The company clarified that Green Solutions numbers were also influenced by a change in TOESL order book reporting methodology.

TOESL adopted a rolling 12-month forecast model for reporting order book, replacing the earlier practice of reporting only the first year revenue from long-term contracts. This increased the reported order book by Rs. 139 crore, with no impact on underlying contracts, revenue recognition, or financial results.

The industry mix of Q1 order booking highlighted several demand pockets. Chemicals (18%), data centers (17%), engineering (13%), and metals and mining (11%) were major contributors. Management explicitly flagged data centers as a high-potential growth sector, and in the concall described multiple touchpoints across the group, including cooling solutions, boiler pressure parts via TBWES, water, and chemicals.

Management commentary: Legacy clean-up, execution focus, and policy-linked opportunities

Management acknowledged that the problematic government project should not have been taken, and explained that cost revisions emerged after late engineering changes from a partner. The CEO also stated that the company has largely exited large, long-duration government projects with civil construction exposure, and that remaining PSU and government-related orders in the backlog are around Rs. 300 to 400 crore, less than 5% of the total order book.

In Bio-CNG, management said four projects remain under performance guarantee test runs (PGTR). One has been successfully completed and handed over, the second is more than 50% complete, and the next two are expected to complete PGTR in August and September. The company is also waiting for policy changes to improve project economics, particularly a possible 20% to 30% increase in Bio-CNG pricing and higher blending mandates.

On FEPL, management said the company plans to bring in an external investor who would take a substantial majority of the renewables platform during FY27.

Takeaways

Thermax’s Q1 FY27 performance was defined by a sharp earnings hit from a single legacy project, compounded by shipment delays and cost volatility. At the same time, the company exited the quarter with a materially higher backlog, improving order balance, and clear demand signals in newer themes like data centers.

The next few quarters will be judged on execution. Management expects better profitability in Q2 to Q4 versus last year, but investor confidence will depend on whether project surprises truly reduce and whether the strong order balance translates into smoother revenue and margin delivery.