Rating Rationale
March 28, 2025 | Mumbai
Thermax Instrumentation Limited
Ratings reaffirmed at 'Crisil AA+/Stable/Crisil A1+'
 
Rating Action
Total Bank Loan Facilities RatedRs.70 Crore
Long Term RatingCrisil AA+/Stable (Reaffirmed)
Short Term RatingCrisil A1+ (Reaffirmed)
Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

Crisil Ratings has reaffirmed its 'Crisil AA+/Stable/Crisil A1+' ratings on the bank loan facilities of Thermax Instrumentation Ltd (TIL; part of the Thermax group).

 

Revenue stood ~14% lower on-year in fiscal 2024 at Rs 120.5 crore given the lower share of contribution of its EPC (engineering, procurement and construction) business. This is in line with the complete shift of the EPC business vertical to its parent—Thermax Ltd (Thermax; rated ‘Crisil AA+/Stable/Crisil A1+’). TIL will entirely focus on the margin lucrative operations and maintenance (O&M) business, particularly in the international market, over the medium term, while the share of EPC business reduces to nil by fiscal 2026 (accounted for ~70% of fiscal 2024 revenue). As a result of this transfer, the topline is expected to come in at Rs 40-60 crore over the medium term. The margin, given the increase in the contribution of the O&M segment, increased to 9.4% in fiscal 2024 from 6.5% in fiscal 2023.

 

The ratings continue to reflect the strong technological, managerial, operational and need-based financial support TIL receives from Thermax. The ratings also factor in the comfortable financial risk profile. These strengths are partially offset by expected modest scale of operations over the medium term.

 

In December 2023, the demerger of the cooling business (ACC) of Thermax Cooling Solutions Ltd (TCSL) and its subsequent merger with TIL was completed. The transfer of business was undertaken to consolidate similar businesses and generate cost and business synergies. Pursuant to the demerger, TIL issued redeemable preference shares of Rs 17 crore to the shareholders of TCSL (that is Thermax).

Analytical Approach

Crisil Ratings has factored in the business, financial and managerial support provided to TIL by Thermax.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong support from the parent, Thermax: Despite the planned shift of its EPC business vertical to Thermax, TIL will continue to be a critical arm for the parent in expanding it’s presence in the international markets for offering O&M services for the power projects. It will continue to draw operational and technical support from Thermax. Apart from the access to need-based funding support, TIL would also benefit from Thermax’s established relationships with customers in the south-east Asian, the Middle East and African countries; and its management’s vast experience, which should help TIL to scale up its O&M business over the medium term.

 

  • Comfortable financial risk profile: TIL has nil external debt on its balance sheet and moderate networth of around Rs 50 crore as on March 31, 2024. Its working capital requirement is met through internal accrual, hence there is no reliance on external debt. Pursuant to the demerger order passed in fiscal 2024, TIL issued redeemable preference shares of Rs 17 crore to Thermax. Despite its planned redemption in fiscal 2026, TIL has sufficient liquidity in the form of cash and short-term investments (of Rs 26 crore as of December 2024). Besides this, the company is expected to remain debt-free over the medium term in absence of any major capital expenditure (capex). Bank limit utilisation was also minimal, at 10% on average for the 12 months through February 2025, with no utilisation reported of the fund-based limits. Credit metrics will also remain healthy, given the low working capital requirement and zero external debt.

 

Weakness:

  • Expected modest scale of operations over the medium term: TIL’s scale of operations is expected to moderate over the medium term, with the complete transfer of its EPC business to Thermax. While the EPC business segment contributed to ~70% of the revenue in fiscal 2024, this is expected to be nil by fiscal 2026. That said, growth of TIL’s O&M business vertical over the medium term remains monitorable. Meanwhile, Thermax’s extensive experience in the O&M space and its presence in the international market is expected to aid healthy order booking for the company.

Liquidity: Strong

The parent, Thermax, will provide need-based support in case of exigencies. On a standalone basis, liquidity will remain adequate despite its planned redemption of the redeemable preference shares of Rs 17 crore in fiscal 2026, given sufficient cash position and short-term investments (of Rs 26 crore as of December 2024), and cash accrual supporting liquidity in absence of any external debt obligations. Additionally, the company had low bank limit utilisation of 10% on average for the 12 months through February 2025.

Outlook: Stable

TIL will continue to derive strong support from Thermax, sustaining its credit risk profile.

Rating sensitivity factors

Upward factors:

  • Improvement in the credit risk profile of Thermax
  • Healthy double-digit revenue growth and operating margin of above 25% on a sustained basis
  • Sustenance of the healthy financial risk profile, with total outside liabilities to tangible networth (TOLTNW) ratio of less than 1.2 times and adequate liquidity

 

Downward factors:

  • Deterioration in the credit risk profile of Thermax
  • Operating margin under 10% because of cost overrun or raw material unavailability
  • Large, debt-funded capex or acquisition, weakening the credit metrics, with the TOLTNW ratio falling below 1.5 times
  • Change in Thermax’s support philosophy

About the Company

Incorporated in 1996, TIL was engaged in rendering erection, commissioning, civil works and O&M services for turnkey contracts for power plants in India and abroad. Based on the recent shift in business strategy, TIL will exclusively focus on undertaking O&M services for turnkey contracts for power projects, primarily in the international markets.

Key Financial Indicators

Particulars (Rs crore)

Unit

2024

2023

Revenue from operations

Rs crore

120

141

Profit after tax (PAT)

Rs crore

12

8

PAT margin

%

9.6

6.0

Adjusted debt/adjusted networth

Times

0.34

-

Interest coverage

Times

89.16

153.76

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 10.00 NA Crisil A1+
NA Cash Credit^ NA NA NA 30.00 NA Crisil AA+/Stable
NA Cash Credit/ Overdraft facility$ NA NA NA 15.00 NA Crisil AA+/Stable
NA Letter of Credit% NA NA NA 10.00 NA Crisil A1+
NA Proposed Long Term Bank Loan Facility NA NA NA 5.00 NA Crisil AA+/Stable

^ Bank guarantee and letter of credit is sub-limits of cash credit
% Is a sublimit of bank guarantee
$ Fully interchangeable with bank guarantee

Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 50.0 Crisil AA+/Stable   -- 02-01-24 Crisil AA+/Stable 22-09-23 Crisil AA+/Stable 29-12-22 Crisil AA+/Stable Crisil AA+/Stable
      --   --   --   -- 28-06-22 Crisil AA+/Stable --
Non-Fund Based Facilities ST 20.0 Crisil A1+   -- 02-01-24 Crisil A1+ 22-09-23 Crisil A1+ 29-12-22 Crisil A1+ Crisil A1+
      --   --   --   -- 28-06-22 Crisil A1+ --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 10 ICICI Bank Limited Crisil A1+
Cash Credit& 20 HDFC Bank Limited Crisil AA+/Stable
Cash Credit& 10 Citibank N. A. Crisil AA+/Stable
Cash Credit/ Overdraft facility% 15 ICICI Bank Limited Crisil AA+/Stable
Letter of Credit$ 10 ICICI Bank Limited Crisil A1+
Proposed Long Term Bank Loan Facility 5 Not Applicable Crisil AA+/Stable
& - Bank guarantee and letter of credit is sublimit of cash credit
% - Fully interchangeable with bank guarantee
$ - Is the sublimit of Bank Guarantee
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)
Criteria for factoring parent, group and government linkages

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