Rating Rationale

Brickwork Ratings (BWR) has assigned a long-term rating of BWR A- with a Stable outlook and a short-term rating of BWR A2+ for the bank loan ratings (BLR) of Thermal Systems Private Limited (TSPL, or the company).

The rating factors in the company's four-decade-long existence in boilers, heat exchangers, and other industrial equipment, backed by strong relationships with domestic and global clients that drive repeat business. TSPL’s operating scale has doubled in recent years, underpinned by a robust order book and consistent execution timelines. The rating is further supported by a robust financial profile marked by low gearing and comfortable debt coverage indicators, alongside a diversified product portfolio and a reputed, wide-reaching customer base across multiple end-user sectors. These key strengths are partially offset by susceptibility to fluctuations in foreign exchange rates and the volatility of raw material steel prices, though a natural hedge and escalation clauses in several projects mitigate these risks. Additionally, while operations are working capital-intensive, the requirement is effectively cushioned by customer advances.

BWR believes that the business and financial risk profile of TSPL will be maintained over the medium term. The Stable outlook indicates BWR's expectations that the company will sustain its business risk profile in the medium term with healthy orders on hand and timely execution. 

The terms of sanction include standard covenants stipulated for bank loan facilities.

• Longstanding Existence and Experienced Promoters:  :

  With over 40 years of industry experience in waste heat recovery boilers, heat exchangers, and other products, the promoters possess extensive knowledge of market dynamics. Their established relationships with domestic and international clients and suppliers drive repeat orders that support ongoing operations. Additionally, the promoters are actively pursuing growth through strategic domestic diversification, key industry associations, technology partnerships, and international MOUs.

   

• Healthy and diversified pipelines: :

  The company maintains an extensive network in India alongside an international presence in 40 countries, serving diverse industrial sectors. Over recent fiscal years, the primary share of its operating revenue—exceeding 55%— has come from the steel sector, with the remainder contributed by industries including power generation, sulphuric acid production (SAP), oil refining,  ferrous, non-ferrous, and Fertilisers and chemical processing. 

  As of 22 October 2026, the company holds work orders in progress of Rs. 1,070.92 crore, scheduled for execution over a 10–15-month timeframe. The company has prestigious clients such as Bharat Heavy Electricals Limited (BHEL), Hindustan Petroleum, Jindal Saw Limited, IOCL (Indian Oil Corporation Ltd.), Vedanta Group, Rungta Sons Pvt Ltd, Hindustan Zinc, Megha Engineering, and IFFCO (Indian Farmers Fertiliser Cooperative Limited). Additionally, the company serves key international clients, including Ballestra (Italy), JESA SA (Morocco), John Zink (Italy), MECS (USA), and SNC-Lavalin (Canada).

• YOY Improvement in Operations: :

  Driven by a favorable outlook in the steel and power sectors, the company's year-over-year sales have demonstrated consistent growth, nearly doubling relative to FY23 levels. In FY26, total operating income is Rs. 685.39 Crores, ~13% up from Rs. 606.05 Crores in FY25. Furthermore, exports continuously contribute between 8% and 13% of overall sales. Operating profit margins improved from 8.10% in FY24 to 10.18% in FY25, rising further to 11.64% in FY26, driven by the growing scale of operations.  On a provisional basis 6MFY27, TSPL operating income stood at Rs. 282.66 crore. Supported by a robust order book, the company projects achieving a revenue scale of Rs. 700–750 crore for FY27. 

   

   

• Comfortable financial risk profile: :

  The company exhibited comfortable financial standing in FY26, supported by a Tangible Net Worth (TNW) of Rs. 209.03 Crs and interest-free promoter unsecured loans (USLs) of Rs. 7.07 Crs. The gearing ratio is low at 0.38x in FY26 (FY25: 0.12x), while the TOL/TNW ratio increased to 1.90x in FY26 from 1.60x in FY25—driven mainly by substantial project advances and higher trade payables, which reached Rs. 109 Crs as of March 31, 2026 (FY25: Rs. 54.87 Crores) and reduced to Rs. 70.8 Crs by September 30, 2026 The debt protection metrics remain robust with an ISCR of 6.77x and a DSCR of 5.45x for FY26, (FY25: 7.52x & 5.82x) both of which are projected to remain stable going forward.

• Working capital intensive operations:  :

  The working capital operations of the company are intensive, marked by a conversion cycle of 153 days in FY26 as against 107 days in FY25 owing to the high inventory days, which stood at 123 days in FY26 as against 94 days in FY25. The inventory buildup was due to the addition of new work orders and the commissioning phase. Further, the debtor days stood at 89 days in FY26 as against 68 days in FY25, wherein the company receives advance payments from selective customers, resulting in efficient working capital management. BWR expects the working capital operations of the company to remain at similar levels over the medium term. 

  
   

   

• Susceptibility of profitability to raw material price volatility: :

  The company is exposed to the risk of price volatility from the time of procurement of the product till sale of the same. This also exposes the company to risks to its growth and profitability.  Steel is the primary raw material, procured predominantly from reputable domestic suppliers, along with roughly 8–9% imported from China. Although elevated steel prices posed a challenge, the company’s operating margins during fiscal 2025 and 2026. To mitigate raw material price volatility, procurement is initiated immediately following contract awards, with execution spanning a 10–15 month period. Additionally, price escalation clauses are available for selective customer agreements. Achieving a sustained and significant improvement in operating margins—supported by reduced input costs and wider adoption of price escalation provisions in contracts—will be crucial for the ratings.

Positive:

• A sustained and significant growth in total operating income above Rs 800 Crore alongside an operating profit margin above 12%, while maintaining a comfortable financial risk profile. 

• Adequate liquidity position with TOL/TNW below 1.50x.

Negative:

• Delay in the execution of the projects, thereby causing any dip in the scale of operations or profit margins below 10%, or an increase in borrowing more than anticipated. 

• Elongation of the operating cycle beyond 185 days, adversely affecting the company’s liquidity.

The company’s liquidity profile is expected to remain adequate, supported by projected net cash accruals of Rs. 56–57 Crs against minimal debt repayment obligations in FY27 and FY28.  For the 12 months ending September 2026, average working capital utilization stood at over 90% for non-fund-based limits and 61% for fund-based limits. The company has availed an additional emergency line of credit of Rs. 4.57 Crs to support liquidity. As of 28 October 2026, liquidity is further backed by free cash and liquid investments of ₹1.31 crore, lined marked FDRs of Rs. 79.05 Crores, alongside interest-free promoter unsecured loans (USLs) of Rs. 7.07 Crs. The liquidity is further expected to remain adequate, with no major capital expenditure is planned for the projected period; any routine operational capex will be funded through internal accruals.

Originally established as a proprietary concern by P.V. Raju in 1984, the business was reconstituted as a private limited company in 1991 under the name Thermal Systems Hyderabad Private Limited (TSHPL). On July 14, 2026, it was renamed Thermal Systems Private Limited (TSPL).

The company specializes in delivering turnkey solutions—ranging from conceptual design to commissioning—for Waste Heat Recovery Systems and custom-designed heat recovery equipment across diverse industrial applications. Its principal product offerings include process gas boilers, waste heat recovery boilers, lean/tail gas-fired boilers, fired boilers, and heat exchangers, among others.

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural,transactional or legal aspects. Details on the complexity levels of the instruments are available on BWR's website Complexity Levels.

Not Applicable

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