CHAIRPERSON
Dear Shareholder,
It is my privilege to present the 31st Annual Report of your company. In fiscal
2011-12, Thermax generated a total income of Rs 5375 crore and a profit after tax of Rs.
407 crore, higher respectively by 9% and 6% over the last year.
Though we marginally improved our performance, the gains have been modest. It has been
a tough year for the manufacturing sector and especially challenging for capital goods
industry players like Thermax. I would like to take this opportunity to thank our Managing
Director and CEO, Mr. M.S.Unnikrishnan and his team for maintaining the company`s
performance in a volatile environment; and all our employees who have worked very hard to
protect our top and bottom lines. I am grateful to our Directors who, as always, have been
a source of guidance and incredible support.
I would like to share with you the fact that we are gearing up for a challenging year
ahead. The Government`s exclusive focus on tightening monetary policy as expressed by a
series of interest rate hikes throughout the year, complete policy paralysis vis-a-vis
coal supply, environmental issues, land acquisition, defunct state electricity boards and
so on, have resulted in a decline of the country`s economic growth from 8.6% in 2011 to
below 6.7%. It is unfortunate that we missed the opportunity to reap significant gains for
our country even as we were comparatively insulated from the global slowdown. We have
failed to make policy and structural reforms over the past two years to propel India
towards its growth targets. As policy initiatives continue to flounder, we have been
witnessing an alarming slowdown in industry as reflected in a weakening IIP growth for the
year. The Eurozone chaos and a crisis of confidence in the domestic economy have already
pushed us into a slowdown phase.
Our order carry forward into the new year stands 25% lower than the previous year. The
power sector, which contributes about 20 – 25% of our company`s turnover in recent
years, is languishing as there is a near freeze in order booking and slowdown in
execution. It will be a difficult year ahead as for the project business, which
contributes around 2/3 rd of our income, we need a good order backlog from the previous
year if we have to show a healthy growth in revenues.
The economic situation could get worse in Europe and the US recovery is not too
encouraging. Uncertain times are ahead. But before we blame it all on Europe and the
external markets, it would make eminent sense to see that there is a lot that can be done
within India. When the aspirations of a predominantly young population have been kindled,
there can be no option for any government but to revive our growth engine. To do this, the
ever widening supply-demand gap in the power sector has to be addressed as 400 million
Indians still wait for reliable power. Your company is optimistic that, in the near
future, its businesses will be able to contribute significantly to the creation of
additional capacity in power, both on and off grid. The manufacturing plant that the joint
venture Thermax Babcock & Wilcox Energy Solutions is setting up will be ready during
this financial year. Though it may be a while before we receive an order, we are confident
that the power sector and therefore the JV will do well over time.
There are non-infrastructure sectors like food, pharmaceuticals and chemicals that have
so far been insulated from the economic slowdown and your company`s product divisions have
been able to gain from improved business. We are hopeful this will continue. The company
will also maintain its focus on select international markets with its services and
solutions that promote efficient and eco-friendly energy, retrofits and revamps and
reliable project management expertise.
Last year, your company was able to make further progress on the renewable energy front
with applications that harnessed solar and hybrid forms of energy. The rural
electrification project at Shive village that Thermax began with the support of the
Department of Science and Technology, has been made operational. This technology
demonstration project had been undertaken on a public private partnership basis. Today,
many more customers have installed your company`s products that work on solar thermal
energy for their heating and cooling applications. We will continue to make these products
more economically viable and expand our green energy offerings to help client businesses
reduce their carbon footprint.
The recent acquisition of Rifox, a German company that specialises in steam efficiency
products will reinforce the company`s presence in the clean energy space in Europe and
other markets. This acquisition will also extend the reach of your company`s service arm,
which over time, will help compensate for the cyclical vagaries of the project business.
I am happy to share with you that Danstoker, the Danish company that Thermax acquired
earlier, continued to perform well, improving on its previous year`s growth, in spite of
the volatile business condition prevailing in Europe.
The economic slowdown is having an impact on the creation of new jobs for aspiring
candidates. We will continue to recruit a fair number of engineer trainees as we do each
year. However, your company shares with other capital goods organisations the paradox of
the difficulty of preventing talent migration in an environment of reduced opportunities.
The power sector, although operating at a stalled momentum, seems to be busy with
recruitments on a business-as-usual basis.
I am delighted to share with you that our Board has agreed to increase the allocation
for CSR activities from the erstwhile 1% to 3% of the company`s profit after tax. The
schools that the Thermax Social Initiative Foundation manage in partnership with Akanksha
continue to do well, helping children with all round development. In the coming year we
will adopt one more school, making it three schools in the city of Pune. We are confident
that the additional resources can be utilised to expand our work in the field of education
for the economically underprivileged.
Let me conclude by thanking all our shareholders, business partners and well wishers
once again. With your support, we are confident of staying on course even during these
trying times.
With best wishes
Meher Pudumjee
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