Your Directors have pleasure in presenting the Thirty-second Annual Report, together
with the audited accounts of your company for the year ended March 31, 2013.
(Rupees in crore)
|Profit before finance cost, depreciation and tax
|Finance cost & depreciation
|Profit before tax
|Provision for taxation (incl. deferred tax)
|Profit after tax
|Balance carried forward from last year
|Profit available for appropriation (cumulative)
|Proposed equity dividend
|Tax on dividend
|Transfer to general reserve
|Surplus carried forward
For the financial year 2012-13, your company reported a total revenue of Rs. 4,763.9
crore as against last year`s revenue of Rs. 5,374.6 crore, a reduction of 11.4 % owing to
a lower order book at the beginning of the year.
Thermax`s Energy business Boiler & Heater, Power, Cooling and Heating
divisions plus the fledgling Solar group contributed 77% of the total revenue while
the Environment business comprising Air Pollution Control, Water and Waste Solutions and
Chemical division accounted for the remaining 23%. Last year the share of Energy and
Environment businesses was 78% and 22% respectively.
During the year, exports including deemed exports were at Rs. 983.9 crore against Rs.
1,142.7 crore last year, a decrease of 13.9%.
Profit before tax at Rs. 515.6 crore was 10.8% of the total revenue, compared to Rs.
600.9 crore, 11.2%, previous year. In a year that continued to witness increase in input
costs, lower price realisations and reduced revenues, the company maintained EBITDA
margins at 10.8% as the management continued focusing on operational efficiency and
controlling costs on a sustainable basis across the company.
Profit after tax stood at Rs. 350 crore compared to Rs. 406.9 crore in the previous
year. Earnings per share (EPS) declined to Rs. 29.37 from Rs. 34.15 in FY 2011-12.
Order booking for the year was Rs. 4,859 crore against Rs. 4,032 crore last year,
registering an increase of 20%. Your company completed the year with an order backlog of
Rs. 4,357 crore as against Rs. 4,230 crore in FY 201112. Like the previous year, FY
2012-13 has also been challenging for the capital goods sector. The difficulties of the
power sector and the resulting absence of fresh investments and order finalisations
Profit after tax on a consolidated basis is lower than the stand-alone results owing to
the losses incurred by Thermax Instrumentation Ltd. (TIL), Thermax (Zhejiang) Cooling
& Heating Engineering Co. Ltd. (TZL) and the company`s share of losses in the joint
venture subsidiaries, Thermax Babcock & Wilcox Energy Solutions Pvt. Ltd. (TBWES) and
Thermax SPX Energy Technologies Ltd. (TSPX). TIL, which undertakes construction and
commissioning work for the Power division of the company, is expected to face another
challenging year ahead. In the tough market conditions prevailing in China, TZL is still
working towards breaking even. The construction of the manufacturing plant of TBWES is
nearing completion and the JV is focussing on making it operational.
The consolidated total income of the Thermax Group was Rs. 5,576.5 crore (Rs. 6,174.2
crore, previous year). Income from international business including deemed exports was Rs.
1,468.3 crore as compared to Rs. 1,574.2 crore for the previous year. The Group registered
a profit before tax of Rs. 481.4 crore (Rs. 596.5 crore, previous year). Profit after tax,
and minority interest was Rs. 320.1 crore for the year. EPS was Rs. 26.87 (Rs. 33.86,
The audited consolidated financial statements presented by the company include the
financial results of all subsidiary companies, prepared in accordance with Accounting
Standard 21 issued by The Institute of Chartered Accountants of India. In addition, a
statement of summarised financials of all the subsidiaries is included.
ACQUISITION OF ASSETS
In April 2013, the company, through its step down subsidiary Danstoker A/S, Denmark,
acquired assets including the factory of D.P. Clean Tech Ltd., Denmark which are suitable
for manufacturing and servicing industrial boilers. The assets are held in the newly
formed companies viz. Boilerworks A/S and Boilerworks ApS. They will provide additional
manufacturing support for Danstoker. The acquisition was funded through the internal
accruals of Danstoker A/S.
The Directors have recommended a dividend of Rs. 7/- (350 %) per equity share of face
value Rs. 2/-. The dividend, if approved by the shareholders, will result in a payout of
Rs. 97.6 crore, including dividend distribution tax of Rs. 14.2 crore.
By a general circular (No. 2/ 2011 dated February 8, 2011), the Ministry of Corporate
Affairs, Government of India, under Section 212(8) of the Companies Act, 1956, has
permitted companies not to attach copies of the Balance Sheets and Profit and Loss
Accounts, Directors` Reports, Auditors` Reports and other documents of all their
subsidiaries to the Accounts of the company. The company has acted accordingly.
However, annual accounts of the subsidiary companies and the related detailed
information are available at any time to shareholders of the parent company, subsidiary
companies and to statutory authorities. On request, these documents will be made available
for inspection at the company`s corporate office.
Thermax Energy Performance Seruices Ltd. (TEPS)
TEPS, a joint venture company with 51-49 percent shareholding between Thermax Limited
and EPS Asia Inc. respectively, had been referred for voluntary winding-up effective
February 28, 2007 due to non-acceptance of business model and lack of technical and
financial investments from the joint venture partner.
TEPS was dissolved on May 10, 2012 pursuant to the Order passed by the Bombay High
Thermax Sdn. Bhd., Malaysia
Your company acquired this entity (registered under the Companies Act, 1965 of
Malaysia) in July, 2012 by way of acquisition of its entire share capital. The entity is
now a wholly-owned subsidiary of the company.
MANAGEMENT DISCUSSION AND ANALYSIS
A Management Discussion and Analysis report, highlighting the performance and prospects
of the company`s energy and environment segments, including details of subsidiaries
catering to the respective businesses is attached.
CORPORATE GOVERNANCE REPORT
A detailed Corporate Governance Report is included in this report.
A certificate from the statutory auditors of the company regarding compliance with the
conditions of corporate governance as required under Clause 49 of the Listing Agreement is
part of this report.
LISTING ON STOCK EXCHANGES
The company`s equity shares are listed on two stock exchanges - National Stock Exchange
of India Limited (NSE stock code - Thermax EQ) and BSE Limited (BSE stock code - 500411).
FINANCE, ACCOUNTS AND SYSTEMS
Opening cash & cash equivalent as on April 1, 2012 including current investments
was Rs. 771.5 crore. Closing cash & cash equivalent as on March 31, 2013 including
current investments stood at Rs. 632.9 crore, after repayment of buyer`s credit loan of
Rs. 162.8 crore.
In addition to repayment of outstanding buyer`s credit loan of Rs. 162.8 crore during
the year, the company made net investments of Rs. 127.3 crore in fixed assets (previous
year Rs. 105.8 crore) and Rs. 42.7 crore in certain subsidiaries (previous year Rs. 88.6
crore), details of which are mentioned in this report.
The net cash outflow after factoring the above was Rs. 138.6 crore in the current year
as against Rs. 25.9 crore in the previous year.
During the year, the company has made net investment of Rs. 195.5 crore in mutual funds
which has been shown separately in cash flow statement.
The company`s net working capital, adjusted for bank fixed deposits, was positive at
Rs. 469.1 crore as against Rs. 33.6 crore in the previous year owing to lower customer
advance balances and higher receivables in absolute terms.
The company continued to strengthen the process of building internal controls as well
as automation of work flows. Focus on cash flows, working capital as well expenditure
control continued through enhanced Management Information Systems.
ICRA Ltd. has reaffirmed its rating, AA+ for long term and A1+ for short term banking
facilities. The long term rating carries a `Stable` outlook.
The company had no unpaid / unclaimed deposit(s) as on March 31, 2013. It has not
accepted any fixed deposits during the year.
The total number of permanent employees on the rolls of the company was 4,100 as on
March 31, 2013 (4,016, the previous year).
During FY 2013-14, the Memorandum of Settlement with the Thermax Kamagar Sangathan
(representing workmen at Chinchwad works) and with the Bhartiya Kamgar Karmachari
Mahasangh (representing workmen at Paudh works) are due for fresh negotiations. The
management of the company is confident of amicable negotiations and closure of these
PARTICULARS UNDER SECTION 217 OF THE COMPANIES ACT, 1956
A statement of the particulars required under Section 217(1) of the Companies Act, 1956
(the Act), read with the Companies (Disclosure of Particulars in the Report of the Board
of Directors) Rules, 1988, is annexed and forms part of this Report.
In terms of the provisions of Section 217(2A) of the Act, read with the rules framed
thereunder as amended, the names and other particulars of the employees are set out in the
annexure to the Directors` Report. Having regard to the provisions of Section 219 (1) (b)
(IV) of the Act, the Annual Report excluding the aforesaid information is being sent to
all the members of the company and others entitled thereto. Any shareholder interested in
obtaining such particulars may write to the Company Secretary at the corporate office of
the company. The statement is also available for inspection at the corporate office during
working hours up to the date of the Annual General Meeting.
In accordance with the provisions of the Companies Act, 1956 and the company`s Articles
of Association, Pheroz Pudumjee and Dr. Jairam Varadaraj retire by rotation at the ensuing
Annual General Meeting and being eligible, offer themselves for reappointment as
Gajanan P Kulkarni was appointed as the Company Secretary as per the provisions of
Section 383A of the Companies Act, 1956. He was also designated as the Compliance Officer
in terms of the Listing Agreement.
DIRECTORS` RESPONSIBILITY STATEMENT
In terms of Section 217(2AA) of the Companies Act, 1956, your Directors, to the best of
their knowledge and belief and according to the information and explanations obtained by
them with respect to the statement of Profit & Loss for the financial year ended March
31, 2013 and the Balance Sheet as at that date ("financial statements"), confirm
1. The financial statements have been prepared on a going concern basis. In the
preparation of the financial statements the generally accepted accounting principles
(GAAP) of India and applicable accounting standards issued by The Institute of Chartered
Accountants of India have been followed.
2. Appropriate accounting policies have been selected and are being applied
consistently. Judgments and estimates that are reasonable and prudent have been made so as
to give a true and fair view of the state of affairs of the company as at the end of the
financial year and of the profit of the company for that period. Significant accounting
policies and other required disclosures have been made in Notes to the Financial
3. Proper and sufficient care has been taken for the maintenance of adequate accounting
records in accordance with the provisions of the Companies Act, 1956, for safeguarding the
assets of the company and for preventing and detecting fraud and other irregularities. To
ensure this, the company has established internal control systems consistent with its size
and nature of operations. In weighing the assurance provided by any such system, its
inherent limitations should be recognised. These systems are reviewed and updated on an
ongoing basis. Periodic internal audits are conducted to provide reasonable assurance of
compliance with these systems. The company has an Internal Audit department which
coordinates the internal audit process. The Audit Committee of the Board meets at periodic
intervals to review the internal audit function.
4. The financial statements have been audited by M/s. B.K. Khare & Co., the
statutory auditors and their report is appended.
COMMITTEES OF THE BOARD
During the year, changes have been effected in the following committees of the Board:
A) Borrowing & Investments Committee: The terms of reference of the committee were
amended by the Board on July 26, 2012.
B) Strategic Business Development Committee: The Board appointed Dr. Jairam Varadaraj
as a member of the committee with effect from February 26, 2013.
The Corporate Governance Report gives details of these committees.
M/s. B.K. Khare & Co., Chartered Accountants, retire as statutory auditors at the
ensuing Annual General Meeting and are eligible for reappointment.
As required under the provisions of Section 224(1B) of the Companies Act, 1956, the
company has obtained a written consent from them to the effect that their reappointment,
if made, would be in conformity with the limits specified in the said section.
M/s. Dhananjay V. Joshi & Associates, Cost Accountants, Pune have been appointed as
the Cost Auditors of the Company for FY 2013-14 subject to the approval of the Central
AWARDS AND RECOGNITION
Your company has received the following awards and recognition during the year:
Thermax MD and CEO, M.S.Unnikrishnan received the Asia Innovator Award at the
2012 CNBC Asia Business Leaders Awards (ABLA) in Bangkok. He is the first Indian to
receive the Innovation Award in the 11 year history of ABLA.
Thermax`s Savli and Chinchwad factories won awards from the CII and the
Greentech Foundation for their health, safety and environment (HSE) practices, employee
involvement and environment management systems.
Your Directors place on record their appreciation of the continued support extended
during the year by the company`s clients, business associates, suppliers, bankers,
investors, government authorities and joint venture partners. Your Directors also place on
record their appreciation of the dedication and contributions made by all the employees
including the workmen, for commitment, hard work and support.
Your Directors would also like to thank all their shareholders for their continued
faith in the company and its future.
||For and on behalf of the Board
|Pune: May 22, 2013
Annexure to the Report of the Board of Directors as required under the Companies
(Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, for the
year ended March 31, 2013
A. CONSERVATION OF ENERGY
The overall energy consumption of the company is not substantial as its processes
require optimal energy. During the year, the following measures were taken towards energy
and resource conservation:
1. Electricity: At the Chinchwad and Savli manufacturing facilities, consumption
was optimised using energy efficient systems including installing auto on-off, replacing
old devices, arresting leakage points through air audit, proper crimping of air hoses with
internally developed crimping tools; and maintaining the power factor according to State
Electricity Board norms, resulting in an annual saving of Rs. 0.8 crore.
At the Paudh plant, the company has reduced electricity consumption by 11% over the
last year for every cubic metre of resin produced. This was done by controlling process
cycle time, effectively utilising power-consuming machinery and reducing power consumption
in cooling towers by relocating them from the ground to the top of the building.
2. Water: The company saved Rs. 1.35 lakh by minimising wastage of potable water at
various locations in the Chinchwad plant.
At Paudh and Jhagadia plants, around 1,70,000 m3 water has been recycled and
used for gardening, process and recirculation of condensate water to boiler feed.
3. Fuel: At Paudh, the company has been able to save Rs. 0.5 crore through
improvement in boiler efficiency and optimum utilisation of steam.
B. TECHNOLOGY ABSORPTION
Research and Development (R&D)
1. Specific areas in which R&D is carried out by the company Four
R&D-cum-technology demonstration projects initiated as public-private partnerships
were commissioned successfully. These projects are a) Distributed power generation through
a combination of solar and biomass, b) Solar air conditioning, c) Cold storage using solar
biomass hybrid technology and d) Anaerobic wastewater treatment. In solar air
conditioning, the company has demonstrated three more prototypes in the field, especially
to cater to the needs of small and medium offices with medium to low temperature solar
In the area of energy, the company also made substantial progress on internationally
funded projects and enhanced its networking with international research institutes. In the
environment sector, new applications of technology on indoor air quality are currently
being studied and initial experiments have shown positive results. The new generation
designs for air pollution control equipment are in the final stages of development.
Innovation projects undertaken for pollution control equipment demonstrated significant
performance improvement. New designs were developed for sewage treatment plants to meet
stringent norms stipulated by pollution control boards and to accommodate plants where
space is a constraint.
2. Benefits derived as a result of the above R&D
The technology demonstration projects have created considerable interest and a credible
enquiry base for second stage demonstration projects in solar cooling, cold storage, etc.
Spin-off benefits in these technology demonstration projects like parabolic troughs,
organic rankine cycle, triple effect chilling system and gassifier will also find
applications in many related energy fields.
The R&D work on air pollution control and waste water is beneficial in improving
efficiencies of the existing products as well as meeting the stringent norms of waste
3. Future plan of action
Renewable energy technologies - solar (both concentrated solar thermal and
photovoltaic), biomass and geothermal will gain importance in the coming years. Solar
thermal technologies for power, heating, cooling and low temperature waste heat recovery
will continue to be thrust areas. Your company will invest its resources in areas like
energy efficient technologies for commercial buildings, fuel cells, absorption cooling
In the environment sector, your company is focusing on waste-to-energy products and
improved wastewater treatment systems to meet stringent environmental regulations.
As part of its strategy, your company intends to invest in new applications in
photovoltaic (PV) systems.
4. Expenditure on R&D
Amount in Rs. crore
|d. Total R&D expenditure as a percentage of turnover
Technology absorption, adaptation and innovation
1. Efforts, in brief, made towards technoloy absorption, adaptation and innovation:
a. Assimilation and adaptation of technologies related to biomass gasification designs
and harnessing of geothermal energy in India through new innovative concepts.
b. In-house development of surface and coating chemicals which fill product gaps in the
range of paper chemicals are currently being tested in the market.
c. Innovations and automations in dual axis tracking systems for concentrating solar
thermal as well as solar PV systems.
d. Development of special combustion grate (pusher grate) for waste-to- energy projects
and the development of high capacity, low velocity carbon burnout unit in the field of
large sized boilers and heaters.
2. Benefits derived as a result of the above efforts - product improvement, cost
reduction, product development, import substitution, etc.
a. Initiatives in biomass gasification and geothermal technologies will result in
efficient and easier power generation and addition of green products to your company`s
b. Introduction of surface and coating chemicals expanded the product basket of Thermax
c. Innovation in the solar domain such as dual axis tracking system helped capture more
energy, thereby reducing solar field footprint and eliminating manual intervention.
d. Newly developed special combustion grate proved to be the best import substitute for
European and Chinese technologies for the waste-to-energy market in India.
3. In case of imported technology (imported during the last fiue years reckoned from
the beginning of the financial year), following information is furnished
||Year of import
||If technology has been fully absorbed
||If not fully absorbed, reasons and future plan of action
|High pressure condensate polishing unit technology
||In the process of absorption
||This technology would be absorbed after commissioning and execution of a commercial
||Currently, such a project is being pursued.
|Construction chemicals technology
||In the process of absorption
||The technology transfer is complete and the product development, third party testing
and seed marketing is in the final stage. It is expected to be completed in FY 2013-14.
|Technology for certain intermediaries used in the manufacture of different bases of
||In the process of absorption
|Difficult-to-degrade wastewater systems
||In the process of absorption
||Technology absorption and application development has been completed for other
industrial segments and commercialisation is being pursued.
|Sequencing Batch Reactor system
||In the process of absorption
||Project commissioning has been delayed due to various constraints. Once the project is
commissioned, the technology will be absorbed.
|Photo-electro chemical air purification technology for indoor air purification
||In the process of absorption
||Basic product development completed including rapid prototyping. New critical
applications in industrial segments with good potential identified. Detailed understanding
of requirements in the identified segments done. Initiated investigations to evaluate
||In the process of absorption
||First prototype unit manufactured and ready for testing.
|Sub critical utility boiler technology
||In the process of absorption
||The first and second pulverized coal boiler installations were commissioned during FY
2012-13. Performance trials are scheduled in FY 2013-14.
C. FOREIGN EXCHANGE EARNINGS AND OUTGO
The company`s operations in export markets are elaborated in the Management Discussion
and Analysis Report.
During the year, the company had a net foreign exchange inflow of Rs. 381.3 crore as
against a net inflow of Rs. 44.6 crore in the previous year.
The details on foreign exchange earnings and outgo are given in the Notes 31(j), 31(k)
and 31(l) of Financial Statements, which form part of the Annual Report.