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Thermax Ltd.

BSE: 500411 Sector: Engineering
BSE 00:00 | 19 Feb 985.55 18.00






NSE 00:00 | 19 Feb 985.55 17.50






OPEN 974.90
52-Week high 1180.00
52-Week low 928.70
P/E 39.44
Mkt Cap.(Rs cr) 11,743
Buy Price 976.50
Buy Qty 1.00
Sell Price 1005.00
Sell Qty 1.00
OPEN 974.90
CLOSE 967.55
52-Week high 1180.00
52-Week low 928.70
P/E 39.44
Mkt Cap.(Rs cr) 11,743
Buy Price 976.50
Buy Qty 1.00
Sell Price 1005.00
Sell Qty 1.00

Thermax Ltd. (THERMAX) - Director Report

Company director report

Dear shareholder

Your directors are pleased to present the Thirty-Seventh Annual Report together withthe audited financial statements of your company for the year ended March 312018.

Financial Results

(Rupees in Crore)



2017-18 2016-17 2017-18 2016-17
Total revenue 3992.61 3972.94 4602.03 4703.77
Profit before finance cost depreciation and tax 475.35 476.44 517.33 547.04
Finance cost & depreciation 72.24 69.02 95.29 91.61
Profit before tax & exceptional items 403.11 407.42 422.04 455.43
Exceptional items (25) (132.84) 0 (17.84)
Profit before tax but after exceptional items 378.11 274.58 422.04 437.59
Provision for taxation (incl. deferred tax) 139.86 129.75 165.75 155.99
Profit after tax 238.25 144.83 256.29 281.60
Share of profit/(loss) on joint venture NA NA (25.19) (65.46)
Other comprehensive income 3.59 8.82 27.03 (19.15)
Total comprehensive income 241.84 153.65 258.13 196.99
Total equity 2565.56 2409.76 2714.74 2539.01
Earnings Per Share (EPS) (Rs.) Face Value Per Share Rs. 2/- 19.99 12.15 20.61 19.80

Annual Performance

Your company posted a total revenue of Rs. 3993 crore for the financial year 2017-18against last year's Rs. 3973 crore. On a consolidated level the group revenue was at Rs.4602 crore (Rs. 4704 crore). The current year's revenue is exclusive of Goods andService Tax (GST) while last year's revenue includes Excise Duty and hence they are notcomparable.

The Energy segment contributed 78% (79.2%) to the group's operating revenue while theEnvironment segment accounted for 14.1% (14%). The Chemical segment contributed 7.9%(6.8%) to the revenue.

On a standalone basis revenue from exports including deemed exports was Rs. 1262crore against Rs. 1176 crore in the previous year an improvement of 7.3%.

Group operating revenue from international business was Rs. 1794 crore against Rs.1585 crore during the last year.

Profit before tax and exceptional items on a standalone basis was at Rs. 403 crore10.1% of the total revenue compared to Rs. 407 crore 10.2% of the total revenue in theprevious year. The group's profit before tax and exceptional items at Rs. 422 crore was9.2% of the total revenue compared to Rs. 455 crore at 9.7% in the previous year.

On a standalone basis the exceptional item of expenditure Rs. 25 crore (Rs.133 crore)represents an impairment of investment in subsidiary companies Thermax (Zhejiang) Cooling& Heating Engineering Co. Limited (TZL) and Thermax SPX Energy Technologies Limited.Profit after tax and exceptional items stood at Rs. 238 crore compared to Rs. 145 crore inthe previous year. Earnings per share (EPS) were at Rs. 19.99 (Rs. 12.15).

The year showed signs of a possible recovery in the global economy as well as an uptickin capacity utilisation in the domestic sector. The revenue was flat due to lower ordercarry forward and continued slowdown during the initial quarters. However your companyregistered significant growth in order booking arising from business opportunities inrefinery upgradation due to Bharat VI requirements captive cogeneration plants in thefertiliser and chemical sector as well as significant orders in the Middle East Africaand South East Asia.

Standalone order booking for the year was Rs. 5696 crore against Rs. 3831 crore lastyear registering an increase of 49%. Your company completed the year with an orderbacklog of Rs. 5302 crore as against Rs. 3618 crore in the previous year. Consolidatedorder intake was Rs. 6380 crore 45% higher than last year's Rs. 4394 crore.


The directors have recommended a dividend of Rs. 6/- (300%) per equity share of theface value Rs. 2/-.

The dividend if approved by the shareholders will translate in a payout of Rs. 86.18crore including dividend distribution tax of Rs. 14.69 crore.

Share Capital

The paid-up equity share capital of the company was Rs. 23.83 crore as on March312018. There was no public rights preferential or bonus issue during the year. Thecompany has neither issued any shares with differential voting rights sweat equityshares nor has it granted any stock options.


Annual accounts of the subsidiary companies and related detailed information areavailable to the shareholders of the parent company subsidiary companies and to thestatutory authorities. On request these documents will be made available for inspectionat the company's corporate office.

The company does not have any 'material subsidiary' whose income or net worth exceeds20% of the consolidated income or net worth respectively of the listed entity and it'ssubsidiaries in the immediately preceding accounting year.

The report on the performance of subsidiary companies is included in the ManagementDiscussion and Analysis section of this report.

Information on newly incorporated subsidiaries and acquisition during the year

Keeping pace with the strategy of selective internationalisation the company has setup a step-down subsidiary company in Sri Lanka (through a Singapore based wholly ownedsubsidiary) named 'Thermax Energy & Environment Lanka (Private) Limited' which wasincorporated on August 8 2017.

The company through its step-down subsidiary in Denmark acquired 100% stake in BariteInvestments Sp. z.o.o. Poland ('Barite'). With this Danstoker Poland Sp. Zoo. (DanstokerPoland Spotka Z Ograniczona Odpowiedzialnosciq) erstwhile 'Barite' became a step- downsubsidiary of the company.

During the year the company has increased its equity stake from 54.67% to 76% in FirstEnergy Private Limited (FEPL) Pune an alternative energy solutions company.

This is pursuant to an agreement entered into in July 2015 envisaging stage-wiseacquisition of FEPL.

Management Discussion and Analysis

The Management Discussion and Analysis section highlighting the performance andprospects of the company's energy environment and chemical segments including details ofsubsidiaries information on company's health safety and environment measures humanresources risk management and internal controls is attached as Annexure - 1 on page no.26.

Corporate Governance Report

A detailed Corporate Governance Report regarding SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 which also includes disclosures required as perSections 134 and 177 of the Companies Act 2013 is attached as Annexure - 3 on page no.46.

A certificate from the statutory auditors of the company regarding compliance with theconditions of corporate governance as required under Schedule V of the Listing Regulationsis a part of this report.

Secretarial Standards

The Institute of Company Secretaries of India had revised the Secretarial Standards onmeetings of the Board of Directors (SS-1) and Secretarial Standards on general meetings(SS-2) with effect from October 12017. The company complies with the revised secretarialstandards.

Business Responsibility Report

In terms of the Listing Regulations Business Responsibility Report describing theinitiatives taken by the company from environmental social and governance perspectives isenclosed as Annexure - 4 on page no. 62.

Vigil Mechanism/Whistle Blower Policy

The company has a vigil mechanism named 'Whistle Blower Policy' to deal with instancesof fraud and mismanagement if any. The details of the policy are provided in theCorporate Governance Report and also posted on the website of the company

Employee Strength

The total number of permanent employees on the rolls of the company as on March 312018were 3664 compared to 3488 employees in the previous year.

Wage Agreements

During the year an amicable wage settlement was signed with Chemical Mazdoor Panchayat(representing workmen at Savli works). This long-term settlement is of five yearsduration. Similarly a long pending wage agreement was also signed with Bhartiya KamgarKarmachari Mahasangh and Hind Kamgar Sanghatana (representing workmen at Paudh works).

Particulars of Employees

The information required pursuant to Section 197 read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 duly amended inrespect of employees of the company will be provided upon request. In terms of Section136 of the Act the Annual Report excluding the aforesaid information is being sent to allthe members and others entitled to it. Any shareholder interested in obtaining suchparticulars may write to the Secretarial Department at the corporate office of thecompany. The information is also available for inspection at the corporate office duringworking hours up to the date of the Annual General Meeting.

Details of Trusts for the benefit of employees

a) ESOP and Welfare Trust

The company had set up a Thermax Employee Stock Option Plan (ESOP) Trust in the year2002 which holds 2906250 equity shares of Rs. 2/- each of Thermax. The Trust has beenrechristened as Thermax Employees ESOP and Welfare Trust (ESOP and Welfare Trust).

The Trust has not made any buying or selling transactions in the secondary market.

The company at present does not have any ESOP scheme under this trust.

b) Employee Welfare Trusts

The company has various Employee Welfare Trusts primarily for providing medical andeducational aid to its employees and their families. These trusts presently hold 3635190equity shares of Rs. 2/- each of the company. None of the trusts had any dealings in thesecondary market.

The relevant disclosures as required under the SEBI (Share- based Employee Benefits)Regulations 2014 on Employee Welfare Trusts will be made available on the company'swebsite:

Disclosure: Anti-Sexual Harassment Policy

The company has in place an Anti-Sexual Harassment Policy in line with therequirements of the Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013. All employees (permanent contractual temporary trainees)are covered under this policy. To build awareness in this area the company has beencarrying out induction/refresher programmes in the organisation on a periodical basis.

An Internal Complaints Committee (ICC) has been set up to redress complaints receivedregarding sexual harassment.

The following is a summary of sexual harassment complaints received and disposed offduring the year 2017-18:

• Number of complaints received - Nil

• Number of complaints disposed off- NA

Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo

The information on the conservation of energy technology absorption and foreignexchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013read with Rule 8 of the Companies (Accounts) Rules 2014 is annexed as Annexure - 5 onpage no. 78.

Corporate Social Responsibility Initiatives

As a part of its initiatives under Corporate Social Responsibility (CSR) the companyhas undertaken projects mainly in the area of education. The projects are largely inaccordance with Schedule VII of the Companies Act 2013. Since 2007 the CSR initiativeshave been undertaken through Thermax Foundation. The detailed report on CSR is provided asAnnexure - 2 on page no. 40.

The details of the CSR committee and CSR policy are available on the company's

The Annual Report on CSR activities & CSR policy is provided as Annexure - 6 onpage no. 80.


All independent directors of the company have given declarations that they meet thecriteria of independence as laid down under Section 149(6) of the Companies Act 2013 (theAct) and the Listing Regulations.

The company has formulated a policy on 'Familiarisation programme for independentdirectors' which is available on the company's website:

In accordance with the provisions of the Companies Act 2013 and the company's Articlesof Association Pheroz Pudumjee retires by rotation at the ensuing AGM and being eligibleoffers himself for re-appointment as a director.


A calendar of meetings is prepared and circulated in advance to the directors.

During the year five Board meetings were convened and held the details of which aregiven in the Corporate Governance Report.

Remuneration Policy

The Remuneration Policy in brief for selection appointment and remuneration ofdirectors and senior management is given in the Corporate Governance Report.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and Listing Regulations theBoard has carried out an annual evaluation of its performance. The details of theBoard/Committee evaluations are given in the Corporate Governance Report.

Directors' Responsibility Statement

In terms of Section 134 (3)(c) of the Companies Act 2013 your directors to the bestof their knowledge and belief according to the information and explanations obtained bythem in the normal course of their work state that in all material respects;

a. In the preparation of the annual financial statements for the year ended March312018 the applicable accounting standards have been followed;

b. Appropriate accounting policies have been selected applied consistently judgmentand estimates have been made that are reasonable and prudent so as to give a true and fairview of the state of affairs of the company as on March 312018 and of the profit of thecompany for the year ended on that date;

c. Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;

d. The annual financial statements have been prepared on a going concern basis;

e. Proper internal financial controls were in place and the financial controls wereadequate and operating effectively; and

f. Proper systems to ensure compliance with the provisions of all applicable laws werein place and were adequate and operating effectively.

Change in Key Managerial Personnel (KMP)

Kedar Phadke was appointed as Company Secretary and KMP effective August 8 2017. Hewas also designated as the Compliance Officer of the company in terms of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 in place of Sudhir Lale.

Related Party Transactions

All related party transactions entered into during the financial year were at an arm'slength basis and were in the ordinary course of business. There were no materiallysignificant related party transactions made by the company with promoters directors keymanagerial personnel or other designated persons which may have a potential conflict withthe interest of the company at large.

All related party transactions are placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee/Board is obtained on a quarterly basis forthe transactions which are of a foreseen and repetitive nature. The transactions enteredinto pursuant to the omnibus approval so granted and a statement giving details of allrelated party transactions are placed before the Audit Committee for their approval on aquarterly basis. The company has developed a Related Party Transactions Manual andStandard Operating Procedures for the purpose of identification and monitoring of suchtransactions.

The policy on Related Party Transactions as approved by the Board is available on thecompany's website:

None of the directors have any pecuniary relationships or transactions vis-a-vis thecompany except as disclosed under Sr. No. 2A of the Corporate Governance Report.

Standalone and Consolidated Financial Statements

The financial statements for the year ended March 312018 have been prepared as perSchedule III to the Companies Act 2013. The consolidated financial statements of thegroup are prepared in compliance with the Accounting Standards and Listing Regulations asprescribed by SEBI. The cash flow for the year 2017-18 is attached to the balance sheet. Aseparate statement containing the salient features of subsidiaries/associate companies andjoint ventures in the prescribed form (AOC-1) is also attached.

Significant and Material Orders passed by the Regulators or Courts

There are no significant material orders passed by the regulators/courts which wouldimpact the going concern status of the company.

Public Deposits

The company had no unpaid/unclaimed deposit(s) as on March 312018. The company has notaccepted any fixed deposits during the year.

Particulars of Loans Guarantees or Investments

Details of loans guarantees and investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the financial statements.

Material Changes and Commitments

There have been no material changes and commitments affecting the financial positionof the company which have occurred between the end of the financial year and the date ofthis Report.

Committees of the Board

The details of all committees and their terms of reference are set out in the CorporateGovernance Report.


Statutory Auditors

M/s. SRBC & Co. LLP Chartered Accountants was appointed as the Statutory Auditorsfor a period of five years commencing from the 34th AGM until the conclusion ofthe 39th AGM.

In accordance with the Companies Amendment Act 2017 enforced on May 7 2018 by theMinistry of Corporate Affairs the appointment of statutory auditors is not required to beratified at every Annual General Meeting.

As required under the Listing Regulations M/s. SRBC & Co. LLP the auditors haveconfirmed that they hold a valid certificate issued by the Peer Review Board of theInstitute of Chartered Accountants of India.

Cost Auditors

In terms of Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Amendment Rules 2014 M/s. Dhananjay V. Joshi & Associates CostAccountants Pune have been appointed as the Cost Auditors of the company for FY 2018-19.

Secretarial Audit

In accordance with the provisions of Section 204 of the Companies Act 2013 and TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the companyhas appointed M/s. SVD & Associates Company Secretaries Pune to undertake theSecretarial Audit of the company for FY 2018-19. The Secretarial Audit Report for FY2017-18 is annexed as Annexure-7 on page no. 83.

The observations of the secretarial auditors in their report are self-explanatory andtherefore the directors do not have any further comments to offer on the same.

Extract of Annual Return

The details forming part of the extract of the annual return in Form No. MGT-9 isannexed herewith as Annexure - 8 on page no. 86.

Awards and Recognition

Your company has received the following awards during the year:

• Thermax received the 'Excellence in Governance' Award at 'The Economic TimesFamily Business Awards' held in Mumbai for best practices in corporate governance.

• Anu Aga was honoured at the 'Times Pune Visionaries' felicitation on April 132018. At this Times Group event that celebrated the work of stalwarts from different walksof life Anu was felicitated for her exemplary contribution to national life.

• At the World HRD Congress Sharad Gangal EVP HR IR and Admin of Thermaxreceived the 'HR Excellence in Manufacturing' Award. The event recognises leadingorganisations and HR practitioners creating impactful human capital strategies.

• Jagdish Lomte Chief Information Officer of Thermax won the CIO 100 Award atthe 12th Annual CIO 100 Symposium & Awards Ceremony for a project designedand built by Thermax's Business Technology Group - for an Enterprise Management Solutionto bring the IT environment under a unified management platform.

• Thermax won the 'Innovative Energy Saving Product' Award for its One DegreeAbsorption Chiller at the 18th CII National Award for Excellence in EnergyManagement in Hyderabad.


Your directors place on record their appreciation for the continued support extendedduring the year by the company's customers business associates suppliers bankersinvestors government authorities and joint venture partners. They also place on recordtheir appreciation for the dedication and value added contributions made by all theemployees.

Your directors would also like to thank all the shareholders for continuing to reposefaith in the company and its future.

For and on behalf of the Board
Meher Pudumjee
(DIN: 00019581)
Pune: May 18 2018