Thermax Ltd Directors Report.

Dear shareholder,

Your directors are pleased to present the Thirty-Seventh Annual Report, together with the audited financial statements of your company for the year ended March 31,2018.

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. 3,993 crore for the financial year 2017-18, against last years Rs. 3,973 crore. On a consolidated level, the group revenue was at Rs. 4,602 crore (Rs. 4,704 crore). The current years revenue is exclusive of Goods and Service Tax (GST), while last years revenue includes Excise Duty, and hence they are not comparable.

The Energy segment contributed 78% (79.2%) to the groups operating revenue while the Environment 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. 1,262 crore against Rs. 1,176 crore in the previous year, an improvement of 7.3%.

Group operating revenue from international business was Rs. 1,794 crore against Rs. 1,585 crore during the last year.

Profit before tax and exceptional items, on a standalone basis, was at Rs. 403 crore, 10.1% of the total revenue, compared to Rs. 407 crore, 10.2% of the total revenue in the previous year. The groups profit before tax and exceptional items at Rs. 422 crore was 9.2% 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 in the 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 uptick in capacity utilisation in the domestic sector. The revenue was flat due to lower order carry forward and continued slowdown during the initial quarters. However, your company registered significant growth in order booking arising from business opportunities in refinery upgradation due to Bharat VI requirements, captive cogeneration plants in the fertiliser and chemical sector as well as significant orders in the Middle East, Africa and South East Asia.

Standalone order booking for the year was Rs. 5,696 crore against Rs. 3,831 crore last year, registering an increase of 49%. Your company completed the year with an order backlog of Rs. 5,302 crore as against Rs. 3,618 crore in the previous year. Consolidated order intake was Rs. 6,380 crore, 45% higher than last years Rs. 4,394 crore.


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

The dividend, if approved by the shareholders, will translate in a payout of Rs. 86.18 crore, 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 March 31,2018. There was no public, rights, preferential or bonus issue during the year. The company has neither issued any shares with differential voting rights, sweat equity shares, nor has it granted any stock options.


Annual accounts of the subsidiary companies and related detailed information are available to the shareholders of the parent company, subsidiary companies and to the statutory authorities. On request, these documents will be made available for inspection at the companys corporate office.

The company does not have any material subsidiary whose income or net worth exceeds 20% of the consolidated income or net worth respectively, of the listed entity and its subsidiaries in the immediately preceding accounting year.

The report on the performance of subsidiary companies is included in the Management Discussion 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 set up a step-down subsidiary company in Sri Lanka (through a Singapore based wholly owned subsidiary), named Thermax Energy & Environment Lanka (Private) Limited which was incorporated on August 8, 2017.

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

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

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

Management Discussion and Analysis

The Management Discussion and Analysis section, highlighting the performance and prospects of the companys energy, environment and chemical segments, including details of subsidiaries, information on companys health, safety and environment measures, human resources, 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 per Sections 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 the conditions of corporate governance as required under Schedule V of the Listing Regulations is a part of this report.

Secretarial Standards

The Institute of Company Secretaries of India had revised the Secretarial Standards on meetings of the Board of Directors (SS-1) and Secretarial Standards on general meetings (SS-2) with effect from October 1,2017. The company complies with the revised secretarial standards.

Business Responsibility Report

In terms of the Listing Regulations, Business Responsibility Report describing the initiatives taken by the company from environmental, social and governance perspectives is enclosed 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 instances of fraud and mismanagement, if any. The details of the policy are provided in the Corporate 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 31,2018 were 3,664 compared to 3,488 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 years duration. Similarly, a long pending wage agreement was also signed with Bhartiya Kamgar Karmachari 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, in respect of employees of the company, will be provided upon request. In terms of Section 136 of the Act, the Annual Report excluding the aforesaid information is being sent to all the members and others entitled to it. Any shareholder interested in obtaining such particulars may write to the Secretarial Department at the corporate office of the company. The information is also available for inspection at the corporate office during working 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 year 2002 which holds 29,06,250 equity shares of Rs. 2/- each of Thermax. The Trust has been rechristened 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 and educational aid to its employees and their families. These trusts presently hold 36,35,190 equity shares of Rs. 2/- each of the company. None of the trusts had any dealings in the secondary 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 companys website:

Disclosure: Anti-Sexual Harassment Policy

The company has in place, an Anti-Sexual Harassment Policy in line with the requirements 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 been carrying out induction/refresher programmes in the organisation on a periodical basis.

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

The following is a summary of sexual harassment complaints received and disposed off during 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 foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed as Annexure - 5 on page no. 78.

Corporate Social Responsibility Initiatives

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

The details of the CSR committee and CSR policy are available on the companys website:

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


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

The company has formulated a policy on Familiarisation programme for independent directors which is available on the companys website:

In accordance with the provisions of the Companies Act, 2013 and the companys Articles of Association, Pheroz Pudumjee retires by rotation at the ensuing AGM and being eligible, offers 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 are given in the Corporate Governance Report.

Remuneration Policy

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

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, the Board has carried out an annual evaluation of its performance. The details of the Board/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 best of their knowledge and belief, according to the information and explanations obtained by them 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 March 31,2018, the applicable accounting standards have been followed;

b. Appropriate accounting policies have been selected, applied consistently, judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as on March 31,2018 and of the profit of the company for the year ended on that date;

c. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets 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 were adequate and operating effectively; and

f. Proper systems to ensure compliance with the provisions of all applicable laws were in 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. He was also designated as the Compliance Officer of the company in terms of the SEBI (Listing Obligations 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 arms length basis and were in the ordinary course of business. There were no materially significant related party transactions made by the company with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the 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 for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted and a statement giving details of all related party transactions are placed before the Audit Committee for their approval on a quarterly basis. The company has developed a Related Party Transactions Manual and Standard Operating Procedures for the purpose of identification and monitoring of such transactions.

The policy on Related Party Transactions as approved by the Board is available on the companys website:

None of the directors have any pecuniary relationships or transactions vis-a-vis the company 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 31,2018 have been prepared as per Schedule III to the Companies Act, 2013. The consolidated financial statements of the group are prepared in compliance with the Accounting Standards and Listing Regulations as prescribed by SEBI. The cash flow for the year 2017-18 is attached to the balance sheet. A separate statement containing the salient features of subsidiaries/associate companies and joint 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 would impact the going concern status of the company.

Public Deposits

The company had no unpaid/unclaimed deposit(s) as on March 31,2018. The company has not accepted any fixed deposits during the year.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees and investments covered under the provisions of Section 186 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 position of the company, which have occurred between the end of the financial year and the date of this Report.

Committees of the Board

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


Statutory Auditors

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

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

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

Cost Auditors

In terms of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, M/s. Dhananjay V. Joshi & Associates, Cost Accountants, 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 The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the company has appointed M/s. SVD & Associates, Company Secretaries, Pune, to undertake the Secretarial Audit of the company for FY 2018-19. The Secretarial Audit Report for FY 2017-18 is annexed as Annexure-7 on page no. 83.

The observations of the secretarial auditors in their report are self-explanatory and therefore, 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 is annexed 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 Times Family Business Awards held in Mumbai for best practices in corporate governance.

• Anu Aga was honoured at the Times Pune Visionaries felicitation on April 13, 2018. At this Times Group event that celebrated the work of stalwarts from different walks of life, Anu was felicitated for her exemplary contribution to national life.

• At the World HRD Congress, Sharad Gangal, EVP, HR, IR and Admin of Thermax received the HR Excellence in Manufacturing Award. The event recognises leading organisations and HR practitioners creating impactful human capital strategies.

• Jagdish Lomte, Chief Information Officer of Thermax, won the CIO 100 Award at the 12th Annual CIO 100 Symposium & Awards Ceremony for a project designed and built by Thermaxs Business Technology Group - for an Enterprise Management Solution to bring the IT environment under a unified management platform.

• Thermax won the Innovative Energy Saving Product Award for its One Degree Absorption Chiller at the 18th CII National Award for Excellence in Energy Management in Hyderabad.


Your directors place on record their appreciation for the continued support extended during the year by the companys customers, business associates, suppliers, bankers, investors, government authorities and joint venture partners. They also place on record their appreciation for the dedication and value added contributions made by all the employees.

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

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