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THERMAX LIMITED

Thermax is one of the leading Energy and and a wide network of sales and service offices and Environment solutions company in . dealer network.

Background The Indian promoters hold 61.98 per cent stake in the company. Mutual funds, banks, insurance Thermax Limited, set up by Mr. R. D.Aga more than companies and financial institutions hold 16.58 per three decades ago, is a global solutions provider cent stake in the company while the foreign focussing on energy and environment engineering. institutional investors hold 4.28 per cent stake. Since inception, the company has come a long way Private corporate bodies hold 2.43 per cent stake from being a small boiler company to a and the Indian public holds 14.47 per cent stake in multidivisional major with a focused vision and the company. Non-resident Indians hold the mission to conserve energy and preserve remaining stake. environment. It offers products and services in heating, cooling, waste heat recovery, captive power, Products and brands water treatment and recycling, waste management and performance chemicals. It has been able to The company's core businesses are divided into two successfully leverage on its competence and main segments, Energy and Environment, with the dominance in boiler manufacturing to enter other Energy segment accounting for about 68 per cent of energy-related products catering to similar the total turnover. while the Environment segment industrial segments. It has also graduated to contributes the remaining share of 32 per cent. providing project solutions starting with captive Within the Energy business segment, there are four power projects. divisions - Boilers and Heaters, Energy Systems, Absorption Cooling and Cogeneration Systems.The The company's products and systems are used in Environment business segment consists of three over 40 countries all over the world and this is divisions viz.Water and Waste Solutions,Air supported through a network of subsidiaries, Pollution Control Equipment and Chemicals. manufacturing facilities and sales and service offices in over 15 countries. It is headquartered in India, The Boilers and Heaters division is the largest with manufacturing facilities in () division in the company accounting for more than

Company Products Established Founder Distribution Production plants

Thermax Energy and 1980 Mr R D Aga India, USA, Brazil, China India environment Thailand, Malaysia, solutions Russia, UK, Indonesia etc. 165 25 per cent of the total turnover in 2005.This is demineralisers and dealkalisers, membrane followed by Energy Systems division with a share of separation & reverse osmosis and waste recycling. 15.9 per cent and Cogeneration Systems division Air Pollution and Purification division's products with a share of 14.9 per cent in the total turnover include Standard Air pollution control products, in 2005.Air Pollution Control Equipment division Engineered Air Pollution Control Systems,Air comes next with a share of 12.9 per cent followed Purification Systems and the Chemicals division by Absorption Cooling at 11.7 per cent share in manufactures Boiler and Cooling Water Chemicals, the total turnover in 2005. Water and Waste Ion Exchange Resins, Polyelectrolytes, Oil Field Solutions division and Chemicals division Chemicals and Fireside Chemicals. contributed 9.8 per cent and 9.6 per cent respectively to the total turnover in 2005. Financial Analysis

Some of the products manufactured by the Thermax has shown an impressive financial company's Boilers and Heaters division include performance between 1999 and 2005. Its gross sales steam boilers, thermic fluid heaters, process- have witnessed a CAGR of 12.4 per cent during this integrated boilers, exhaust gas boilers and Fired period, with gross sales reaching US$ 221 million in Heaters.The company's Energy Systems division 2005. Exports contributed US$ 40 million, which was offers captive power systems, while the Absorption more than 18 per cent of the gross sales in 2005.The Cooling division manufactures Steam driven single company's net profit has grown at a CAGR of 5.8 and double effect chillers, hot water driven chillers per cent to reach US$ 12.7 million in 2005. Net and direct fuel fired chillers. Cogeneration division profits have grown at a lower rate because of the offers Cogeneration systems on EPC basis. rough times, the company faced from 2000 to 2002. The company undertook a restructuring exercise The company's Water and Waste Solutions division around 2002, which has helped the company to makes clarification & filtration, deionisers, significantly improve its performance. 166 It has over the years had a very small amount of air-conditioning and process cooling, co-generation debt in its books and has been a zero debt solutions, bio-mass fired boilers for niche markets, company from 2004 onwards.The company's heat recovery units and engineering and return on net worth and return on capital consultancy services. In December 2001, the employed have improved in the last four years. company acquired 50 per cent stake of the US- Thermax' contribution in making 'Made in India' based Culligan International in Thermax Culligan global Water Technologies (TWT),the 50:50 joint venture between the two companies formed in The company's focus on global markets was initially 1997, which has helped it to increase its share in accelerated by the slow moving Indian economy in the USA market. the late 1990s. Recession in the Indian economy led the company to look for overseas opportunities The company entered Brazil in 2003 by setting up and now the company has a presence in 16 Thermax do Brasil Energia e Equipamentos Ltda. overseas markets through its subsidiaries and sales (TdB).Through this subsidiary, the company has and marketing offices. In its quest to source been able to successfully initiate the sales of cutting-edge technologies, the company set up absorption chillers in Brazil.The company has Thermax Babcock & Wilcox Limited (TBW) a initiated close co-operation with local gas 60:40 joint venture with Babcock & Wilcox companies to offer gas fired chillers at competitive International Investments Co, USA to market life cycle costs. industrial boilers in the US market.The company bought Babcock & Wilcox's stake of 40 per cent in The company has recently made a foray into the the joint venture in 2004 thereby making TBW a Hong Kong and Chinese market through a wholly wholly owned subsidiary. owned subsidiary,Thermax Hong Kong Limited (THKL).This subsidiary has commenced its The company entered through a wholly operations in China with a representative office at owned subsidiary, ME Engineering Limited, U.K, Shanghai.Apart from the above, the company has which is in the business of energy-related systems two more subsidiaries,Thermax (Rus) Ltd. in Russia and standardised products. During the past few and Thermax International Ltd. in Mauritius. years, the company has taken new initiatives to explore and develop the Western European market Factors fuelling Thermax' global for packaged boilers.These initiatives together with initiatives related product support and service business lay the foundation for the company's foray in packaged There are various factors responsible for the global boilers, both in the UK and EU markets. It has expansion of Thermax. Some of these factors are another subsidiary Thermax Europe, which serves discussed below. as the front-end for the absorption chiller business of the company in Europe. Systematic Diversification - The company has been continuously reviewing and upgrading its The company established a subsidiary,Thermax Inc, products to gain competitive advantage for both in the US in March 2001.The US subsidiary is the domestic and international markets.The involved in the business of its key products and company has in the past successfully introduced services which include resins for water treatment several new products that have gained acceptance and specialty applications, absorption chillers for from diverse market segments. 167 Alliances for market access and technology - The company is planning to tap the Chinese market The company has formed several subsidiaries, for sourcing components and chemicals and has alliances and joint ventures in many countries to plans of setting up a production base in China in access key markets and technology for its products. the coming years. It is also focusing on its It has in the past sourced cutting-edge technologies subsidiary in Brazil to tap the large South American from world technology majors, like Babcock & market.The company believes that these initiatives Wilcox USA, Kawasaki Thermal Engineering would enable it to increase share of exports in its Company, ; Eco Tech,Canada; Honeywell, USA; total revenue to 40 per cent from about 18 per Bloom Engineering, ; Struthers Wells and cent in 2005. Ozone Systems, USA to increase its own competitiveness.

Customer concentration risk - The company recognises the risk associated with over dependence on any single customer or any single project. Its businesses are well spread amongst numerous customers and geographies.Additionally, it has a well-documented credit policy for evaluation and authorisation of all large credit exposures.

Global Competition in India - The Indian market for the company's products are increasingly getting competitive with the fall in tariff rates and entry of many overseas companies in the domestic market.This has acted as a catalyst for the company to increase its focus on the international markets especially in Europe and US.

Future plans

The company has targeted doubling its turnover Globalisation at a glance and tripling its profits by 2008. It is aiming at a 40- • Exports to more than 40 countries, constituting 45 per cent growth in its top-line through nearly 20 per cent of sales improved operational efficiencies, better quality of • Sales and service offices in 15 countries products, efficient delivery and increased • Presence in US, Europe, Brazil, Hongkong, Russia competitiveness, besides focusing on innovation and and Mauritius through its own subsidiaries R&D. Its R&D will focus on multiplying the • Sourcing technology from majors like Babcock & application base of its products and creating Wilcox USA, Kawasaki Thermal Engineering competitive solutions. It also envisages a joint Company, Japan; Eco Tech, Canada; Honeywell, USA; development model with national / international Bloom Engineering, Germany; Struthers Wells and technical institutes for breakthrough technologies Ozone Systems, USA in specific areas towards meeting the long-term objectives of the company. www.thermaxindia.com 168