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THERMAX LIMITED

Thermax is one of the leading Energy and mission to conserve energy and preserve Environment solutions company in . environment. It offers products and services in heating, cooling, waste heat recovery, captive power, Background water treatment and recycling, waste management and performance chemicals. It has been able to Thermax Limited, set up by Mr. R. D.Aga more than successfully leverage on its competence and three decades ago, is a global solutions provider dominance in boiler manufacturing to enter other focussing on energy and environment engineering. energy-related products catering to similar Since inception, the company has come a long way industrial segments. It has also graduated to from being a small boiler company to a providing project solutions starting with captive multidivisional major with a focused vision and power projects.

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. 164

The company's products and systems are used in the total turnover in 2005. Water and Waste over 40 countries all over the world and this is Solutions division and Chemicals division supported through a network of subsidiaries, contributed 9.8 per cent and 9.6 per cent manufacturing facilities and sales and service offices respectively to the total turnover in 2005. in over 15 countries. It is headquartered in India, with manufacturing facilities in () Some of the products manufactured by the and a wide network of sales and service offices and company's Boilers and Heaters division include dealer network. steam boilers, thermic fluid heaters, process- integrated boilers, exhaust gas boilers and Fired The Indian promoters hold 61.98 per cent stake in Heaters.The company's Energy Systems division the company. Mutual funds, banks, insurance offers captive power systems, while the companies and financial institutions hold 16.58 per Absorption Cooling division manufactures Steam cent stake in the company while the foreign driven single and double effect chillers, hot water institutional investors hold 4.28 per cent stake. driven chillers and direct fuel fired chillers. Private corporate bodies hold 2.43 per cent stake Cogeneration division offers Cogeneration and the Indian public holds 14.47 per cent stake in systems on EPC basis. the company. Non-resident Indians hold the remaining stake. The company's Water and Waste Solutions division makes clarification & filtration, deionisers, Products and brands demineralisers and dealkalisers, membrane separation & reverse osmosis and waste recycling. The company's core businesses are divided into Air Pollution and Purification division's products two main segments, Energy and Environment, with include Standard Air pollution control products, the Energy segment accounting for about 68 per Engineered Air Pollution Control Systems,Air cent of the total turnover. while the Environment Purification Systems and the Chemicals division segment contributes the remaining share of 32 per manufactures Boiler and Cooling Water Chemicals, cent.Within the Energy business segment, there are Ion Exchange Resins, Polyelectrolytes, Oil Field four divisions - Boilers and Heaters, Energy Chemicals and Fireside Chemicals. Systems,Absorption Cooling and Cogeneration Systems.The Environment business segment Financial Analysis consists of three divisions viz.Water and Waste Solutions,Air Pollution Control Equipment and Thermax has shown an impressive financial Chemicals. performance between 1999 and 2005. Its gross sales have witnessed a CAGR of 12.4 per cent The Boilers and Heaters division is the largest during this period, with gross sales reaching US$ division in the company accounting for more than 221 million in 2005. Exports contributed US$ 40 25 per cent of the total turnover in 2005.This is million, which was more than 18 per cent of the followed by Energy Systems division with a share of gross sales in 2005.The company's net profit has 15.9 per cent and Cogeneration Systems division grown at a CAGR of 5.8 per cent to reach US$ with a share of 14.9 per cent in the total turnover 12.7 million in 2005. Net profits have grown at a in 2005.Air Pollution Control Equipment division lower rate because of the rough times, the comes next with a share of 12.9 per cent followed company faced from 2000 to 2002.The company by Absorption Cooling at 11.7 per cent share in undertook a restructuring exercise around 2002, 165

which has helped the company to significantly involved in the business of its key products and improve its performance. services which include resins for water treatment and specialty applications, absorption chillers for 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 166

company has in the past successfully introduced competitive solutions. It also envisages a joint several new products that have gained acceptance development model with national / international from diverse market segments. technical institutes for breakthrough technologies in specific areas towards meeting the long-term Alliances for market access and technology - objectives of the company. The company has formed several subsidiaries, alliances and joint ventures in many countries to The company is planning to tap the Chinese market access key markets and technology for its products. for sourcing components and chemicals and has It has in the past sourced cutting-edge technologies plans of setting up a production base in China in from world technology majors, like Babcock & the coming years. It is also focusing on its Wilcox USA, Kawasaki Thermal Engineering subsidiary in Brazil to tap the large South American Company, ; Eco Tech,Canada; Honeywell, USA; market.The company believes that these initiatives Bloom Engineering, ; Struthers Wells and would enable it to increase share of exports in its Ozone Systems, USA to increase its own total revenue to 40 per cent from about 18 per competitiveness. cent in 2005.

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 Globalisation at a glance markets especially in Europe and US. • Exports to more than 40 countries, constituting nearly 20 per cent of sales Future plans • Sales and service offices in 15 countries • Presence in US, Europe, Brazil, Hongkong, Russia The company has targeted doubling its turnover and Mauritius through its own subsidiaries and tripling its profits by 2008. It is aiming at a 40- • Sourcing technology from majors like Babcock & 45 per cent growth in its top-line through Wilcox USA, Kawasaki Thermal Engineering improved operational efficiencies, better quality of Company, Japan; Eco Tech, Canada; Honeywell, USA; products, efficient delivery and increased Bloom Engineering, Germany; Struthers Wells and competitiveness, besides focusing on innovation and Ozone Systems, USA R&D. Its R&D will focus on multiplying the application base of its products and creating www.thermaxindia.com 167