Dear Shareholder,

This past year has been unlike any other in living memory. Amid the COVID-19 challenges, business priorities had to be redefined, with health and safety becoming the primary imperative. At the same time, ensuring business continuity to meet customer needs, and maintaining robust financial health was also vital to our sustainable long-term growth. I am happy to share that your company performed admirably on all these counts.

We took multiple initiatives for the safety of our employees, who had to adapt with agility to the new norms. From strict adherence to the COVID safety protocols at our factories and customer sites, to the development of a COVID management app, your company ensured seamless transition to the transformed realities. Learning from the first wave of the pandemic, we decided to expand our COVID safety ambit, during the second surge, to include the broader labour force that supports Thermax, especially contract workers and the migrant workforce. Thermax has partnered with Aajeevika Bureau to formulate the minimum standards that the company will adhere to in ensuring the well-being of the entire ecosystem of our people.

The pandemic also triggered a series of challenges on the customer front, necessitating a new level of responsiveness on the part of the company. Maintaining service continuity for international customers, and for those engaged in essential businesses such as food and pharmaceuticals, demanded out-of-the-box initiatives. Concurrently, your company had to address urgent requests for site shutdowns and force majeure implementations during the lockdown period, followed by expedited deliveries as the economy rebounded, only to slow down again with the relapse of COVID-19. Our digital capability, which we have been continually investing in over the years, proved to be a particularly valuable asset during COVID. Our expertise in remote operations enabled us to solve urgent customer problems, ensuring seamless execution of commissioning and other orders from customers across the world. One of our earliest crisis management challenges was the commissioning of a boiler for a customer in Egypt, without any way to get our employees to the site. We successfully commissioned the project in line with the customer’s expectations through our digitally enabled remote operations capability. Throughout the year, several such orders from the Philippines to Zambia to the USA were executed. Our teams received numerous recognitions from our customers for going over and beyond during these difficult times. That said, while our intent has been to do our best, logistical complications over the past year have made us realise that continuous service improvement is a business imperative. I do believe that the prolonged pandemic has irrevocably changed customer behaviour and employee expectations.

As cash preservation became a major priority during the pandemic, we also worked closely with our customers and partners to ensure timely payments to Thermax by ironing out documentation and other issues. At the same time, we took all necessary steps to pay our MSME suppliers on time. Further, to support our channel partners and distributors, Thermax collaborated with financial institutions to roll out credit support facilities. These efforts translated into more than 50% increase in the company’s cash and cash equivalent during the fiscal.

The business environment was also adversely affected during the year by commodity price rise, logistical challenges (container unavailability and increase in freight cost), and supply issues from China. In this light, the PBT (profit before tax and exceptional items) of 6.8% is a testament to the efforts of our entire team, and the robust fundamentals which the organisation has built over the years. ‘Agile’, an internal initiative that we launched in April 2020 to drive the company’s transformation in the pandemic period, has also contributed to our positive financial performance during the year. As part of Agile, a cross-company team took a deep look at all indirect costs, and some specific direct costs and delivered significant cost savings in these categories. The employees also undertook short-term voluntary salary cuts that helped manage costs during the toughest period.

The company’s financial performance during 2020-21 was supported by the operational milestones achieved in an extremely difficult environment. Many of Thermax’s plants delivered their highest ever throughputs during the later part of the year. On the orders front, Thermax registered Rs. 4,784 crore, with a healthy mix of segments and geographies. The strength of the company’s multi-industry and nationwide connect, and its sustained focus on increasing the share of business from products and services was a key driver of this achievement. Our success in securing orders for difficult applications, where efficiency and carbon footprint reduction were important considerations, underlines the company’s strength. As an example, in our large boilers business, 100% of the orders received in Q3 and Q4 were related to green energy and waste heat recovery. One such noteworthy project, and my favourite, is the solution we built for a major paper recycling company for Non-Recyclable Solid Waste (NRSW) management. Typically, about 20% of a paper recycling plant comprises NRSW, which includes wet paper and plastic that cannot be recycled. Thermax’s solution converts NRSW into steam and power, while meeting the highest environmental norms. We have to our credit several other such applications, where Thermax is the first to market. Our Chemical business also shone in adversity, delivering one of its best years. A good mix of international customers, optimum cost point, and favourable commodity pricing were the tailwinds that propelled the business to new heights. New capacity additions provide this segment with headroom to grow further in the coming years.

Amid our business initiatives, the focus on our carbon footprint has also remained high. A number of new projects for carbon footprint reduction were implemented during the year. These will emerge as stepping stones towards the realisation of our commitment to increase the scale of the company’s green offering and reduce 25% of its carbon footprint by 2025.

I joined Thermax in April 2020. The question that I am asked most often is - “How difficult it was to make the transition to Thermax, given the COVID outbreak and the resultant challenges?” I can confidently say that the transition has been a lot easier than I had expected. The company’s core values and open culture led me to feel entirely at home immediately on joining, despite the tumultuous time on the business front. For this, I would like to express my gratitude to my predecessor Unny, and to all the former and current employees who have contributed to building the Thermax culture. Their relentless efforts have helped provide a strong foundation that is helping the company succeed in a difficult environment.

Before I conclude, I would like to highlight that while COVID is a short-term crisis that has all our current attention, climate change remains the bigger problem that businesses, institutions and governments need to tackle urgently. For countries like India, arresting climate change should be a priority while also addressing the increasing energy needs of a growing economy. Thermax is uniquely positioned to bridge the gap between energy availability and sustainability. It is this larger purpose around which the Thermax team and I are building the company’s future path.

I look forward to sharing our progress along this journey in my future interactions with you. For now, I wish you and your loved ones a safe and healthy year ahead.

With best regards,

Ashish Bhandari