-Ashish Bhandari
It is my pleasure to share with you this year’s Annual Report. FY 2022-23 was a watershed year for Thermax with the business reaching all-time highs on multiple financial metrics including those of revenues, order backlog, profits, and cash flow from operations. These numbers were a result of strength across business sub-segments. I would like to thank each one of Thermax’s stakeholders as it is their partnership that is at the core of our achievements.
The post Covid-19 revival of the Indian economy continued through the entirety of last year. The strong growth of the GDP at a rate of 7% was supported by a consistently robust manufacturing Purchasing Managers’ Index (PMI) that maintained a healthy average of 55.6. Private credit offtake increased by 15% despite an increasing rate environment and signs of a global recession. The domestic economic policy aligned well with industry needs and supported this growth.
Additionally, the Union Budget 2023-24 provided a push for green growth, encouraging the use of alternate sources of energy such as bioenergy and green hydrogen. The Budget projected an increase in capital investment in infrastructure by Rs. 10 lakh crore (3.3% of India’s GDP). The allocation of Rs. 19,744 crore towards the National Green Hydrogen Mission, and the production-linked incentive (PLI) scheme for 14 sectors to establish India as a strong manufacturing base have been some welcome moves. Thermax has, directly and indirectly, benefitted from these policies. Also, growth in Thermax’s channel business is a good benchmark for this broad-based revival. The channel business witnessed orders growth in the high teens with strength across sectors including food and beverages, chemicals, cement, steel, edible oils, and textiles.
Customers today are desiring green solutions like never before. For Thermax, these range from waste (including biomass) to energy to heat recovery to solar and wind hybrid renewable energy. Also, customers are requesting zero liquid discharge solutions, close to zero (<10 ppm) emission plants, advanced effluent treatment, and evaluation of carbon capture technologies. As India and the world move to decarbonise and clean up their energy systems, companies such as Thermax will have a valuable role to play in this journey. This means a sense of urgency in everything we do, fostering numerous partnerships within our ecosystem, and shifting capabilities from large specification-driven projects to projects that are bespoke, technology-driven, often smaller in scale but distributed in breadth.
To achieve this shift in capabilities, we have been making several changes internally. FY 2022-23 was a year when many initiatives started to take root and, in several cases, bore fruit. This is reflected in our business advancements.
With more than a decade of experience and 40+ installations in India, our subsidiary, Thermax Onsite Energy Solutions Limited (TOESL), has now ventured into international geographies such as Indonesia and Sri Lanka. The business portfolio is being further expanded with biomass gasification and bio-CNG solutions under the build-own-operate model. Moreover, TOESL has invested in dedicated briquetting facilities to ensure self-sustained operations for the contract tenure with customers and has supplied over 2.9 lakh tonnes of biomass during the fiscal.
First Energy Private Limited (FEPL), another of our subsidiaries, has concluded 180 MWp captive renewable power projects for some major industrial consumers in Maharashtra, Gujarat and Tamil Nadu. We have also set up a wind-solar hybrid project for captive users. Moving ahead, we will continue to expand our horizons in other states as well and will continue to explore new products, platforms and services to improve its topline. Besides, we are also exploring the possibility of connecting large power projects with the central transmission utility (CTU).
To foray into the bio-CNG space, Thermax has signed a shareholders’ agreement with EverEnviro Resource Management Pvt. Ltd. (EverEnviro), a company of green growth equity fund, India’s largest climate fund, to establish Thermax Bioenergy Solutions Pvt. Ltd. (TBSPL). The newly established business is seeing good traction with a surge in enquiries for bio-CNG projects. The business is in the process of commissioning one pilot plant in collaboration with TOESL along with setting up a bio-CNG plant for a municipal corporation, and two other customer projects are under execution - all in Northern India. All major field stock like rice straw, press mud and organic municipal waste is being utilised to generate biogas. This business model is an excellent way of achieving resource optimisation, reducing carbon footprint and facilitating circularity.
We have observed consistent traction for our non-recyclable solid waste (NRSW) boiler and received multiple orders for our vapour absorption technology and multi-fuel fired boiler in the first year of its launch. Additionally, a breakthrough export waste-to-energy order was also bagged from an international construction engineering company.
To foray into the bio-CNG space, Thermax has signed a shareholders’ agreement with EverEnviro Resource Management Pvt. Ltd. (EverEnviro), to establish Thermax Bioenergy Solutions Pvt. Ltd. (TBSPL). The newly established business is seeing good traction with a surge in enquiries for bio-CNG projects.
Edge Live (ML-based asset performance enhancement solution), being launched last year, was a major capability enhancement to our customer portal, Edge.
Edge Live has been successfully deployed for over 70 customers at 140 sites, and 4,000 assets.
Four specialised operations centres have been set up in Pune and Chennai, India, which are responsible for the constant monitoring of assets. These centres are staffed by subject matter experts who oversee asset classes. Acting as a hub for customer success, the centres work closely with stakeholders to improve the uptime, efficiency, and reliability of assets.
We are currently undergoing two internal shifts. The first shift involves improving our processes to create a more agile and digitally-driven Thermax. This initiative, called Project Sprint, involves partnering with a top-tier consulting firm for 18 months. While we have experienced growth in our revenue and orders this year, our headcount growth has been limited. This limitation has had an impact on work-life balance, as indicated by employee surveys, and has contributed to higher attrition rates. Moving forward too, we aim to restrict our headcount increase specifically in growth sectors like hydrogen and services. Project Sprint is crucial for establishing a scalable business model.
The second internal initiative focusses on building a performance-based culture. The employee performance evaluation methodology has been refreshed with the aim of encouraging frequent discussion on goals and on the process of achieving such goals. Talent development, especially career acceleration of high potential employees, has also been emphasised. This also involves implementing a performance-styled compensation structure with an increased variable component. In addition, we are adopting rigorous talent management practices, enhanced training modules, and introducing Employee Stock Option Plans (ESOPs).
In an ever-evolving technology environment, no company can work in isolation. Partnerships across the ecosystem are crucial to success, and Thermax is well-positioned to be a trusted partner in its customers’ energy transition journey.
In many of Thermax’s core markets, energy transition is about bridging the gap between energy availability and energy sustainability. To accomplish this, we are leveraging partnerships across the landscape. Most of our new business models reflect this collaborative approach. We have partnered with EverEnviro and Primove for bio-CNG initiatives; and with Australia’s Fortescue Future Industries (FFI) for hydrogen-based projects. There are other similar strategic partnerships too that are in the works.
On the research front, we have collaborated with IIT Delhi and NCL Pune for coal gasification and specific application development for resins. During the Coal Ministry’s visit to our 6 TPD coal-to-methane plant in Pune, we demonstrated our capabilities in the conversion of high-ash Indian coal to methanol – a first-of-its-kind initiative to convert 50% of ash coal into value-added chemicals. Moreover, we are working with customers in relevant industries to create multiple new solutions in waste-to-energy. Further, to rapidly enhance our capabilities on the digital front, we acquired minority stakes in ExactSpace and Covacsis.
Our focus at Thermax is to build a resilient company that can thrive in a rapidly changing energy landscape. I am glad to report that in FY 2022-23, we made significant progress towards this endeavour.
With all these changes being implemented within the Company, it is an opportune time to recast our reporting segments to reflect our current business management approach. The new segments going forward are those of Industrial Products, Industrial Infra, Green Solutions and Chemical. The Industrial Products segment encompasses a range of products related to heating, cooling, air pollution control, water and wastewater. These products are sold across diverse industries, often through channel partners and distributors. The segment necessarily requires manufacturing plants and is also service-intensive.
The second segment is Industrial Infra, which includes customised and bespoke solutions that are often large in scale and tailored to meet our customers’ specific requirements. There is an EPC component to these projects with considerable site work including civil engineering. Our large boilers vertical is also part of this business. While margins are somewhat lower, this business has excellent cash flows with negative working capital.
Green Solutions is a relatively small but important new segment to report, wherein Thermax provides renewable energy and utility solutions on a build-own-operate (BOO) basis. The customers are primarily industrial and contract terms range from 10 to 25 years. This business is upfront cash-intensive with a long tail of relatively secure cash flows.
Chemical continues as a separate segment, as before.
I have now spent more than three years with Thermax. From the Covid-19 driven lows of 2020 to the recovery fuelled highs of the past year, it has been a remarkable journey. Through the operational considerations that a turnaround of this magnitude brings, our focus at Thermax is to build a resilient company that can thrive in a rapidly changing energy landscape. I am glad to report that in FY 2022-23, we made significant progress towards this endeavour.
As we look ahead, we are steadfast in our commitment to achieving our own decarbonisation targets and to partner with our customers in their energy transition journey, reinforcing our dedication to a sustainable and greener future.
Warmly,
