Dear Shareholder,

It is a pleasure to present the 40th Annual Report of your company.

As we conclude another year of uncertainty, dominated by the Coronavirus outbreak, the situation worldwide, and particularly in India, has seen a lot of distress. Our heartfelt condolences to the families of the 11 employees who lost their lives to COVID, and to those who have lost their loved ones. Let us continue having faith, and hope that this too shall pass!

At the beginning of 2020-21, the Board of your company had set out four priorities. The first and foremost was the health and safety of our people. Our team has operated, and continues to do so, with strict Standard Operating Health & Safety Procedures at all our locations. The second was cash flow – I am happy to say that the company has enhanced its cash flow and managed working capital very well. The third priority was order booking – although difficult with travel restrictions, all our people, including dealers and channel partners, have done reasonably well. And finally, profit – indeed a very good job done, as a result of strong focus on cost reduction and execution of orders under constraints of supply chain difficulties and COVID infections.

On behalf of the Board, I would like to thank our new Managing Director & CEO, Ashish Bhandari, who joined us on April 7, 2020, the Executive Council, our SBU heads, and the senior management, for navigating the company through a very tough and challenging year. A big ‘thank you’ to all our employees for their dedication and efforts in effectively collaborating with all our stakeholders, despite going through a lot of pain and anxiety within families, as also the limitations of working from home. Thank you, to all our customers for their understanding and continued patronage; our channel and vendor partners, who have worked tirelessly to meet commitments; our auditors, who, despite many challenges, have worked hard to audit our accounts; our shareholders and all other stakeholders, for their continued and unwavering support. I would also like to express my sincere appreciation to all my fellow Board members for attending all our Board and Committee meetings, supporting and guiding the management in taking many important decisions during this difficult time. And a special thank you to our former MD & CEO, Mr. M.S. Unnikrishnan, who graciously agreed to extend his tenure and superannuated on August 31, 2020, after ensuring a smooth transition, supporting Ashish through the initial phase of COVID induced disruption.

Progressing into FY 2021-22, ESG (Environmental, Social and Governance), especially ‘S’, is taking centre stage, in view of the rising disparity in incomes and a sharp focus on securing human lives. While the economic and social disruption has been devastating, many of those affected, not just by the virus but also by loss of livelihood, have been migrant workers and daily wage earners. Moved by the plight of this ‘invisible’ workforce forming India’s backbone, your company has made a modest beginning towards improving their working conditions, both within our premises and at our sites. In partnership with NGOs Dasra and Aajeevika Bureau, along with a few other like-minded corporations, I am happy to share that we have commenced an initiative called the Social Compact (SoCo), for restoring the equity of these migrant workers. It is a small beginning, but I am very hopeful it will make an impact, since it has the buy-in of all within Thermax.

‘E’ (Environment) is also in focus, as climate change continues to pose an existential threat to the planet. The much cleaner environment witnessed during lockdowns should have persuaded even the sceptics that it is human activity that is responsible for our environmental degradation. Thermax has always been a proponent of ESG, since long before the term was invented. Your company is constantly looking at ways to harness waste energy for productive use, be it in heating, cooling or generating power; cleaning and recycling water; or using waste biomass or non-recyclable solid waste in the paper industry as fuel, for protecting the environment in the long-term.

I am also very happy to inform you that the orders registered by our subsidiary, TBWES, in the second half of FY 2020-21 were all ‘green’. We are also seeing some of our customers shifting from a capex to an opex model – our subsidiary TOESL has partnered with them to decarbonise, as also reduce their water footprint.

Leveraging our forte in waste to energy, we have introduced a unique environmental-friendly product called T-HVAC (Thermal Heating, Ventilation and Air Conditioning), which utilises exhaust gas from heavy vehicles, to cool their cabins in summer and heat them in winter.

‘G’ (Governance) has always been the cornerstone of the way in which Thermax operates – with an emphasis on all our stakeholders. I am very proud of the independence of our Board members – we welcome constructive dissent and differences of opinion, since that is what makes an organisation stronger and sustainable.

Kudos to our Chemical business team, who have quietly contributed a significant profit to the overall bottom line of the company during the year. Their enhanced manufacturing capacity and a strong focus on every customer is deserving of appreciation.

Coming to the global arena, although our exports from India have increased, thanks to our chiller and chemical businesses, our international subsidiaries have been going through a challenging time. We continue to focus on improving our overseas manufacturing and marketing capabilities in Europe and Southeast Asia. We are also building local EPC capabilities in select countries, while continuing our plug-and-play modular engineering solutions, that enable our customers to minimise onsite construction work, thus offering new possibilities for growth.

With digitalisation reshaping our lives, Thermax commenced its ‘Smart Thermax’ journey with a structured digital roadmap. The travel constraints of the pandemic prompted us to explore remote commissioning technologies for large boilers, and we have successfully accomplished projects in countries like Turkey and Nigeria. We have also leveraged Remote Online Service Support (ROSS) to support overseas customers with commissioning of our chillers. We are also aiming to augment our service footprint through digitalisation, which will help us effectively track and monitor our widespread installation base, constantly adding value to our customers.

During the lockdown, digitalisation enabled many of our people to work from home (or from anywhere). This has encouraged the HR team to explore new ways of working, which are more agile and location-agnostic, with enhanced focus on outcome-driven performance. Hopefully, over time, this should enable the organisation to enhance its gender diversity, as also attract talent from all over the world.

Thermax Foundation has been supporting, and continues to partner with several good, credible and trusted NGOs that are going all out to help communities with rations, equipment to help fight COVID, and of course continuing to educate young minds through our partnership with Akanksha Foundation. In the coming year, we shall also focus more aggressively on skilling or reskilling people in poor communities, to help them get back on their feet again.

Moving forward, the Thermax of the future is one that is closely aligned with the needs of a cleaner, greener, and healthier world. We still have a long way to go, but with more sustainable projects, we are today a clean energy, clean water and clean air company, delivering on our philosophy of ‘Conserving Resources, Preserving the Future’.

I would like to conclude by once again thanking all our stakeholders for continuing to repose their faith in this institution. Please do not let your guard down - stay safe and healthy. Each of us is safe only if all of us are safe.

Warmly,

Meher Pudumjee