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THERMAXAn energy & Environment Engineering

Company

By

119278001 AniketPatankar119278072 Ankur Basumatary119278109 SanchitKorgaonkar119278113 AshishMundawane119278130 Aritra Mukherjee

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Index

Industry Overview

Thermax Overview

Strategic Initiatives for Sustainable Growth

Sequential Combination Strategies

Environment and Organizational Appraisal

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• Product/ equipment of high value, durable

• Economic asset life 3 years

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Used as plant and machinery for agricultural, industrial and commercial (transportation etc.) purpose in production/ service delivery process

• Textile Machinery• Machine Tools• Electrical and Power

Equipment • Earthmoving and

Construction Equipment• Process Plant Equipment

Capital Goods Industry-OverviewCORPORATE STRATEGY

History of ThermaxThermaxType PublicIndustry Energy and Environmental

engineeringFounded 1980Headquarters Pune, IndiaArea served Worldwide (75 countries)Revenue $1.1 BillionWebsite www.thermaxindia.com

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Vision

To be a globally respected, high performance organization, offering sustainable solutions in energy & environment

Missions

• Aspire to become a leading technology company with a global outlook delivering world-class products and services to customers.

• Fulfill the needs of our customers – best understood through an enlightened partnership with him.

• Expand and define new markets by expanding the frontiers of research and engineering and customer applications in our chosen field of business..

• Contribute substantially to the global priority areas of energy conservation, environment protection and enrichment of society..

Values• Respect• Commitment• Honesty and integrity• Concern for Society and the Environment

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Products

Boilers & Turbines

Stream Accessori

es

Water & waste

management

Dust Collector

Electrostatic precipitators

Heaters

ProductsCORPORATE STRATEGY

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Global PresenceCORPORATE STRATEGY

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PuneSpread across 50 acres with manufacturing set-up of 65000 sq meterscapable of producing boilers and chillers

Manufacturing Facility

PaudhSpread across 47 acres with manufacturing area of 110000 sq meters.This plant has capacity to manufacture 20000 cu.m/yr of resin

SavliSpread across 100 acres capable to address the need of large size fielderected boilers & heaters

MundraSpread across 10 acres. Port based assembly facility developed forshipment of large –size plants

ChinaSpread across 6.5 acres. Green-field project completed with aninvestment of USD 11 Million

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Educational Initiatives•Adopting government Scools•Akanksha Learning Center•Teach for India

Affirmative Action Sponsoring of interns from SC/ST background

Marathon Raising funds for Akanksha Funds raised Over 17 Lakhs Teach for India

Thermax - CSR InitiativesCORPORATE STRATEGY

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CORPORATE STRATEGY

Thermax Advanced technology

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Strategic Initiatives for Sustainable Growth

Capitalize on fossil growth Through Efficiency Improvement

•Introduction of supercritical and emission control technologies to improve efficiency and reduce carbon emissions of upcoming power plants•Combined Cycle Offerings•Large Size CFBC’s(circulating FBC)

Creating a Green Portfolio / Focus on Environmental Businesses

•Waste to Energy•Renewable energy•Environmental Businesses

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Alternate sources of energy

JV with Iceland based Reykjavik geothermal to explore geothermal

energy

May 2011, Signed a technology transfer

license agreement with Lambion Energy

Solutions, a German engineering company

Thermax Onsite Energy Solutions (TOESL) set

up in 2009 to focus on green energy

July 2011Designed and commissioned first of its kind solar air conditioning system at Solar Energy Center at Gurgon

2012, In collaboration with Solar Energy

Centre –took a project to use rice husk and

solar energy

Alternative Sources of Energy

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Thermax Ltd in technological partnership with Amonix, Inc is working on concentrated photovoltaic (CPV) technology for clean power generation to India.

Thermax has designed and commissioned a first-of-a kind solar air conditioning system of 100 kw technology at the Solar Energy Centre in Gurgaon, Haryana.

Thermax currently working on integrating Solar Field With a Conventional Boiler and Developing an Independent Solar Power Plant

Maharashtra State Government has laid the foundation of 1st India’s first public private partnership project for rural electrification in partnership with Thermax

Thermax’ s Foray in to solar sector CORPORATE STRATEGY

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Uses steam, heat or hot water from geothermal reservoirs to provide the force that spins the turbine generators and produces electricity.

The estimated potential for geothermal energy in India is about 10,000 MW.

A pilot 3 MW project is slated to be set up in Puga Valley in Ladakh, which is likely to be first such project in India

Thermax in partnership with Icelandic firm Reykjavík Geothermal to set up a geothermal power project in India.

Thermax’ s Foray in to Geothermal EnergyCORPORATE STRATEGY

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Environmental Operations• Indian water and wastewater treatment is driven by rapid industrialization, infrastructure

growth and high population growth.• Thermax offers systems for air pollution control, water and wastewater treatment and

recycling for industrial, commercial, defense, hospitality and municipal sectors. • This segment has continually witnessed strong traction from the industrial power and

municipal segments and contributed ~25% to the company’s standalone revenue and ~28% to standalone EBIT in Q1 FY12.

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Cash position improves to Rs. 552 Crfrom Rs. 448 Cr.

Capex of Rs. 28 Cr in comparison to Rs. 25.4 Cr.

Net worth crosses Rs. 1000 Cr mark.

For the fourth year running, Thermaxfeatured in Forbes “Asia’s 200 Best Undera Billion” companies.

2011 Major Milestones

Average PBIT of 13% Revenue

distribution: Energy 75% & Environment 25%

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Method of diversification

Balance of the markets between indigenous matrket & the export market

Parity between stadard products and custom-built products and projects

An irrepressible urge to grow

Enter product lines which serve a wide cross–section of industry

Quality managenent

Growth StrategiesCORPORATE STRATEGY

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Thermic fluid heating into air heating into industrail drying into paint drying

Move from familiar to not so familiar

oil into solid fuels into coal. wood and husk

Defining and Redefining business

Quick to react to events and oppurtinitiesEx Oil crisis

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Choice of products which can use the same assets and infrastructural facilities.

Move into areas which provided a synergy either in terms of the technology, or the market or both.

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Method of DiversificationCORPORATE STRATEGY

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Training a cadre of plant manegers and operatives who don not require respection

Setting up of a physical and non-destructive testing laboratory.

Developing detailed quality assurance manuals

Building and updating a critical vendor list

Generating a system of feedback and review of rejects and customer complaints

Quality ManagementCORPORATE STRATEGY

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Sequential Combination Strategies

Formation:•Packaged boiler & thermic fluid heater.

Internationalization:•Resin Plant in US•JV with Culligan International for water treatment •JV with US-based EPS for energy service businessDiversification:Cogeneration BusinessDivestment:•Thermax Engineering Costruction

Expansion:•Coal boilers•Field-erected boilersDiversification:•Water treatment plants•Surface-Coating and Pollution Control Equipment

Diversification:•Energy Conservation Equipment Internationalization:•JV with Deviebiss, Babcock and Willcox

Restructure:•BoD stepped down to restructureDivestment:•In non-related sectoes like Software

1960s 1970s 1980s 1990s 2000s

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Sequential Combination Strategies•Acquired ME Engineering, UK present in energy related engineering•Industrial Fans division sold to Universal fans India

•Three wholly owned subsidiaries namely Thermax Co-gen, Thermax Electronics and Winman Gas were amalgamated with the company.•2007 Technical Knowhow transfer and license agreement with Balcke Durr GaBH for dry and wet precipitators.

•Wholly owned subsidiary Themax Culligan Water Technology present in water treatment•2001 Thermax Electronics was hived off

•Forayed into O& M contracts for captive power plants.•Babcock Wilcox merged.

2000 2001 2005 2007

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Porters Five Forces Analysis

• High• Domestic Big Ones like BHELIndustry Rivalry

• Medium• Threat of technologically improved equipments

Threat of Substitutes

• Medium• Procurement of raw material in market price

Supplier’s Bargaining Power

• Very high• Domestic companies like BHEL, Suzlon • Chinese Imports create pressure on price

Buyer’s bargaining power

• Low• Not an attractive sector

Threat of new entrants

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Strengths

Diversified Product PortfolioTechnological AllianceStrong Balance Sheet Global Presence

Opportunities

New foreign acquisitionsHuge untapped market globallyHuge potential environmental sectorRapidly growing power sector

Threats

High price of Raw MaterialHigh Interest RateLow Import DutyPoor Infrastructure in India

Weaknesses

Lack of Global Competitiveness in technologyHigher Working Capital RequirementHeavily dependant on domestic demandShort Gestation Contract company unlike BHEL

S W

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SWOT AnalysisCORPORATE STRATEGY

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ETOP AnalysisEnvironmental Sectors

Nature of Impact

Impact of Each sector

Economic Economy slowdown; Increase in interest rates

Market Less growth in demand in domestic market

International A meager share of export; Threat of Chinese substitution

Political No political impact

Regulatory Decrease in import duty; Environmental clearance hurdle;

Social No Social Impact as mostly B2B

Supplier No Apparent Impact

Technological Less advanced technology

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Boiler production to rise by 22.6% in 2012-13

Units 2008-09 2009-10 2010-11 2011-12(Forecast)

2012-13(Forecast)

2013-14(Forecast)

Production Rs Crore

14,893.0 15,765.0 20249.0 26633.6 32660.3 39503.3

Export Rs Crore

955.0 844.7 1145.2 1427.6 1636.3 1801.4

Import Rs Crore

2,263.0 2095.8 1154.0 1946.9 2047.8 2283.4

Domestic market value

Rs Crore

16201.0 17016.2 20657.8 27153.0 33071.8 39987.2

Capital Goods Industry: Boiler Market forecastCORPORATE STRATEGY

Turbine production to rise by 16.2% in 2012-13

Units 2008-09 2009-10 2010-11 2011-12(Forecast)

2012-13(Forecast)

2013-14(Forecast)

Production Rs Crore

4278.3 5436.7 6986.3 8250.4 9587.0 10900.4

Export Rs Crore

315.9 564.5 491.7 618.8 728.6 863.3

Import Rs Crore

1348.8 2420.0 2285.3 2778.9 3057.3 3238.5

Domestic market value

Rs Crore

5311.1 7292.2 8779.7 10410.5 11915.6 13275.6

Capital Goods Industry: Turbine Market forecastCORPORATE STRATEGY

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Business Segment Performance -2011

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Expenditure Sources -2011

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Total expenses (Rs. Million in 2011) 47,041.50

Raw materials, stores & spares 34,344.90

Power, fuel & water charges 227.1

Compensation to employees 3,619.60

Indirect taxes 1,503.70

Selling & distribution expenses 1,817.90

Other operational exp. of industrial ent. 766.6

Interest paid 21.8

Depreciation 423.8

Raw materials, stores & spares Power, fuel & water charges Compensation to employees Indirect taxes Selling & distribution expenses Other operational exp. of industrial ent. Interest paid Depreciation

Distribution of expenses

4%18%

4%

18%

55%

Raw Materials distributionChemicals Fabricated ItemsFerrous Sheets, Plates & Tubes Ferrous TubesOthers

High dependence on chemicals and steel Prices

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•Ion Exchange Resins & Chemicals•50% YoY growth

Plastics and Rubbers

•Energy & Environment Products & Systems: around 80% YoY growth•Energy Products(Boilers Capacity Above 30M): 120% YoY and 50% over five years froth

Non-electrical machineryPrime Movers

•Water Treatment Plants: 150% YoY Growth•Air Pollution Control Plants & Systems: 150% YoY Growth•Components & Spares: 50% increase over five year period

Non-electrical machineryIndustrial Machinery

•Energy Products-Heaters: Sales reduced compared to last year•Energy Products-Power Plants: Sales doubled over last year and over five years

Electrical machinery

•Phenomenal growth in Environmental Sector (about 150%)•Core business of Boilers is also doing well •Heaters sales have dropped but over period it’s growth is good.Inferences

Product PerformanceCORPORATE STRATEGY

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Obstacles in Growth

Period considered in from May 06 to May 11

•Domestic coal shortage, delay in environmental clearances, acquisition problem and policy inactions are slowing power sector expansion•Resulted in slowdown of power project execution•Slow demand growth for power plant equipments

Declining order growth due to delay in

power projects

•Steep increase in interest rates to tackle inflation.•Rising interest rates are increasing cost of capital•Inflation is causing rise in cost of raw materials •Increasing pressure on maintaining margins

Slow growth in capital Goods sector

•Steel and Chemicals are major raw materials•Due to demand rise, steel prices are fluctuating•Direct affects on profit margins

Raw Material Costs

•~33% of equipment supplied to Indian power projects.•Better product pricing and better delivery time. •Assist the Indian power companies to facilitate loans from the Chinese banks at lower interest rates

Chinese Competition

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Recommendations

• Develop and restructure technology infrastructure to support firms striving to improve their technological capabilities and competitiveness.

• Focus on selected manufacturing technologies and products

• Upgrade Technological capabilities of Capital Goods SMEs

• Develop technical education and training facilities• Promote quality culture

Source: PWC report on ‘Global competitiveness of Indian Capital Goods Industry’

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How will we win? Quality Speed to Market After-sales Service Enhance Market Position Build technology leadership Increase emphasis on diversified product lines, customer

bases, and markets

How will we get there? High Research &

Development investment Strategic Acquisition for

technological alliance and economies of scale

Where will we be active? Boilers, Turbines Air Pollution Control Waste water management Waste management Renewable energy

How will we obtain our results? Global Expansion Joint ventures in Europe

How will returns be obtained?Cost control through scale and technologyCompetitive Pricing

Strategy DiamondCORPORATE STRATEGY

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References

• CMIE Database• http://

www.steelguru.com/indian_news/Thermax_acquires_Virgo_Valves_steam_unit/256062.html

• http://business-standard.com/india/news/markets-trade-flat/161555/on

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Industry Contacts

•General Manager, ManufacturingRajiv Sondur

•HR Head, Pune Division Mamta Joshi

•Assistant Manager Pune PlantAmol Palli

•Executive EngineerDigambar Davle

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