Thermax

The Directors have pleasure in presenting the Twenty-seventh Annual
 Report together with the audited accounts of your company for the year
 ended March 31, 2008.
 
 FINANCIAL RESULTS
                                                      (Rupees in crore)
                                         2007-2008       2006-2007
 
 Total income                             3245.94         2210.03
 Profit before interest, depreciation,
 tax and extraordinary items               451.35          316.08 
 Interest & depreciation                    23.07           20.06
 Profit before tax & 
 before extraordinary items                428.28          296.02
 Extraordinary items 
 of (expenses)/ income                       2.10           (5.48)
 Provision for taxation 
 (incl. deferred tax)                      149.60          102.74
 Profit after tax & extraordinary items    280.78          187.80
 Balance carried forward from last year    222.97          136.61
 Profit available for 
 appropriation (cumulative)                503.75          324.41
 Interim dividend/
 proposed equity dividend                   95.33           71.49
 Tax on dividend                            16.20           10.95
 Transfer to general reserves               33.02           19.00
 Surplus carried forward                   359.20          222.97
 
 PERFORMANCE
 
 Your company has posted robust results during the year with total
 income at Rs. 3246 crore, up from Rs 2210 crore in the previous year,
 registering a growth of 47%. Profit before tax and extraordinary items
 at Rs. 428 crore (Rs. 296 crore in the previous year), recorded a
 growth of 45%.  Profit after tax is higher at Rs. 280.8 crore from Rs.
 187.8 crore of the previous year. Earnings per share (EPS) moved up
 significantly to Rs. 23.56 compared to Rs. 15.76 in 2006-07.
 
 During the year exports, including deemed exports, have risen to Rs.
 678.2 crore from Rs. 401.7 crore last year, a growth of 69%.
 
 A detailed review of the companys performance and future prospects is
 included in the Management Discussion and Analysis section of the
 Annual Report.
 
 CONSOLIDATED RESULTS
 
 The consolidated income of the Thermax Group has gone up by 49% to Rs.
 3525 crore. Income from international business has increased to Rs.
 715.3 crore from Rs. 441-2 crore. Profit before tax has increased 47%
 to Rs. 445.7 crore. Profit after tax and minority interest has
 increased 50% to Rs. 290.7 crore. Earnings per share (EPS) on a
 consolidated basis has gone up to Rs. 24-40 as compared to Rs. 16.26 in
 the previous year. ME Engineering Ltd., the UK based step-down
 subsidiary, was referred to Administration last year and during the
 year liquidation process has started. This company has not been
 considered for consolidation. Voluntary winding-up of Thermax Energy
 Performance Services Ltd., the joint venture subsidiary company, is
 underway and also has not been considered for consolidation.
 
 In tenns of approval granted by the Central Governmenr pursuant to-the
 provisions of Section 212(8) of the Companies Act, 1956, copies of the
 Balance Sheet and Profit and Loss Account, Directors Report and
 Auditors Report of the subsidiary companies, in India and abroad, have
 not been attached to the Accounts of the company for the year 2007-08.
 However, on request by any member of the company/statutory authority
 interested in obtaining them, these documents will be made available
 for examination at its corporate office. The audited consolidated
 financial statement presented by the company include the financial
 information of all its subsidiary companies prepared in accordance with
 the Accounting Standard 21 (AS 21) issued by The Institute of Chartered
 Accountants of India. Pursuant to the approval, a statement of
 summarised financials of all the subsidiaries is attached along with
 the consolidated financial statement.
 
 DIVIDEND
 
 The Directors have recommended dividend payment of Rs. 8 per equity
 share (400%) of face value of Rs. 2 each for the financial year
 2007-08, as against 300% paid last year.
 
 The dividend, if approved by the shareholders, will entail a payout of
 Rs. 111.5 crore, including dividend distribution tax Rs. 16.2 crore.
 
 SUBSIDIARIES Domestic
 
 Thermax Engineering Construction Co. Ltd.
 
 Thermax Engineering Construction Co. Ltd.  (TECC), a wholly owned
 subsidiary of your company, undertakes and executes engineering
 construction projects mainly for the Boiler and Heater (B&H) business
 unit of the parent company.
 
 During the year under review, the company has clocked 1.1 million
 man-days and constructed more than 60,000 tons of boiler equipment.
 This has been the largest deployment of resources till date. TECC has
 been involved in the mega energy project for a large refinery in
 Gujarat, the largest project order being executed by the company.
 
 TECCs total income increased by 28% to Rs. 113.7 crore from Rs. 89.1
 crore last year. Profit after tax was marginally lower at Rs. 1.8 crore
 compared to Rs.  1.9 crore in the previous year due to higher operating
 costs. During the year, your company has invested Rs 3 crore in the
 share capital of this subsidiary.
 
 Thermax Instrumentation Limited
 
 Thermax Instrumentation Limited (TIL), a wholly
 
 owned subsidiary, after expanding into new business activities last
 year, has now focused its operations on installation and commissioning
 of power and cogeneration plants including civil construction.
 
 In 2007-08, the company had a total income of Rs. 157.2 crore and
 profit after tax of Rs. 7 crore.  It has simultaneously handled 10
 power plants during the year. The company also received its first
 overseas order for installing and commissioning of a power plant from
 South East Asia.
 
 Thermax Inc., U.S.A.
 
 This wholly owned step-down subsidiary is the front- end value chain
 for the parent companys two businesses in the USA - chemicals and
 cooling.
 
 The income of the company increased by 52% to USD 17.3 million and the
 company posted a profit after tax of USD 0.1 million against a loss of
 USD 0.3 million last year.
 
 The chemical business showed significant improvement in margins despite
 cost pressures..!he strategy is now to focus on profitability through a
 combination of product mix and pricing.
 
 The cooling business grew substantially during the year and is poised
 to gain additional market share through new alliances in the North
 American market and scaling up of new applications in the industrial
 sector in Brazil.
 
 Thermax Europe Ltd., U.K.
 
 This wholly owned subsidiary achieved an overall income of £ 3.5
 million as compared to £ 3.6 million last year, despite the closure of
 one of its business lines. The cooling business grew to £ 3.2 million
 from £ 2 million last year.
 
 Due to unfavourable market conditions the company decided not to pursue
 the packaged boiler business in the UK, and it was closed down last
 year. The increased awareness in Europe to reduce green house gases and
 the attempts of large corporations to check carbon emissions have
 opened business opportunities for absorption products.
 
 The company continued to build upon its leadership position in the
 solar based cooling systems market and supplied several hot water
 chillers for solar chilling applications.
 
 It successfully executed the first of a kind absorption gas chiller
 coupled to fuel cells for a German telecom group. During the year it
 also supplied exhaust gas based heat pump and bio diesel based cooling
 system for the emerging CHPC (combined heating, power &. cooling)
 market.
 
 Thermax Hong Kong Limited, Hong Kong
 
 Thermax Hong Kong Limited (THKL), a wholly owned overseas subsidiary,
 was established with the dual purpose of making a foray into the
 Chinese absorption cooling market and to provide support for the
 sourcing activities for the various businesses of the parent company.
 
 The company posted an income of HK$ 8.2 million and made a nominal
 profit after tax of HK$ 34,742
 
 The company has achieved its initial objectives on both counts. The
 parent company has since established a new subsidiary company Thermax
 (Zhejiang) Cooling and Heating Engineering Co.  Ltd. (TZL) in China for
 the manufacture and sale of absorption chillers. Thus, the business
 activities of the company will now be directly undertaken by TZL. As no
 new significant business is anticipated in the next financial year, the
 company closed its representative office at Shanghai in December 2007.
 
 Thermax (Zhejiang) Cooling & Heating Engineering Co. Ltd., China
 
 Thermax (Zhejiang) Cooling 6k Heating Engineering Co. Ltd., the wholly
 owned subsidiary, has been incorporated to set up an absorption chiller
 manufacturing facility in the Zhejiang province of China. The new
 facility will complement Thermaxs Indian manufacturing base and play a
 key role in its selective internationalisation programme.
 
 The manufacturing facility is fast approaching completion with all
 major machinery installed at site.  Trial production has commenced from
 May 15, 2008 and commercial production is expected to go on stream in
 July 2008.
 
 During the year, your company has invested USD 8 million in the share
 capital of this subsidiary and has eannarked additional funds of USD
 3.47 million.
 
 Thermax do Brasil - Energia e Equipamentos Ltda., Brazil (TdB)
 
 During the fiscal year the subsidiary recorded a sales income of BRL
 0.4 million against BRL 0.7 million in the previous year. The business
 model of providing service to customers has been changed from direct
 engagement to a franchisee arrangement from November 2007.
 
 The future of this subsidiary remains uncertain.  A decision regarding
 its continuation will be taken during this financial year.
 
 A Management Discussion and Analysis report, highlighting the
 performance and prospects of the companys energy and environment
 businesses, is attached and forms part of this report.
 
 CORPORATE GOVERNANCE
 
 It has been the endeavour of your company to follow and implement best
 practices in corporate governance, in letter and spirit. A detailed
 Corporate Governance Report is attached and forms part of this report.
 
 A certificate from the auditors of the company regarding compliance of
 the conditions of corporate governance as required under Clause 49 of
 the Listing Agreement, forms part of this report.
 
 LISTING ON STOCK EXCHANGES
 
 The companys equity shares are listed on two stock exchanges - The
 National Stock Exchange of India Limited (NSE) and Bombay Stock
 Exchange Limited (BSE).
 
 FINANCE ACCOUNTS AND SYSTEMS
 
 The cash generated from operations was Rs 141.2 crore as compared to Rs
 324-3 crore in the previous year after factoring in the higher net
 working capital requirement to service the growth in income. The
 receivables and inventory ratios have improved over the previous year.
 The company maintained its debt free status.
 
 The company adopts a conservative approach in managing its treasury/
 investment portfolio - based on safety, liquidity and returns. The bulk
 of the surplus funds are invested in debt funds. The company continues
 to cover its foreign currency exposures through forward contracts. The
 company has not used any derivative instruments or options during the
 year.
 
 The company continues to have a P1 + rating by CRISIL for its
 commercial paper programme. During the year it has not borrowed on this
 account.
 
 Public Deposits
 
 During the year, one deposit of Rs. 12,000 has been claimed and repaid
 by the company. The company had no unpaid / unclaimed deposit (s) as on
 March 31, 2008. It has not accepted any fixed deposits during the year.
 
 In terms of the provisions of Section 205C of the Companies Act, 1956
 read with the Investor Education and Protection Fund (Awareness and
 Protection of Investors) Rules, 2001, the company has transferred
 unclaimed dividend for the financial year 1999-2000 amounting to Rs.
 1.49 lakh to the Fund.
 
 AWARDS AND RECOGNITION
 
 The company was featured, for the third consecutive year, in the Forbes
 list of Asias Best Under a Billion (Dollar) Companies.
 
 During the year, Mrs. A. R. Aga, Director of the company, was honoured
 at the Zee Astitva Awards as the Business Woman of the Year 2007. The
 award is in recognition of her contributions to industry and society.
 
 The companys well-known house magazine Fireside bagged the gold award
 for the best internal house magazine at the 47th awards function of the
 Association of Business Communicators of India.
 
 TECHNOLOGY TIE-UPS
 
 During the year the company has signed three major technology and
 manufacturing license agreements with global leaders. These technology
 agreements would enable the company to move into new areas of business
 by adding value to its customer operations. Brief details of the
 tie-ups are given below:
 
 Georgia-Pacific Chemicals LLC, USA:
 
 A technology and manufacturing license agreement for performance
 enhancing chemicals in the paper & pulp industry was signed with
 Georgia-Pacific Chemicals LLC, based in Atlanta, USA. Products based on
 the licensed technology will enable your company to expand its business
 in the domestic paper industry and also in South East Asia.
 
 Babcock & Wilcox Power Generation Group, Inc., USA:
 
 Building on 20 years of business relationship, including a successful
 joint venture with Babcock & Wilcox (B&W), USA your company has entered
 into an agreement with the boiler majors Power Generation Group for
 subcritical utility boilers up to 800 MW. The tie-up will give Thermax
 the right to use B&Ws technology to make a significant impact in the
 power sector, where an estimated 20,000 MW of capacity is expected to
 be added every year in the next 15 year period. The company will now
 manufacture and sell subcritical B&W Radiant utility boilers in India.
 These boilers will be largely manufactured at the companys new
 manufacturing facility at Savli in Gujarat.
 
 Balcke-Diirr GmbH, Germany:
 
 The company has signed a technical know how transfer and license
 agreement with Balcke-Diirr GmbH, Germany, for dry and wet
 Electrostatic Precipitators (ESPs) for the power, industrial and
 utility segments upto 300 MW The agreement covers leading European and
 American ESP designs of Balcke-Diirr. For utility power projects above
 300 MW Balcke-Diirr and your company would cooperate on a case-to-case
 basis.
 
 This partnership will give your company a distinct technology edge in
 the domestic power, steel, cement and utility sectors and to gain its
 rightful share of the air pollution control business emerging from
 these sectors.
 
 EMPLOYEE STRENGTH
 
 The total number of permanent employees on the rolls of the company was
 4464 as on March 31, 2008.
 
 PARTICULARS UNDER SECTION 217 OF THE COMPANIES ACT. 1956
 
 A statement of the particulars required under Section 217(1) of the
 Companies Act, 1956, read with the Companies (Disclosure of Particulars
 in the Report of the Board of Directors) Rules, 1988, is annexed and
 forms part of this Report.
 
 Particulars of the employees as required under Section 217(2A) of the
 Companies Act, 1956, read with the rules framed thereunder, are also
 annexed and forms part of this report. However, in terms of Section
 219(1) (b)(iv) of the Companies Act, 1956, the report and accounts are
 being sent to all shareholders excluding the aforesaid annexure. Any
 shareholder interested in obtaining a copy of the same may write to the
 Company Secretary at the corporate office.
 
 DIRECTORS
 
 Mr. Prakash Kulkarni retired as the Managing Director on June 30, 2007
 as per the companys superannuation policy. The Board places on record
 its deep appreciation of Mr. Kulkarnis leadership during his tenure as
 Managing Director.
 
 Mr. Ravi Venkatesan resigned as a Director of the company effective
 March 31, 2008, owing to his commitments and busy schedule in his
 present full- time employment. The Board places on records its sincere
 appreciation of the valuable contribution during his tenure.
 
 Dr. Raghunath A. Mashelkar, Independent Director, has been appointed as
 an Additional Director on January 29, 2008. Dr. Mashelkar holds office
 of Additional Director, pursuant to the provisions of Section 260 of
 the Companies Act, 1956 and Article 98 of the Articles of Association
 of the company, upto the conclusion of the ensuing Annual General
 Meeting. The requisite notice, together with necessary deposit has been
 received from members, pursuant to Section 257 of the Companies Act,
 1956, proposing Dr. Mashelkar as a Director of the company. The
 necessary resolution appointing Dr.  Mashelkar as Director of the
 company has been set out in the Notice of the ensuing Annual General
 Meeting for the approval of shareholders.
 
 In accordance with the provisions of the Companies Act, 1956 and the
 companys Articles of Association, Mrs. A. R. Aga and Mr. Tapan Mitra
 retire by rotation at the ensuing Annual General Meeting and being
 eligible, have filed their consent to act as Directors of the company,
 if appointed.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 The Directors accept responsibility for the integrity and objectivity
 of the Profit & Loss Account for the financial year ended March 31,
 2008 and the Balance Sheet as at that date (financial statements) and
 confirm that:
 
 1. The financial statements have been prepared on a going concern
 basis. In the preparation of the financial statements the generally
 accepted accounting principles (GAAP) of India and applicable
 accounting standards issued by The Institute of Chartered Accountants
 of India as also the guidelines issued by the Reserve Bank of India
 applicable to the company have been followed.
 
 2. Appropriate accounting policies have been selected and applied
 consistently. Judgements and estimates that are reasonable and prudent
 have been made so as to give a true and fair view of the state of
 affairs of the company as at the end of the financial year and of the
 profit of the company for that period.  Significant accounting policies
 and other required disclosures have been made in Schedule 18 annexed to
 the Financial Statements.
 
 3.  Proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956, for safeguarding the assets of the company and for
 preventing and detecting fraud and other irregularities. To ensure
 this, the company has established internal control systems, consistent
 with its size and nature of operations. In weighing the assurance
 provided by any such system, its inherent limitations should be
 recognised. These systems are reviewed and updated on an ongoing basis.
 Periodic internal audits are conducted to provide reasonable assurance
 of compliance with these systems. The company has an Internal Audit
 department which coordinates the internal audit process. The Audit
 Committee of the Board meets at regular intervals to review the
 internal audit function.
 
 4. The financial statements have been audited by M/s. B. K. Khare &
 Co., the statutory auditors and their report is appended thereto.
 
 COMMITTEES OF THE BOARD
 
 During the year, changes have been effected in the following committees
 of the Board:
 
 Borrowing and Investments Committee: Mr. M. S.  Unnikrishnan has been
 inducted as a member of this committee with effect from July 1, 2007 in
 place of Mr. Prakash Kulkarni. Mr. Pheroz Pudumjee was also co-opted as
 a member of the committee effective October 27, 2007.
 
 Strategic Business Development Committee: Mr. M. S.  Unnikrishnan has
 been inducted as a member of this committee with effect from July 1,
 2007 in place of Mr. Prakash Kulkarni.
 
 Share Transfer and Shareholders Grievance Committee: Mr. M. S.
 Unnikrishnan has been inducted as a member of this committee with
 effect from July 1, 2007 in place of Mr. Prakash Kulkarni.
 
 The Corporate Governance Report details the changes in respect of each
 of the aforesaid committee.
 
 AUDITORS M/s. B. K. Khare & Co., Chartered Accountants, retire as
 statutory auditors at the ensuing Annual General Meeting and being
 eligible, offer themselves for reappointment.
 
 ACKNOWLEDGEMENTS
 
 Your Directors also place on record their appreciation of the continued
 support extended by the companys clients, business associates, bankers
 and investors during the year. Your Directors also place on record
 their appreciation of the dedication and contributions made by
 employees at all levels, who through their competence, hard work and
 support have enabled the company to achieve growth and improved
 performance. Your Directors look forward to their continued support in
 the future as well.
 
                                    For and on behalf of the Board
 
                                             Meher Pudumjee
 Pune: May 21, 2008                             Chairperson