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Directors Report of Thermax Ltd.

Mar 31, 2015

Dear shareholder,

The directors have pleasure in presenting the Thirty-fourth Annual Report, together with the audited financial statements of your company for the year ended March 31, 2015.

Financial Results (Rupees in crore) 2014-15 2013-14

Total revenue 4808.22 4366.46

Profit before finance cost, depreciation and tax 580.85 473.51

Finance cost & depreciation 83.81 66.62

Profit before tax 497.04 406.89

Provision for taxation (incl. deferred tax) 161.10 153.92

Profit after tax 335.94 252.97

Balance carried forward from last year 1452.16 1308.83

Profit available for appropriation 1788.10 1561.80

Proposed equity dividend 83.41 71.49

Tax on dividend 16.98 12.15

Transfer to general reserve - 26.00

Surplus carried forward 1687.71 1452.16

Annual Performance

Your company posted a total revenue of Rs. 4,808 crore for the financial year 2014-15, against last year''s 4,366 crore, an increase of 10%. The rise in revenues in subdued market conditions that have prevailed for over two years was largely due to the higher order book at the beginning of the year. The government has been taking various steps to promote the manufacturing sector. Though these measures have created a favourable market sentiment, it would take some more time for noticeable changes to happen at the ground level. In the capital goods industry we largely depend upon the revival of core sectors like power, steel, cement, oil & gas, etc. but there has been no significant investment in these sectors. Considering this scenario, the company is putting in more efforts in its international initiatives while focusing on improving the domestic market share.

Thermax''s Energy business contributed 82% of the Group''s operating revenue while the Environment business accounted for the remaining 18%.

Despite adverse market conditions, your company continued to invest in research and innovation initiatives.

During the year, the revenue from international markets including deemed exports were Rs. 1,092 crore against Rs. 1,101 crore last year.

Profit before tax at Rs. 497 crore was 10.3% of the total revenue, compared to Rs. 407 crore, at 9.3% in the previous year.

Profit after tax stood at Rs. 336 crore, compared to Rs. 253 crore in the previous year. Earnings per share (EPS) were at Rs. 28.19 (Rs. 21.23 in FY 2013-14).

Order booking for the year was Rs. 3,951 crore against Rs. 5,394 crore last year, registering a decrease of 27%. Your company completed the year with an order backlog of Rs. 4,396 crore as against Rs. 5,389 crore last year. Though your company made a modest improvement in its revenue and profit, 2014-15 continued to be tough in the absence of project orders getting finalised in the core sectors of the economy.

Dividend

The Directors have recommended a dividend of Rs. 7/-(350%) per equity share of face value Rs. 2/-.

The dividend, if approved by the shareholders, will result in a payout of Rs. 100 crore, including dividend distribution tax of Rs. 17 crore.

subsidiaries

Annual accounts of the subsidiary companies and related detailed information are available to shareholders of the parent company, subsidiary companies and to the statutory authorities. On request, these documents will be made available for inspection at the company''s corporate office.

The report on performance of subsidiary companies is included in Management Discussion and Analysis.

Information on newly incorporated / ceased subsidiaries during the year

In order to enhance its presence in South-East Asia, the company has incorporated a wholly-owned subsidiary, ''Thermax Engineering Singapore Pte.Ltd.'' on May 22, 2014.

The company has set up another step-down subsidiary company in Indonesia (through the Singapore based wholly-owned subsidiary), namely, ''PT Thermax International Indonesia'' which was incorporated on October 22, 2014.

Thermax incorporated a subsidiary, ''Thermax Senegal S.A.R.L.'' to tap business in power sector in Senegal.

During the year, Omnical Kessel, the company''s step down subsidiary in Germany has filed for insolvency, due to continued losses.

The company does not have any ''material subsidiary'' whose net worth exceeds 20% of the consolidated net worth of the holding company in the immediately preceding accounting year or has generated 20% of the consolidated revenue during the previous financial year.

Management Discussion and Analysis

The Management Discussion and Analysis report, highlighting the performance and prospects of the company''s energy and environment segments, including details of subsidiaries catering to the respective businesses, information on company''s health, safety & environment measures, human resources, risk management and internal controls systems, is attached.

Corporate Governance Report

A detailed Corporate Governance Report that also contains disclosures required as per the Section 134 and 177 of the Companies Act, 2013 is attached.

A certificate from the statutory auditors of the company regarding compliance with the conditions of corporate governance as required under Clause 49 of the Listing Agreement is part of this report.

Finance, Accounts And Systems

During the year, the company has invested Rs. 49 crore in capital expenditure. The net fixed assets including capital work-in-progress stands at Rs. 648 crore as on March 31, 2015.

The company has generated Rs. 280 crore from

operations after payment of tax. Cash and cash equivalent as at the end of the financial year stands at Rs. 1,005 crore.

Current investment in mutual fund was Rs. 783 crore.

In order to strengthen its internal control system, the company has automated a number of controls and is also reinforcing its existing system. Further, its Oracle ERP has been upgraded to the latest R-12 platform.

Public Deposits

The company had no unpaid/ unclaimed deposit(s) as on March 31, 2015. It has not accepted any fixed deposits during the year.

Particulars of Loans, Guarantees or Investments

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

Vigil Mechanism / Whistle Blower Policy

The company has a vigil mechanism named ''Whistle Blower Policy'' to deal with instances of fraud and mismanagement, if any. The details of the said policy is explained in the Corporate Governance Report and also posted on the website of the company.

Employee Strength

The total number of permanent employees on the rolls of the company was 4,027 as on March 31, 2015 (4,046 the previous year).

Particulars of Employees

The information required pursuant to Section 197 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the company, will be provided upon request. In terms of Section 136 of the Act, the Annual Report excluding the aforesaid information is being sent to all the members and others entitled thereto. Any shareholder interested in obtaining such particulars may write to the Company Secretary at the corporate office of the company. The said information is also available for inspection at the registered office during working hours up to the date of the Annual General Meeting.

Details of Trusts for the Benefit of Employees

a) ESOP Trust

The company has ESOP Trust which holds 29,06,250 (2.44%) Equity Shares of Rs. 2/- each of Thermax. The Trust has not made any buying or selling transactions in the secondary market. The company presently does not have any ESOP scheme.

b) Employee Welfare Trusts

The company has a few Employee Welfare Trusts primarily for providing housing loans / medical / educational aid to its employees and their families. These Trusts presently hold 36, 35,190 Equity Shares of Rs. 2/- each of the company. None of the Trusts had any dealings in the secondary market.

Disclosure - Anti Sexual Harassment Policy

The company has in place, an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013.

An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed of during the year 2014-15:

Number of complaints received - Nil Number of complaints disposed of - Nil

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014, is annexed as ''Annexure 1''

Corporate Social Responsibility Initiatives

As a part of its initiatives under "Corporate Social

Responsibility (CSR)'''', the company has undertaken projects in the areas of education, livelihood, health, water and sanitation. These projects are largely in accordance with Schedule VII of the Companies Act, 2013. The CSR initiatives are undertaken through Thermax Social Initiative Foundation (TSIF), since 2007.

In view of the requirements under the Companies Act, 2013, the Company has formed a Corporate Social Responsibility Committee (CSR Committee) and approved CSR Policy, a copy of which is available on the company''s website. As per the said policy, the company would continue its CSR initiatives through TSIF.

The Annual Report on CSR activities is annexed as ''Annexure 2''.

Directors

At the Annual General Meeting (AGM) of the company held on July 22, 2014, the members of the company have appointed Dr. Jairam Varadaraj, Dr. Valentin A.H. von Massow, Dr. Raghunath Mashelkar and Nawshir Mirza as independent directors in terms of the Companies Act, 2013 for a term of 5 years effective from July 22, 2014.

All independent directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

The company has formulated a policy on ''Familiarisation programme for independent directors'' which is available on the company''s website, www.thermaxglobal.com

In accordance with the provisions of the Companies Act, 2013 and the company''s Articles of Association, Pheroz Pudumjee retires by rotation at the ensuing AGM and being eligible, offers himself for re-appointment as director.

Meetings

A calendar of meetings is prepared and circulated in advance to the directors.

During the year, five Board meetings were convened and held, the details of which are given in the Corporate Governance Report.

Remuneration Policy

The Board has, on the recommendation of the Nomination & Remuneration Committee, approved a policy for selection, appointment and renumeration of director and senior management. The gist of Remuneration Policy is stated in the Corporate Governance Report.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual evaluation of its own performance. The manner in which the evaluation has been carried out is explained in the Corporate Governance Report.

Directors'' Responsibility Statement

In terms of Section 134 (3) (c) of the Companies Act, 2013, your directors, to the best of their knowledge and belief and according to the information and explanations obtained by them in the normal course of their work, state that, in all material respects;

a) In the preparation of the annual financial statements for the year ended March 31, 2015, the applicable accounting standards have been followed;

b) Appropriate accounting policies have been selected, applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at March 31, 2015 and of the profit of the company for the year ended on that date;

c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d) The annual financial statements have been prepared on a going concern basis;

e) Proper internal financial controls were in place and the financial controls were adequate and operating effectively; and

f) Proper systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

Related Party Transactions

All related party transactions that were entered into during the financial year were at an arm''s length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the company with promoters, directors, key managerial personnel or other designated persons which may have a potential conflict with the interest of the company at large.

All related party transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is obtained on a quarterly basis for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted and a statement giving details of all related party transactions is placed before the Audit Committee for their approval on a quarterly basis. The company has developed a Related Party Transactions Manual and Standard Operating Procedures for purpose of identification and monitoring of such transactions.

The policy on Related Party Transactions as approved by the Board is uploaded on the company''s website.

None of the directors have any pecuniary relationships or transactions vis-a-vis the company.

Particulars of contracts & arrangements with Related Parties are appended in Form AOC 2 as ''Annexure 3''.

Significant and Material Orders Passed by the Regulators nr Courts

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the company and its future operations.

Committees of The Board

Risk Management Committee

During the year, pursuant to the requirement of Clause 49 of the Listing Agreement, the company has constituted a Risk Management Committee. A Risk Management Policy has been prepared which is placed on the website of the company.

The details of all committees and its terms of reference are set out in the Corporate Governance Report.

Auditors

Statutory Auditors

M/s. B. K. Khare & Co., Chartered Accountants, retire as statutory auditors at the ensuing Annual General

Meeting (AGM) and are eligible for reappointment.

As required under the provisions of Section 139 (1) of the Companies Act, 2013, the company has obtained a written consent from them to the effect that their re-appointment, if made, would be in conformity with the limits specified in the said section.

The Audit Committee has recommended appointment of M/s. SRBC & Co. LLP Chartered Accountants, at the ensuing (AGM) as Joint Auditors of the company for a term of five years. Necessary resolution for such appointment is mentioned in the Notice of the AGM for approval of the members.

As required under Clause 49 of the Listing Agreement, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

Cost Auditors

In terms of Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, M/s. Dhananjay V. Joshi & Associates, Cost Accountants, Pune have been appointed as the Cost Auditors of the company for FY 2015-16.

Secretarial Audit

In accordance with the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the company has appointed M/s. SVD & Associates, Company Secretaries, Pune, to undertake the Secretarial Audit of the company.

The Secretarial Audit report is annexed herewith as ''Annexure 4''.

Extract of Annual Return

The details forming part of the extract of the Annual Return in Form No. MGT-9 is annexed herewith as ''Annexure 5''.

Awards and Recognition

Your company has received the following awards during the year:

- Best Concentrated Solar Thermal manufacturer

award from Ministry of New and Renewable Energy for the largest number of solar installations in the last three years.

- Safety Innovation Award 2014 for Chinchwad factory from the Institution of Engineers, India (IEI) for safety management and disaster mitigation; and Safety Award 2014 for Chinchwad factory by the Greentech Foundation for its innovative health, safety and environment practices.

- ''L&D Team of the Year'' award from the Tata Institute of Social Sciences for innovation and industry focused content in learning and development.

- BML Munjal Awards 2015 - Business Excellence through Learning and Development for recognising learning and development as an enabler to improve business performance.

- Bharat Asmita Lifetime achievement award 2015 for Anu Aga, director, instituted by MAEER''s MIT Group of Institutions, Pune.

Acknowledgements

Your directors place on record their appreciation of the continued support extended during the year by the company''s customers, business associates, suppliers, partners, bankers, investors, government authorities and joint venture partners. They also place on record their appreciation of the dedication and contributions made by all the employees for their commitment, hard work and support.

Your directors would also like to thank all their shareholders for their continued faith in the company and its future.

For and on behalf of the Board

Meher Pudumjee Pune: May 26, 2015 Chairperson


Mar 31, 2013

Dear Shareholder,

The Directors have pleasure in presenting the Thirty-second Annual Report, together with the audited accounts of your company for the year ended March 31, 2013.

Financial Results

(Rupees in crore)

2012-13 2011-12

Total income 4763.88 5374.55

Profit before finance cost, depreciation and tax 580.14 654.40

Finance cost & depreciation 64.51 53.50

Profit before tax 515.63 600.90

Provision for taxation (incl. deferred tax) 165.67 194.04

Profit after tax 349.96 406.86

Balance carried forward from last year 1091.46 823.54

Profit available for appropriation (cumulative) 1441.42 1230.40

Proposed equity dividend 83.41 83.41

Tax on dividend 14.18 13.53

Transfer to general reserve 35.00 42.00

Surplus carried forward 1308.83 1091.46

ANNUAL PERFORMANCE

For the financial year 2012-13, your company reported a total revenue of Rs. 4,763.9 crore as against last year''s revenue of Rs. 5,374.6 crore, a reduction of 11.4 % owing to a lower order book at the beginning of the year.

Thermax''s Energy business — Boiler & Heater, Power, Cooling and Heating divisions plus the fledgling Solar group — contributed 77% of the total revenue while the Environment business comprising Air Pollution Control, Water and Waste Solutions and Chemical division accounted for the remaining 23%. Last year the share of Energy and Environment businesses was 78% and 22% respectively.

During the year, exports including deemed exports were at Rs. 983.9 crore against Rs. 1,142.7 crore last year, a decrease of 13.9%.

Profit before tax at Rs. 515.6 crore was 10.8% of the total revenue, compared to Rs. 600.9 crore, 11.2%, previous year. In a year that continued to witness increase in input costs, lower price realisations and reduced revenues, the company maintained EBITDA margins at 10.8% as the management continued focusing on operational efficiency and controlling costs on a sustainable basis across the company.

Profit after tax stood at Rs. 350 crore compared to Rs. 406.9 crore in the previous year. Earnings per share (EPS) declined to Rs. 29.37 from Rs. 34.15 in FY 2011-12.

Order booking for the year was Rs. 4,859 crore against Rs. 4,032 crore last year, registering an increase of 20%. Your company completed the year with an order backlog of Rs. 4,357 crore as against Rs. 4,230 crore in FY 2011-12. Like the previous year, FY 2012-13 has also been challenging for the capital goods sector. The difficulties of the power sector and the resulting absence of fresh investments and order finalisations continued.

Profit after tax on a consolidated basis is lower than the stand-alone results owing to the losses incurred by Thermax Instrumentation Ltd. (TIL), Thermax (Zhejiang) Cooling & Heating Engineering Co. Ltd. (TZL) and the company''s share of losses in the joint venture subsidiaries, Thermax Babcock & Wilcox Energy Solutions Pvt. Ltd. (TBWES) and Thermax SPX Energy Technologies Ltd. (TSPX). TIL, which undertakes construction and commissioning work for the Power division of the company, is expected to face another challenging year ahead. In the tough market conditions prevailing in China, TZL is still working towards breaking even. The construction of the manufacturing plant of TBWES is nearing completion and the JV is focussing on making it operational.

The consolidated total income of the Thermax Group was Rs. 5,576.5 crore (Rs. 6,174.2 crore, previous year). Income from international business including deemed exports was Rs. 1,468.3 crore as compared to Rs. 1,574.2 crore for the previous year. The Group registered a profit before tax of Rs. 481.4 crore (Rs. 596.5 crore, previous year). Profit after tax, and minority interest was Rs. 320.1 crore for the year.

EPS was Rs. 26.87 (Rs. 33.86, previous year).

The audited consolidated financial statements presented by the company include the financial results of all subsidiary companies, prepared in accordance with Accounting Standard 21 issued by The Institute of Chartered Accountants of India. In addition, a statement of summarised financials of all the subsidiaries is included.

ACQUISITION OF ASSETS

In April 2013, the company, through its step down subsidiary Danstoker A/S, Denmark, acquired assets including the factory of D.P. Clean Tech Ltd., Denmark which are suitable for manufacturing and servicing industrial boilers. The assets are held in the newly formed companies viz. Boilerworks A/S and Boilerworks ApS. They will provide additional manufacturing support for Danstoker. The acquisition was funded through the internal accruals of Danstoker A/S.

DIVIDEND

The Directors have recommended a dividend of Rs. 7/- (350 %) per equity share of face value Rs. 2/-. The dividend, if approved by the shareholders, will result in a payout of Rs. 97.6 crore, including dividend distribution tax of Rs. 14.2 crore.

SUBSIDIARIES

By a general circular (No. 2/ 2011 dated February 8, 2011), the Ministry of Corporate Affairs, Government of India, under Section 212(8) of the Companies Act, 1956, has permitted companies not to attach copies of the Balance Sheets and Profit and Loss Accounts, Directors'' Reports, Auditors'' Reports and other documents of all their subsidiaries to the Accounts of the company. The company has acted accordingly.

However, annual accounts of the subsidiary companies and the related detailed information are available at any time to shareholders of the parent company, subsidiary companies and to statutory authorities. On request, these documents will be made available for inspection at the company''s corporate office.

Thermax Energy Performance seruices Ltd. (TEPS)

TEPS, a joint venture company with 51-49 percent shareholding between Thermax Limited and EPS Asia Inc. respectively, had been referred for voluntary winding-up effective February 28, 2007 due to non- acceptance of business model and lack of technical and financial investments from the joint venture partner.

TEPS was dissolved on May 10, 2012 pursuant to the Order passed by the Bombay High Court.

Thermax Sdn. Bhd., Malaysia

Your company acquired this entity (registered under the Companies Act, 1965 of Malaysia) in July, 2012 by way of acquisition of its entire share capital. The entity is now a wholly-owned subsidiary of the company.

MANAGEMENT DISCUSSION AND ANALYSIS

A Management Discussion and Analysis report, highlighting the performance and prospects of the company''s energy and environment segments, including details of subsidiaries catering to the respective businesses is attached.

CORPORATE GOVERNANCE REPORT

A detailed Corporate Governance Report is included in this report.

A certificate from the statutory auditors of the company regarding compliance with the conditions of corporate governance as required under Clause 49 of the Listing Agreement is part of this report.

LISTING ON STOCK EXCHANGES

The company''s equity shares are listed on two stock exchanges - National Stock Exchange of India Limited (NSE stock code - Thermax EQ) and BSE Limited (BSE stock code - 500411).

FINANCE, ACCOUNTS AND SYSTEMS

Opening cash & cash equivalent as on April 1, 2012 including current investments was Rs. 771.5 crore. Closing cash & cash equivalent as on March 31, 2013 including current investments stood at Rs. 632.9 crore, after repayment of buyer''s credit loan of Rs. 162.8 crore.

In addition to repayment of outstanding buyer''s credit loan of Rs. 162.8 crore during the year, the company made net investments of Rs. 127.3 crore in fixed assets (previous year Rs. 105.8 crore) and Rs. 42.7 crore in certain subsidiaries (previous year Rs. 88.6 crore), details of which are mentioned in this report.

The net cash outflow after factoring the above was Rs. 138.6 crore in the current year as against Rs. 25.9 crore in the previous year.

During the year, the company has made net investment of Rs. 195.5 crore in mutual funds which has been shown separately in cash flow statement.

The company''s net working capital, adjusted for bank fixed deposits, was positive at Rs. 469.1 crore as against Rs. 33.6 crore in the previous year owing to lower customer advance balances and higher receivables in absolute terms.

The company continued to strengthen the process of building internal controls as well as automation of work flows. Focus on cash flows, working capital as well expenditure control continued through enhanced Management Information Systems.

ICRA Ltd. has reaffirmed its rating, AA for long term and A1 for short term banking facilities. The long term rating carries a ''Stable'' outlook.

Public Deposits

The company had no unpaid / unclaimed deposit(s) as on March 31, 2013. It has not accepted any fixed deposits during the year.

EMPLOYEE STRENGTH

The total number of permanent employees on the rolls of the company was 4,100 as on March 31, 2013 (4,016, the previous year).

WAGE AGREEMENTS

During FY 2013-14, the Memorandum of Settlement with the Thermax Kamagar Sangathan (representing workmen at Chinchwad works) and with the Bhartiya Kamgar Karmachari Mahasangh (representing workmen at Paudh works) are due for fresh negotiations. The management of the company is confident of amicable negotiations and closure of these settlements.

PARTICULARS UNDER SECTION 217 OF THE COMPANIES ACT, 1956

A statement of the particulars required under Section 217(1) of the Companies Act, 1956 (the Act), 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.

In terms of the provisions of Section 217(2A) of the Act, read with the rules framed thereunder as amended, the names and other particulars of the employees are set out in the annexure to the Directors'' Report. Having regard to the provisions of Section 219 (1) (b) (IV) of the Act, the Annual Report excluding the aforesaid information is being sent to all the members of the company and others entitled thereto. Any shareholder interested in obtaining such particulars may write to the Company Secretary at the corporate office of the company. The statement is also available for inspection at the corporate office during working hours up to the date of the Annual General Meeting.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and the company''s Articles of Association, Pheroz Pudumjee and Dr. Jairam Varadaraj retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment as directors.

COMPANY SECRETARY

Gajanan P Kulkarni was appointed as the Company Secretary as per the provisions of Section 383A of the Companies Act, 1956. He was also designated as the Compliance Officer in terms of the Listing Agreement.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, your Directors, to the best of their knowledge and belief and according to the information and explanations obtained by them with respect to the statement of Profit & Loss for the financial year ended March 31, 2013 and the Balance Sheet as at that date ("financial statements"), 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 have been followed.

2. Appropriate accounting policies have been selected and are being applied consistently. Judgments 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 Notes 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 periodic 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.

COMMITTEES OF THE BOARD

During the year, changes have been effected in the following committees of the Board:

A) Borrowing & Investments Committee: The terms of reference of the committee were amended by the Board on July 26, 2012.

B) Strategic Business Development Committee: The Board appointed Dr. Jairam Varadaraj as a member of the committee with effect from February 26, 2013.

The Corporate Governance Report gives details of these committees.

AUDITORS

M/s. B.K. Khare & Co., Chartered Accountants, retire as statutory auditors at the ensuing Annual General Meeting and are eligible for reappointment.

As required under the provisions of Section 224(1B) of the Companies Act, 1956, the company has obtained a written consent from them to the effect that their reappointment, if made, would be in conformity with the limits specified in the said section.

COST AUDITORS

M/s. Dhananjay V. Joshi & Associates, Cost Accountants, Pune have been appointed as the Cost Auditors of the Company for FY 2013-14 subject to the approval of the Central Government.

AWARDS AND RECOGNITION

Your company has received the following awards and recognition during the year:

- Thermax MD and CEO, M.S.Unnikrishnan received the Asia Innovator Award at the 2012 CNBC Asia Business Leaders Awards (ABLA) in Bangkok. He is the first Indian to receive the Innovation Award in the 11 year history of ABLA.

- Thermax''s Savli and Chinchwad factories won awards from the CII and the Greentech Foundation for their health, safety and environment (HSE) practices, employee involvement and environment management systems.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the continued support extended during the year by the company''s clients, business associates, suppliers, bankers, investors, government authorities and joint venture partners. Your Directors also place on record their appreciation of the dedication and contributions made by all the employees including the workmen, for commitment, hard work and support.

Your Directors would also like to thank all their shareholders for their continued faith in the company and its future.

For and on behalf of the Board

Meher Pudumjee

Pune: May 22, 2013 Chairperson


Mar 31, 2012

Dear Shareholder,

The Directors have pleasure in presenting the Thirty-first Annual Report, together with the audited accounts of your company for the year ended March 31, 2012.

Financial Results (Rupees in crore)

2011-12 2010-11

Total income 5374.55 4935.49

Profit before finance cost, depreciation tax and extraordinary items 654.40 618.21

Finance cost& depreciation 53.50 45.51

Profit before tax & before extraordinary items 600.90 572.70

Provision for taxation (incl. deferred tax) 194.04 190.28

Profit after tax & extraordinary items 406.86 382.42

Balance carried forward from last year 823.54 605.76

Profit available for appropriation (cumulative)1230.40 988.18

Proposed equity dividend 83.41 107.24

Tax on dividend 13.53 17.40

Transfer to general reserve 42.00 40.00

Surplus carried forward 1091.46 823.54

ANNUAL PERFORMANCE

Your company has registered record total revenue of Rs. 5374.6 crore, a growth of 8.9% over last year's revenue of Rs. 4935.5 crore.

Thermax's Energy business comprising Boiler & Heater, Power, Cooling and Heating contributed 78.2% of the total revenue while the Environment business comprising Air Pollution Control, Chemicals, Water and Wastewater Solutions accounted for the remaining 21.8%. Last year, the share of Energy and Environment businesses was 80% and 20% respectively.

During the year, exports, including deemed exports were higher at Rs. 1142.7 crore from Rs. 1065.9 crore last year, an increase of 7.2%.

Profit before tax at Rs. 600.9 crore was 11.2% of total revenue as compared to Rs. 572.7 crore in the previous year which was 11.6%. The company maintained the EBITDA margins at 11% even though the year witnessed increase in input costs. The company's management continues to work on building operational efficiency and controlling costs on a sustainable basis at divisional and overall company levels.

Profit after tax and extraordinary items was at Rs. 406.9 crore compared to Rs. 382.4 crore in the previous year. Earnings Per Share (EPS) rose to Rs. 34.15 from Rs. 32.09 in 2010-11.

Order booking for the year was Rs. 4032 crore against Rs. 5318 crore last year. Your company completed the year with an order backlog of Rs. 4230 crore as against Rs. 5605 crore in the previous year. 2011-12 had been a challenging year for the capital goods sector. Various policy and economic factors were responsible for significantly reducing fresh investments and order finalisations in the power sector, affecting order booking and resulting in lower order backlog. The order inflows were lower compared to the previous year as the economy witnessed a slowing down of growth, particularly in the second half of the financial year.

The profit after tax on a consolidated basis is lower than the stand alone results owing to the losses incurred by the subsidiaries namely, Thermax Instrumentation Ltd. (TIL), Thermax (Zhejiang) Cooling & Heating Engineering Co. Ltd. (TZL) and the company's share of losses in the recent joint venture subsidiaries, Thermax Babcock & Wilcox Energy Solutions Pvt. Ltd. (TBWES) and Thermax SPX Energy Technologies Ltd. TIL, which undertakes erection and commissioning work for the Power division of the company, is expected to face a challenging year ahead. TZL improved its business operations and reduced operating losses. TBWES is yet to be operational.

The consolidated total income of the Thermax Group was Rs. 6174.2 crore (Rs. 5393.6 crore, previous year) recording a 14.5% increase. Income from international business including deemed exports was up 25.9% to Rs. 1574.2 crore from Rs. 1250.3 crore. The Group registered a profit before tax of Rs. 596.5 crore (Rs. 573.4 crore, previous year). Profit after tax, extraordinary items and minority interest was Rs. 403.5 crore for the year. Consequently, EPS also increased to Rs. 33.86 (Rs. 32.03 after extraordinary item, previous year).

A detailed review of performance and future prospects of the company's business and its subsidiaries is included in the section 'Management Discussion and Analysis'.

The audited consolidated financial statements presented by the company include the financial results of all subsidiary companies, prepared in accordance with Accounting Standard 21 issued by The Institute of Chartered Accountants of India. In addition, a statement of summarised financials of all the subsidiaries is included.

STRATEGIC ACQUISITION

Your company acquired Rifox-Hans Richter GmbH, a leading German steam traps and allied steam accessories manufacturer which was the subsidiary of Virgo Valves & Controls Ltd., India. Virgo's steam division has also been acquired by your company for an aggregate consideration of Rs. 13.39 crore. The acquisition which is effective from April 1, 2012, offers a strategic fit for the company's steam engineering business. The acquisition would enable your company's Cooling and Heating service business to extend its portfolio in Europe, South East Asia and the Middle East.

DIVIDEND

The Directors have recommended a dividend of Rs. 7/- (350%) per equity share of face value Rs. 2/-. The dividend, if approved by the shareholders, will entail a payout of Rs. 96.9 crore, including dividend distribution tax of Rs. 13.5 crore.

SUBSIDIARIES

By a general circular (No. 2/ 2011 dated February 8, 2011), the Ministry of Corporate Affairs, Government of India, under Section 212(8) of the Companies Act, 1956, has permitted companies not to attach copies of the Balance Sheets and Profit and Loss Accounts, Directors' Reports, Auditors' Reports and other documents of all their subsidiaries, to the Accounts of the Company. The company has acted accordingly.

However, annual accounts of the subsidiary companies and the related detailed information are available at any time to shareholders of the parent company and subsidiary companies and to statutory authorities. On request, these documents will be made available for inspection at the company's corporate office.

MANAGEMENT DISCUSSION AND ANALYSIS

A Management Discussion and Analysis report, highlighting the performance and prospects of the company's energy and environment segments including details of subsidiaries catering to the respective businesses, is attached.

CORPORATE GOVERNANCE

It has been the endeavour of your company to follow and implement the best practices in corporate governance, in letter and spirit. A detailed Corporate Governance Report is included in this report.

A certificate from the statutory auditors of the company regarding compliance with the conditions of corporate governance as required under Clause 49 of the Listing Agreement is part of this report.

LISTING ON STOCK EXCHANGES

The company's equity shares are listed on two stock exchanges - National Stock Exchange of India Limited (NSE) and BSE Limited (BSE).

FINANCE, ACCOUNTS AND SYSTEMS

As on March 31, 2012 the company's cash and cash equivalents including current investments stood at Rs. 771.5 crore.

The net cash flows from operations, before investments in fixed assets and subsidiaries was Rs. 174.5 crore (previous year Rs. 53.4 crore).

The company made net investments of Rs. 105.8 crore in fixed assets and Rs. 74 crore as equity in Thermax Babcock Wilcox Energy Solutions Private Limited - the Joint Venture with Babcock & Wilcox India Holdings Inc., USA. Besides, the company infused equity of Rs. 10.6 crore in Thermax (Zhejiang) Cooling & Heating Engineering Co. Ltd. and Rs. 4 crore in Thermax Sustainable Energy Solutions Ltd. during the year. The net cash outflow, after factoring the above, was Rs. 25.9 crore in the current year as against Rs. 9.9 crore in the previous year.

The company's net working capital, adjusted for bank fixed deposits, was positive at Rs. 34 crore as against a negative Rs. 117 crore in the previous year owing to lower customer advance balances and higher receivables in absolute terms. The company's management continues to monitor closely and control the working capital.

The process of building internal controls as well as the automation of work flow was continued during the year.

The company's financial statements have been prepared according to the revised Schedule VI of the Companies Act, 1956.

ICRA Ltd. has reaffirmed its rating, LAA for long- term and A1 for short term banking facilities. The long term rating carries a 'Stable' outlook.

Public Deposits

The company had no unpaid / unclaimed deposit(s) as on March 31, 2012. It has not accepted any fixed deposits during the year.

EMPLOYEE STRENGTH

The total number of permanent employees on the rolls of the company was 4016 as on March 31, 2012 (3920 previous year).

WAGE AGREEMENT

During the year, the management of the company has amicably signed the following wage settlement agreements:

1) Memorandum of settlement with Thermax Kamagar Sangathan (representing workmen at Chinchwad works) which will remain in force for a period of three years commencing from May 1, 2010.

2) Memorandum of settlement with Bhartiya Kamgar Karmachari Mahasangh (representing workmen at Paudh works) which will remain in force for a period of three years commencing from July 1, 2010.

PARTICULARS UNDER SECTION 217 OF THE COMPANIES ACT, 1956

A statement of the particulars required under Section 217(1) of the Companies Act, 1956 (the Act), 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.

In terms of the provisions of Section 217(2A) of the Act, read with the rules framed thereunder as amended, the names and other particulars of the employees are set out in the annexure to the Directors' Report. Having regard to the provisions of Section 219(1)(b) (IV) of the Act, the Annual Report excluding the aforesaid information is being sent to all the members of the company and others entitled thereto. Any shareholder interested in obtaining such particulars may write to the Dy. Company Secretary at the corporate office of the company. The statement is also available for inspection at the corporate office, during working hours up to the date of the Annual General Meeting.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and the company's Articles of Association, Dr. Valentin A.H. von Massow and Dr. Raghunath A. Mashelkar retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment as directors.

M. S. Unnikrishnan has been reappointed as the Managing Director and Chief Executive Officer of the company for a period of five years commencing from July 1, 2012. His reappointment requires approval of the shareholders at the ensuing Annual General Meeting.

COMPANY SECRETARY

Devang Trivedi was appointed Compliance Officer in terms of the Listing Agreement and also

Deputy Company Secretary as per the provisions of Section 383A of the Companies Act, 1956. His appointment was necessitated by the resignation of Sunil Lalai as the Company Secretary and Compliance Officer.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, your Directors, to the best of their knowledge and belief and according to the information and explanations obtained by them with respect to the statement of Profit & Loss for the financial year ended March 31, 2012 and the Balance Sheet as at that date ("financial statements"), 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 have been followed.

2. Appropriate accounting policies have been selected and are being applied consistently. Judgments 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 Notes 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 periodic 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:

A) Audit Committee: The Board appointed Nawshir Mirza as a member of the committee with effect from May 3, 2011.

B) International Investment Committee: The terms of reference of the committee were amended by the Board on October 20, 2011.

The Corporate Governance Report gives details of the aforesaid committees.

AUDITORS

M/s. B. K. Khare & Co., Chartered Accountants, retire as statutory auditors at the ensuing Annual General Meeting and are eligible for reappointment. As required under the provisions of Section 224(1B) of the Companies Act, 1956, the company has obtained a written certificate from them to the effect that their reappointment, if made, would be in conformity with the limits specified in the said section.

COST AUDITORS

As per the Order dated January 24, 2012, issued by the Ministry of Corporate Affairs, the appointment of Cost Auditors becomes mandatory for your company pursuant to the provisions of Section 233B of the Companies Act, 1956.

Accordingly, the Board of Directors at its meeting held on May 11, 2012 approved appointment of M/s. Dhananjay V. Joshi & Associates, Cost Accountants, Pune as the Cost Auditors of the company for the financial year 2012-13 subject to the approval of the Central Government.

AWARDS AND RECOGNITION

Your company has received the following awards and recognition during the year:

- Thermax won the CNBC TV-18 India award for

the 'most promising entrant to the big league'. M. S. Unnikrishnan received the award from the Union Finance Minister, Pranab Mukherjee in January, 2012.

- Anu Aga, Director and former Chairperson of Thermax, nominated as Member of the Rajya Sabha by the President of India, on the recommendations of the Prime Minister.

- Chinchwad factory bagged the Safety Innovation Award 2011 from the Institution of Engineers, Delhi, for its innovative health, safety and environment initiatives.

- Chinchwad factory won the Health, Safety and Environment appreciation award 2011 from CII, Western region.

- Gopal Mahadevan, Chief Financial Officer and Executive Vice President received the best performing CFO award in the Capital Goods sector by CNBC TV-18 in February, 2012.

- Meher Pudumjee's column, 'Expressions' in Fireside, the company in-house magazine, won first prize at the Association of Business Communicators of India in November 2011.

- Thermax employees continue to win awards for technical paper presentations, corporate quizzes and sports tournaments.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the continued support extended during the year by the company's clients, business associates, supplier-partners, bankers, investors, government authorities and its joint venture partners. Your Directors also place on record their appreciation of the dedication and contributions made by employees at all levels including the workmen, who through their commitment, hard work and support have steered the company.

Your Directors would also like to thank all their shareholders for their faith in the company and its future.

For and on behalf of the Board

Meher Pudumjee

Pune: May 11, 2012 Chairperson


Mar 31, 2011

The Directors are pleased to present the Thirtieth Annual Report together with the audited accounts of your company for the year ended March 31, 2011.

FINANCIAL RESULTS

(Rupees in crore)

2010-11 2009-10

Total income 4935.49 3235.23

Profit before interest, depreciation, tax and extraordinary items 618.34 433.88

Interest & depreciation 45.37 41.94

Profit before tax & before extraordinary items 572.97 391.94

Extraordinary items of expenses /(income) Nil 114.86 (Net of tax)

Provision for taxation (incl. deferred tax) 190.55 135.64

Profit after tax & extraordinary items 382.42 141.44

Balance carried forward from last year 605.76 548.00

Profit available for appropriation (cumulative) 988.18 689.44

Proposed equity dividend 107.24 59.58

Tax on dividend 17.40 9.90

Transfer to general reserves 40.00 14.20

Surplus carried forward 823.54 605.76

ANNUAL PERFORMANCE

You will be happy to know that this year, at Rs. 4935 crore, the total income of your company has exceeded US $ one billion, a 52.6% increase over last years income of Rs. 3235 crore.

Thermaxs energy business comprising Boiler & Heater, Power and Cooling & Heating contributed 77.3% of its income while the environment business comprising Air Pollution Control, Chemicals, along with Water and Wastewater Solutions accounted for the remaining 22.7%.

In terms of profitability, the company had an EBITDA of 11.6% (12.1% last year). The variation has been due to the rising cost of raw materials, higher share of Power EPC business and the acceptance of certain strategic orders at lower margins.

Your companys performance during fiscal 2010- 11 straddled two distinctly dissimilar phases in the economic environment – a first half of robust growth followed by six months of economic uncertainties. While the first phase saw the continuing surge in our order finalisation, the latter six months saw credit drying up due to high interest rates, resulting in a slowing down of orders. Due to the slow-down in new orders in the last two quarters of 2010-11, your companys performance next year is likely to be subdued. However, being positioned in the crucial areas of energy and environment, with the continuing vibrancy of the national economy, the medium to long term outlook for the company is positive.

Profit before tax and extraordinary items was also higher at Rs. 573 crore as compared to Rs. 391.9 crore in the previous year. Profit after tax and extraordinary items was at Rs. 382.4 crore compared to Rs. 141.4 crore in the previous year (after providing for extraordinary item of Rs. 114.9 crore). Earnings per share (EPS) rose to Rs. 32.09 from Rs. 11.87 (after extraordinary item)in 2009-10.

Order booking for the year was Rs. 5318 crore against Rs. 5794 crore, last year. Your company completed the year with an order backlog of Rs. 5605 crore as against Rs. 5381 crore in the previous year.

During the year, exports, including deemed exports, were higher at Rs. 1065.9 crore from Rs. 656.5 crore last year, an increase of 62.4%.

A detailed review of performance and future prospects is included in the section Management Discussion and Analysis of the Annual Report.

The consolidated total income of the Thermax Group was Rs. 5395 crore (Rs. 3422.2 crore, previous year) recording a 58% increase. Income from international business including deemed exports was up 74% to Rs. 1250.5 crore from Rs. 720.4 crore. The Group registered a profit before tax of Rs. 573.7 crore (Rs. 400.4 crore, previous year). Profit after tax and extraordinary items and minority interest was Rs. 381.7 crore for the year. Consequently, earnings per share (EPS) also increased to Rs. 32.03 (Rs. 12.11 after extraordinary item, previous year).

By a general circular (No. 2/ 2011 dated February 8, 2011), the Ministry of Corporate Affairs, Government of India, under Section 212(8) of the Companies Act, 1956, has permitted companies to not attach copies of the Balance Sheets and Profit and Loss Accounts, Directors Reports, Auditors Reports and other documents of all their subsidiaries, to the Accounts. The company has acted accordingly.

However, annual accounts of the subsidiary companies and the related detailed information are available at any time to shareholders of the parent company and subsidiary companies and to statutory authorities. On request, these documents will be made available for inspection at the companys corporate office.

The audited consolidated financial statements presented by the company include the financial result of the workings of all subsidiary companies, prepared in accordance with Accounting Standard 21 issued by The Institute of Chartered Accountants of India. In addition, a statement of summarised financials of all the subsidiaries is included. Further, the accounts of individual subsidiary companies shall also be posted on the companys website.

STRATEGIC ACQUISITION

During the year, your company acquired Danstoker A/S, a leading European boiler

manufacturer and its German subsidiary, Omnical Kessel for a consideration of Rs. 186.6 crore. The acquisition offers a strategic fit for the companys packaged boiler business, under the Cooling & Heating Business Unit. Providing state-of-the-art technology and process know-how for the companys heating business, this acquisition will enable the division to enhance its product portfolio and extend it to new, untapped markets. The Danstoker and Omnical brands will help your company expand its reach in Europe, South East Asia and the Middle East.

The acquisition will also help in expanding your companys green initiatives, as a significant portion of the revenues of Danstoker and Omnical come from biomass and waste heat recovery boilers. It will enable Thermax to gain from the ongoing renewable energy movement of Europe aimed at generating 20% of its overall energy generation from renewables by 2020.

Details of the acquired entities are provided in the Subsidiaries section of this report.

DIVIDEND

The Directors have recommended a dividend of Rs. 9/- (450%) per equity share of face value Rs. 2/-.

The dividend, if approved by the shareholders, will entail a payout of Rs. 124.6 crore, including dividend distribution tax of Rs. 17.4 crore.

DOMESTIC SUBSIDIARIES

Joint Ventures

Thermax Babcock & Wilcox Energy Solutions Pvt. Ltd.

Thermax Babcock & Wilcox Energy Solutions Pvt. Ltd. was incorporated on June 26, 2010, following the joint venture agreement signed last year with Babcock & Wilcox (B&W), USA to manufacture supercritical boilers.

A manufacturing facility is being set up at Shirwal in Satara District, Maharashtra State to manufacture 3,000 MW of supercritical and sub- critical boilers per year, in the first phase, with a provision to expand the annual capacity to 5,000 M W. The plant will be ready for commercial operations during the financial year 2012-13. As over 60% of the coal based power projects coming up in the 12th Plan are likely to be based on supercritical technology, the subsidiary is confident of its business prospects.

Your company has currently contributed Rs. 49.2 crore in various tranches towards its 51% share of the equity share capital in the joint venture.

Thermax SPX Energy Technologies Ltd.

The company is a joint venture (JV) between Thermax Limited and SPX Netherlands B.V., a wholly owned subsidiary of SPX Corporation, USA. Thermax has a 51% stake in the JV.

The JV would supply equipment to help power plants meet stringent emission norms and improve thermal efficiencies in boiler islands. During the year, the JV has commenced execution of its first order won last year from a leading oil refinery.

The total revenue for the year were Rs. 9.2 crore (Rs. 0.05 crore, previous year). Net loss after tax was Rs. 0.4 crore (Rs. 0.9 crore).

The companys prospects look promising in the medium to long term.

Wholly owned

Thermax Engineering Construction Co. Ltd.

Thermax Engineering Construction Co. Ltd. (TECC) undertakes and executes engineering construction projects mainly for the Boiler and Heater (B&H) business unit.

During 2010-11, the company earned a total income of Rs. 120.1 crore (Rs. 96.8 crore, previous year). It achieved a profit after tax of Rs. 6.4 crore (Rs. 3 crore), resulting from better cost management and favourable settlement of liquidated damages provided in earlier years.

The year-end order balance is Rs. 244 crore, the highest in its history.

Thermax Instrumentation Ltd.

Thermax Instrumentation Limited (TIL) is engaged in the installation and commissioning of power and cogeneration plants, including civil construction, that have been built by the parent companys Power division.

During the year, the company earned a total income of Rs. 236.5 crore and profit after tax of Rs. 3.4 crore (Rs. 129.1 crore and Rs. 2 crore respectively, last year).

TIL has an order balance of Rs. 440 crore at the end of FY 2011.

Thermax Sustainable Energy Solutions Ltd.

Thermax Sustainable Energy Solutions Limited

has been created to develop business related to clean development mechanism (CDM). During the year, the subsidiary received registration for its Programme of Activities from the United Nations Framework Convention on Climate Change (UNFCCC).

The company earned an income of Rs. 0.3 crore (Rs. 0.7 crore, previous year). This mainly comprised CDM consultancy services provided to project owners. The company has incurred a net loss of Rs. 1.2 crore (Rs. 1.2 crore), due to expenses for development, validation and registration of the CDM project and investments in IT infrastructure. As this is an entirely new business for India with its attendant uncertainties, the subsidiary will need the necessary gestation time to establish itself.

The company will be investing substantially in the coming year to accredit many projects under its Programme for carbon credit entitlements in the future.

Thermax Onsite Energy Solutions Ltd.

The company is focused on delivering utilities – green energy from biomass and other renewable sources that it supplies to customers – on a unit consumption basis. As a first step the company has commenced the business of supplying process steam / heat.

Apart from two projects undertaken the previous year, this subsidiary had a lean 2010-11. However, as the business model is conducive for the emerging business environment, it plans to take up more projects this year.

The company had a total income of Rs. 6.1 crore and profit after tax of Rs. 0.6 crore.

Your company has infused Rs. 3.6 crore equity capital into this subsidiary and will invest more, based on the needs of the new contracts.

WHOLLY OWNED OVERSEAS SUBSIDIARIES

Thermax Inc., USA

This step-down subsidiary, which provides the Group access to US markets, currently focuses on ion exchange resins and vapour absorption chillers.

2010-11 witnessed a challenging environment in the US market with slashed production and shrinking investments. The steep rise in hydrocarbon prices increased the input costs of chemical operations. Though these are passed on to customers, sharing the general industry experience, there is a lag between cost increase and price increase that is borne by the producer.

Despite these difficult circumstances, the subsidiary recorded a sales of USD 13.1 mn (USD 14.9 mn, previous year) and a profit of USD 0.04 mn ( USD 0.96 mn, previous year).

Thermax Europe Ltd., UK

Although the market has remained flat in comparison to last year, this subsidiarys focus on specialised market segments and new applications helped it to retain and improve its market share. The company achieved a turnover of GBP 4.3 mn (USD 7 mn) compared to GBP 3.8 mn (USD 5.8 mn) in the previous year. The profit after tax stands at GBP 0.4 mn (USD 0.7 mn) against the previous years profit of GBP 0.4 mn (USD 0.7 mn). The year also saw one of the highest order intake of GBP 5 mn.

Although the market is expected to remain subdued in the short term, the company will continue to focus on its niche segments for the coming year.

Thermax (Zhejiang) Cooling & Heating Engineering Co. Ltd., China

2010-11 was the second full year of its operation. It doubled its production during the period and has plans to ramp it up this year. The company faced the challenge of rising costs in a market recovering after the 2009 global recession. It has taken initiatives to optimise designs and achieve benchmark performance at reduced costs.

In 2010-11 the company achieved total revenues of RMB 47 mn (USD 7.2 mn), an increase of 143% compared to the previous year (RMB 19.3 mn). Loss for the year was RMB 11.4 mn (USD 1.7 mn) after accounting for interest and depreciation, compared to RMB 10.4 mn (USD 1.5 mn), last year.

The final tranche of equity infusion of USD 1.12 mn from the total approved USD 14.4 mn has been remitted in the last quarter.

Thermax Denmark ApS

Thermax Denmark ApS was incorporated on October 29, 2010 with authorised capital of DKK 75 mn (USD 14.3 mn), to acquire the European entity Danstoker A/S along with its subsidiaries. The company is the holding company of Danstoker AS and EIN.

Thermax Netherlands B.V.

Thermax Netherlands B.V. was incorporated on November 4, 2010 with an initial authorised capital of EUR 30 mn (USD 42.5 mn) and is the holding company of Thermax Denmark ApS.

Danstoker A/S, Denmark

The acquisition of Danstoker A/S, a leading European boiler manufacturer and its German subsidiary, Omnical Kessel was completed on November 8, 2010 and was valued at Euro 29.5 mn (USD 41.8 mn).

Danstoker, headquartered in Herning, Denmark has a 75 year tradition in manufacturing. Its manufacturing facilities are located in Denmark and in Omnical, Germany, that it acquired in 2003. Professionally managed and profitable, the company has current annual sales of Euro 40 mn. Danstoker is a respected brand in the renewable energy space and has a strong presence in the Nordic countries, Germany, UK, France and Russia.

Operating predominantly within Germany, Omnical has supplier relationships with European and Japanese gas turbine manufacturers for their requirements of waste heat recovery systems.

MANAGEMENT DISCUSSION AND ANALYSIS

A Management Discussion and Analysis report, highlighting the performance and prospects of the companys energy and environment businesses is attached.

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 included in this report.

A certificate from the auditors of the company regarding compliance with the conditions of corporate governance as required under Clause 49 of the Listing Agreement is part of this report.

LISTING ON STOCK EXCHANGES

The companys equity shares are listed on two stock exchanges – National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE).

FINANCE, ACCOUNTS AND SYSTEMS

As on March 31, 2011, the companys cash and cash equivalents stood at Rs. 752 crore.

One of the major investments made during the year was the infusion of Rs. 130 crore as equity in Thermax Netherlands B. V. for the acquisition of Danstoker Group. The company had also paid an amount of Rs. 159 crore towards the successful out-of-court settlement concluded in the previous year with a US based company. Besides these the company had also made an investment of Rs. 55 crore in fixed assets and Rs. 49 crore as equity in Thermax Babcock Wilcox Energy Solutions Private Limited – the Joint Venture with Babcock & Wilcox Power Generation Group, USA. The net cash outflow after factoring the above was Rs. 164 crore in the current year as against an inflow of Rs. 452 crore in the previous year.

The companys net working capital was negative at Rs. 150 crore as against a negative Rs. 381 crore in the previous year. The companys management continues to monitor and control the working capital position closely.

ICRA Ltd. has reaffirmed its assigned LAA+ and A1+ rating for fund based and non fund based banking facilities, respectively. The long term rating carries a Stable outlook.

Public Deposits

The company had no unpaid / unclaimed deposit(s) as on March 31, 2011. It has not accepted any fixed deposits during the year.

EMPLOYEE STRENGTH

The total number of permanent employees on the rolls of the company was 3920 as on March 31, 2011 (3631 previous year).

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.

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the rules framed thereunder as amended, the names and other particulars of the employees are set out in the annexure to the Directors Report. Having regard to the provisions of Section 219(1)(b) (IV) of the Companies Act, 1956, the Annual Report excluding the aforesaid information is being sent to all the members of the company and others entitled thereto. Any shareholder interested in obtaining such particulars may write to the company secretary at the corporate office of the company. The statement is also available for inspection at the corporate office, during working hours up to the date of the Annual General Meeting.

DIRECTORS

Mr. Nawshir Mirza has been inducted on the Board of your company as an Additional Director with effect from May 3, 2011. He holds office till the ensuing Annual General Meeting in accordance with the provisions of Section 260 of the Companies Act, 1956 (the Act). The requisite notice, with necessary deposit has been received pursuant to Section 257 of the Act, proposing him as a Director of the company. A resolution appointing him as Director has been set out in the notice of the ensuing Annual General Meeting for the approval of the 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, offer themselves for reappointment as directors.

DIRECTORS RESPONSIBILITY STATEMENT

The Directors accept responsibility for the integrity and objectivity of the Profit & Loss Account for the financial year ended March 31, 2011 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 have been followed.

2. Appropriate accounting policies have been selected and are being applied consistently. Judgments 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 17 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 periodic 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:

International Investment Committee: The Overseas Investment Committee of the Board was renamed as International Investment Committee on July 21, 2010. The Corporate Governance Report gives details of the aforesaid committee.

Audit Committee: Dr. Valentin von Massow was co-opted as a member of the committee for the meeting on October 26, 2010. This was necessitated owing to Dr. Jairam Varadarajs inability to attend the meeting.

AUDITORS

M/s. B. K. Khare & Co., Chartered Accountants, retire as statutory auditors at the ensuing Annual General Meeting and are eligible for reappointment. As required under the provisions of Section 224(1B) of the Companies Act, 1956, the company has obtained a written certificate from them to the effect that their reappointment, if made, would be in conformity with the limits specified in the said section.

AWARDS AND RECOGNITION

As a company striving for excellence, we are proud to receive the following awards and recognition during this fiscal year:

- Customer Service Excellence award in water treatment chemicals by Frost and Sullivan.

- Bry Air award for innovative product design.

- Top prizes at 35th International Convention on Quality Control Circles, 2010.

- The ‘CII National HR Excellence Award for 2009 in recognition of Thermaxs leadership in HR excellence.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the continued support extended during the year

by the companys clients, business associates, supplier partners, bankers, investors, government authorities and its joint venture partners. Your Directors also place on record their appreciation of the dedication and contributions made by employees at all levels including the workmen, who through their commitment, hard work and support have steered the company.

Your Directors would also like to thank all their shareholders for their faith in the company and its future.

For and on behalf of the Board

Meher Pudumjee Chairperson

Pune: May 3, 2011


Mar 31, 2010

The Directors take pleasure in presenting the Twenty-ninth Annual Report together with the audited accounts of your company for the year ended March 31, 2010.

FINANCIAL RESULTS

(Rupees in crore)

2009-10 2008-2009

Total income 3235.23 3303.17

Profit before interest, depreciation, tax and extraordinary items 433.88 453.23

Interest & depreciation 41.94 35.38

Profit before tax & before extraordinary items 391.94 417.85

Extraordinary items of expenses / (income) 114.86 (1.36) (Net of tax)

Provision for taxation (incl. deferred tax) 135.64 131.91

Profit after tax & extraordinary items 141.44 287.30

Balance carried forward from last year 548.00 359.20

Profit available for appropriation (cumulative) 689.44 646.50

Proposed equity dividend 59.58 59.58

Tax on dividend 9.90 10.12

Transfer to general reserves 14.20 28.80

Surplus carried forward 605.76 548.00

PERFORMANCE

The total order booking for the year was Rs. 5794 crore as against Rs. 3557 crore, last year. Your company completed the year with a record order book of Rs. 5381 crore. The year 2009-10 began with a lower order book, owing to the global financial crisis, resulting in the total income being marginally lower at Rs. 3235.2 crore, as compared to the previous year. Profit before tax and extraordinary items was Rs. 391.9 crore compared to Rs. 417.9 crore in the previous year. Profit, after tax and extraordinary items, was significantly lower at Rs. 141.4 crore compared to Rs. 287.3 crore in the previous year, owing to a one-time extraordinary expense of Rs. 114.9 crore (net of tax) towards a business settlement. Earnings per share (EPS) dropped to Rs. 11.87 from Rs. 24.11 in 2008-09.

During the year, exports - including deemed exports - were lower at Rs. 656.5 crore from Rs. 912.3 crore last year, a decline of 28% due to the continued financial turmoil in the global market.

A detailed review of performance and future prospects is included in the section Management Discussion and Analysis of the Annual Report.

Collaboration with global technology majors

During the year, your company made significant moves that will help it to benefit from the rapid growth happening in the countrys power sector. It signed two joint venture agreements – with SPX Netherlands BV (SPX) for air pollution control equipment to help power plants meet stringent emission norms and also improve their thermal efficiencies; and with Babcock & Wilcox (B&W), USA for manufacturing supercritical boilers. Details of the joint venture (JV) company formed with SPX is provided in the Subsidiaries section of this report.

With Babcock & Wilcox Power Generation Group, Inc. (B&W PGG), a global leader in power generation industry, Thermax has entered into an alliance to form a strategic joint venture to engineer, manufacture and supply supercritical boilers for the Indian power sector. The JV will also manufacture subcritical boilers over 300 megawatts (MW) in size.

Thermax will own 51% share of the joint venture while B&W PGG will have 49% ownership. The company will bring to the Indian power sector Thermaxs expertise of integrating energy and environment solutions and B&Ws long history of providing proven, state-of-the-art power generation technology and world class project management capabilities. B&W was the first company in the world to build a supercritical boiler.

This technology will allow the new JV to contribute to efficient power generation in the ultra mega thermal plants planned to meet the massive energy requirements of the country. Utility boilers above 660 MW generally fall under the supercritical category. Operating at higher pressures than those of subcritical boilers, they increase efficiency and produce more energy from the same amount of fuel.

The new joint venture is being established at a critical time when Indias ambitious growth plans and its dependence on coal fired power plants for power throw up tremendous energy and environment challenges. It will help meet the challenges of energy efficient power generation, a crucial requirement in the context of emission reduction and the need to conserve fossil fuel.

CONSOLIDATED RESULTS

The consolidated total income of the Thermax Group has reduced, marginally, to Rs. 3422.2 crore from Rs. 3500.7 crore last year. Income from international business was down to Rs.720.4 crore from Rs. 958.8 crore. The Group registered a profit before tax of Rs. 400.4 crore as against Rs. 423.3 crore in the previous year. Profit after tax & extraordinary items and minority interest decreased by 50.1% to Rs. 144.3 crore owing to a one-time extraordinary expenditure of Rs. 114.9 crore (net of tax) relating to the business settlement with Purolite. Consequently, earnings per share (EPS) also reduced to Rs.12.11 as compared to Rs. 24.25 in the previous year.

The liquidation process of ME Engineering Ltd., the erstwhile UK based step-down subsidiary, was completed during the current year. Voluntary winding-up of Thermax Energy Performance Services Ltd., the joint venture company, is under way and is expected to be completed this year. Thermax Hong Kong Ltd., a wholly- owned subsidiary has been registered for a dormancy status in March 2010. Accordingly, these companies have not been considered for consolidation.

In terms of approval granted by the Central Government pursuant to the provisions of Section 212(8) of the Companies Act, 1956, copy of the Balance Sheet and Profit and Loss Account, Directors Report, Auditors Report and other documents of all the subsidiary companies, have not been attached to the Accounts of the company for the year 2009-10. However, on request by any member of the company/statutory authority interested in obtaining them, these documents will be made available for inspection at the companys 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. Further, the accounts of individual subsidiary companies shall also be posted on the companys website.

DIVIDEND

The Directors have recommended a dividend of Rs. 5/- (250%) per equity share of face value of Rs. 2/-.

The dividend, if approved by the shareholders, will entail a payout of Rs. 69.5 crore, including dividend distribution tax of Rs. 9.9 crore.

SETTLEMENT OF BUSINESS DISPUTE

Your company had been involved in a business dispute with Purolite International Ltd., a US competitor, concerning inter alia their trade secrets. The case had been in a US court since May 2005 and has been amicably settled.

In January 2010, the Honourable Judge of a US District Court, unexpectedly ruled against the company on certain

aspects of the case and committed the matter to jury trial. Until then, the company had been advised by its legal counsel that there was remote probability of any significant financial cost in resolution of this dispute. After weighing the uncertainties associated with jury trial, prolonged litigation, resultant costs and future business prospects in that country,

your Board of Directors decided as a matter of business prudence and abundant caution, that the company should seek settlement of the dispute. The business settlement arrived at in February 2010 permanently resolves and closes all claims and counterclaims.

As per the business settlement agreement, Thermax will pay four installments of USD 9.5 million each, spread over the calendar year beginning April 2010. The liability, net of tax, arising from the settlement and amounting to Rs. 114.9 crore has been charged as an extraordinary item to the Profit and Loss Account of the year under report. Your Directors believe that this amicable business settlement will pave the way for your company to move on and pursue worldwide growth in its energy and environment business.

DOMESTIC SUBSIDIARIES

Joint Venture

Thermax SPX Energy Technologies Ltd.

Your company has entered into a joint venture with SPX Netherlands BV, a wholly-owned subsidiary of SPX Corporation, USA - a global infrastructure leader in providing power plant equipment and services. The joint venture was incorporated on October 6, 2009.

The company will operate on the basis of a license agreement with Balcke-Dürr GmbH, Germany, a wholly- owned subsidiary of SPX Corporation. The initial planned equity capital of the joint venture is Rs. 25 crore of which Thermax shall hold 51%. The joint venture will address the requirements of the growing Indian power sector, providing technology solutions for projects above 300 MW range. By integrating SPX solutions for large infrastructure projects and Thermaxs energy-environment expertise, the JV would help power plants meet stringent emission norms and also improve their thermal efficiencies.

In the initial phase, it shall cover air pollution control systems, electrostatic precipitators (ESPs) for high ash coal- based power plants, bag filters and equipment for reducing SOx-NOx emissions, and rotary heat exchangers.

During the year, the company has secured its first order for a regenerative air-preheater (RAPH). This order involves design, engineering, manufacturing, supply, supervision, installation, erection and commissioning of four RAPH units for two 750 TPH boilers (two RAPH for each boiler) for a leading oil refinery. The company has been actively participating in a number of bids for electrostatic precipitators, regenerative air-preheaters, air-cooled condensers and such balance-of-plant equipment to build a strong foundation for future business.

During the year, your company has infused Rs. 10.2 crore as an initial contribution towards the share capital of the joint venture.

Wholly owned

Thermax Engineering Construction Co. Ltd.

Thermax Engineering Construction Co. Ltd. (TECC) undertakes and executes engineering construction projects mainly for the Boiler and Heater (B&H) business unit of your company.

In 2009-10, this subsidiary earned a total income of Rs. 96.8 crore and profit after tax of Rs. 3 crore compared to Rs. 99.9 crore and Rs. 1.5 crore respectively, in the previous financial year. The marginal decline in income was due to lower order balance as on March 31, 2009, resulting from the economic slowdown and projects being put on hold by customers during the financial year 2008-09. Despite the lower income, the subsidiarys profit improved as a result of better cost management. However, the profitability of the company may be impacted in the coming year due to enhanced demand for construction vendors and skilled labour from the power sector.

During the year, the company successfully completed the assembly of a second FM boiler weighing 585 tons at the Mundra port facility, for export. Erection of three spent wash fired units and a municipal solid waste (MSW) fired boiler are the other highlights of the year.

With the companys year end order balance being significant, the focus for the coming year will be on the execution of existing orders. The company is gearing up to face the challenge of recruitment along with training and development of skilled personnel for projects.

Thermax Instrumentation Limited

Thermax Instrumentation Limited (TIL) focuses its operations on installation and commissioning of power and cogeneration plants including civil construction.

During the year, the company earned a total income of Rs. 129.1 crore and profit after tax of Rs. 2 crore compared to Rs. 103.2 crore and Rs. 0.4 crore respectively, last year. Increase in business volume has helped the company achieve a better performance as compared to last year.

The company has secured a breakthrough order in larger capacity projects in the Independent Power Producers (IPP) range.

During the year, the subsidiary successfully commissioned eight power plants comprising ten units aggregating to 212.5 MW – the largest capacity commissioned in any year so far.

With the country focusing on dramatically improving its power generation capacity, and with Thermaxs foray into utility projects, the outlook for the company is positive.

Thermax Sustainable Energy Solutions Limited

With the looming threat of climate change and the need to reduce carbon emission, Thermax Sustainable Energy Solutions Limited (TSES) is entering into businesses related to clean development mechanism (CDM). An amount of Rs. 4 crore was infused towards the share capital of the company to support its foray into this business area.

During the year under review, TSES has developed CDM projects, which are now under validation. In the coming financial year, these projects are expected to be registered with United Nations Framework Convention on Climate Change (UNFCCC).

The company has earned an income of Rs. 69.6 lakh during the year against Rs. 14.2 lakh in the previous year. This comprised mainly reimbursement of expenses for support rendered to the parent company. It has incurred a net loss of Rs. 117.3 lakh compared to Rs. 12.8 lakh loss in the previous year. The loss was predominantly due to higher outlay of expenditure, which would help ramp up the operations when the expected approval from UNFCCC is received.

Thermax Onsite Energy Solutions Limited

Thermax Onsite Energy Solutions Limited (TOESL) was incorporated in September 2009. This subsidiary, focusing on the area of green energy from biomass and other alternate sources, plans to develop utility delivery business to customer on unit-consumption basis. For this, the company installs its own equipment and peripherals at customer site, operates and maintains these, and organises required inputs like fuel, manpower and consumables at its own cost.

This business mainly aims to capture the major share of revenue-side spending of clients by supplying steam, heat or chilled water on a unit basis.

During the period under review, the subsidiary has signed a project for a tenure of seven years to supply heat to a leading paint manufacturing company. The company is already offering services of steam supply to a joint venture in textile knit wear business. With several industrial units identifying the benefits of savings in capital expenditure and freedom from having to manage operation and maintenance of utilities, the outlook for the business looks promising.

The Board of your company has approved an overall investment of Rs. 6 crore towards the equity capital of TOESL for this new business initiative.

OVERSEAS SUBSIDIARIES Wholly owned

Thermax Inc., USA

This step-down subsidiary is the front-end value chain for your companys cooling and chemical businesses in the USA.

The profit after tax of the subsidiary increased significantly to USD 0.96 million (USD 0.1 million, previous year) on a marginally higher top line of USD 14.9 million. Better financial results were achieved in a depressed market environment with sharper focus on speciality resins, customised solutions and cost control.

The external economic environment continues to be challenging with respect to growth, investment and availability of credit. To maintain margins for the chemical business, the efforts to focus on product mix and pricing discipline will continue.

The cooling business segment has started growing with the commercial execution of sourcing/distribution agreement with Trane (division of Ingersoll Rand). Marketing initiatives are in place to transform to a “market share” player in the near future.

Thermax Europe Ltd., UK.

The year witnessed a significant slow down in business activities in all European economies due to credit crunch. The company closed the financial year with a turnover of GBP 3.8 million (USD 5.7 million) as compared to GBP 5.6 million (USD 8.5 million) in the previous year. The profit after tax was GBP 0.43 million (USD 0.65 million) against the previous year profit of GBP 0.55 million (USD 0.83 million). In comparison to the previous year the profitability has increased to 11.3% from 9.8%, owing to better product mix. Although the enquiry levels for chillers remained constant, conversion into orders was a challenge.

The year also saw a 45% increase in service revenues over the previous year. Key highlights of the year included supply of a 3 MW steam chiller to Copenhagen for a district cooling plant. The chiller formed part of the green systems highlighted during the Climate Change Conference. Working with a large German electricity firm, the company installed the first exhaust gas chiller at a major airport in Europe.

With challenging conditions continuing and aggressive strategies adopted by competition, there is pressure on pricing. The company plans to identify standard market segments and improve profitability through operational efficiencies. Service business would continue to be the thrust area for the company to reduce volatility in the business.

With the European economies yet to recover from the effects of global financial crisis the company aims to maintain its performance.

Thermax Hong Kong Limited, Hong Kong

Thermax Hong Kong Limited (THKL) was formed in December 2003 as part of the strategy to enter the Chinese absorption cooling market. It had no revenue stream planned for the financial year. The company was slated for the dormancy status after collection of debts and completion of committed contractual transactions. This being achieved, the company has been registered for a dormancy status in March 2010 under the existing company laws of Hong Kong.

The absorption cooling business of the company is now routed through Thermax (Zhejiang) Cooling & Heating Engineering Company Ltd., a subsidiary set up in China. The sourcing activities are now being done directly by your company.

To support and meet administrative expenses like audit fees, statutory filings, etc. during the dormancy stage, the Board of your company has invested USD 6,500 towards equity share capital.

Thermax (Zhejiang) Cooling & Heating Engineering Co. Ltd., China

Thermax (Zhejiang) Cooling & Heating Engineering Company Ltd. that began commercial operations in September 2008 completed its first full year of operations. During the year, the company has expanded its operations in China with the opening of sales offices in 10 regions. For the year ended December 31, 2009, the company has achieved overall revenue of RMB 20.2 million (USD 3.0 million). It incurred a loss of RMB 11.9 million (USD 1.8 million), after accounting for interest and depreciation. The companys top line is lower than initially planned and the management team is drawing up strategies to scale up revenues.

For the export market, it has geared up to compliment your companys Indian manufacturing base by acquiring all the necessary certifications for supplying chillers to the European and American markets which are poised for growth in the coming years. The company has already commenced its first supplies to these markets during the year.

Thermax International Ltd., Mauritius

During the year, your company has invested USD 25,000 in the share capital of this subsidiary to meet operational expenses. The total investment in this subsidiary towards share capital now stands at USD 3.2 million. The company is a parent to the step down subsidiary, Thermax Inc., USA.

Thermax do Brasil – Energia e Equipamentos Ltda., Brazil

During the fiscal year the subsidiary earned an income of BRL 0.12 million (USD 0.07 million) and made a profit after tax of BRL 0.04 million (USD 0.02 million).

At present, steps are being evaluated towards putting the affairs of the company to hibernation.

MANAGEMENT DISCUSSION AND ANALYSIS

A Management Discussion and Analysis report, highlighting the performance and prospects of the companys energy and environment businesses is attached.

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 included in this report.

A certificate from the auditors of the company regarding compliance with the conditions of corporate governance as required under Clause 49 of the Listing Agreement is part of this report.

LISTING ON STOCK EXCHANGES

The companys equity shares are listed on two stock exchanges – National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE).

FINANCE, ACCOUNTS AND SYSTEMS

As on March 31, 2010, with the increased order booking, the companys cash and cash equivalents stood at Rs. 916 crore. After an investment of Rs. 88 crore in fixed assets, the companys net cash inflow was Rs. 452 crore. Its net working capital was negative at Rs. 380.6 crore as against a positive Rs. 17.1 crore in the previous year.

The management of the company would continue to focus on prudent working capital management and cash flows. The companys funds are invested in debt funds and fixed deposits with reputed banks. It has not traded or engaged in any derivative instruments or options during the year.

ICRA Ltd. has assigned the company LAA+ and A1+ rating for long term and short term bank limits, respectively.

Public Deposits

The company had no unpaid / unclaimed deposit(s) as on March 31, 2010. It has not accepted any fixed deposits during the year.

EMPLOYEE STRENGTH

The total number of permanent employees on the rolls of the company was 3631 as on March 31, 2010.

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

In accordance with the provisions of the Companies Act, 1956 and the companys Articles of Association, Mr. Pheroz Pudumjee and Dr. Jairam Varadaraj retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment as Directors.

IN MEMORY OF DR. MANU SETH

Dr. Manu Seth, a senior member of the Board passed away on August 8, 2009. The Board and the management places on record its heart-felt appreciation of the valuable guidance and support provided by the late Dr. Seth during his tenure of over nine years with the company as its Director and a member of the Audit Committee.

DIRECTORS RESPONSIBILITY STATEMENT

The Directors accept responsibility for the integrity and objectivity of the Profit & Loss Account for the financial year ended March 31, 2010 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 have been followed.

2. Appropriate accounting policies have been selected and are being 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 17 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 periodic 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:

Human Resources Committee: The Remuneration and Compensation Committee of the Board was renamed on January 30, 2010 and the terms of reference of the committee were also modified.

The Corporate Governance Report details the changes in respect of the aforesaid committee.

Audit Committee: The Board appointed D r. Valentin von Massow on October 30, 2009 as a member. This was to facilitate quorum for the meeting of the committee on January 30, 2010 for which Dr. Jairam Varadaraj had expressed inability to attend due to business exigency.

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.

AWARDS AND RECOGNITION

Mrs. Anu Aga, Director of your company was honoured with the Padma Shri by the President of India. The Award is in recognition of her distinguished service in the field of social work.

Thermax won the Enertia Award 2009 for setting up the state-of-the-art manufacturing facility for boilers and allied equipment at Savli, Gujarat. The award was given in the Manufacturing power generation equipment and related auxiliaries category.

Your companys manufacturing plants at Chinchwad won awards for safety performance and environment management from the Greentech Foundation. The plants of its Boiler & Heater business also won the Golden Peacock Award for Occupational Health and Safety from the Institute of Directors.

Thermax also won the Imai Award for Operational Excellence for Exemplary Employee Engagement in Total Productive Maintenance from the Kaizen Institute in February 2010.

At CIIs (Western Region) HR Awards for Excellence 2008, your company received a commendation award for Strong commitment to HR Excellence.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the continued support extended during the year by the companys clients, business associates, supplier partners, bankers and investors. Your Directors also place on record their appreciation of the dedication and contributions made by employees at all levels, who through their commitment, hard work and support have enabled the company to steer itself through a tough and challenging year.

Thanks to the climate of goodwill and mutual trust created over the years, industrial relations in the company continue to be warm and nurturing. The Directors would like to record their appreciation of the good work done by the companys labour union and employees to maintain a harmonious environment for productive work.

Your Directors would also like to thank the shareholders for their continued support.

For and on behalf of the Board

Meher Pudumjee

Pune: May 12, 2010 Chairperson