Thermax Limited (THERMAX) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I extend a warm welcome to all of you to the 42nd Annual General Meeting of your company. I thank all our shareholders and members for joining the meeting. I hope all of you are safe and in good health. We decided to continue to hold the AGM through video conferencing since it was allowed and also to enable all our shareholders across the country to be able to participate. This is in compliance with the directions of the Ministry of Corporate Affairs. The company has taken requisite steps to enable members to participate and vote on the items set out in the notice of this AGM. Before we begin, I would like to mention a few points regarding participation in the AGM through video conferencing. The facility for joining the AGM through VC or other audio visual means have been made available for members on a first come, first serve basis. We have 7 shareholders who have confirmed as speaker shareholders. All members who have joined this meeting shall be muted by default to avoid any disturbances. Thank you. The requisite form for the meeting as required under Section 103 of the Companies Act 2013 is present. Therefore, I call the meeting to order, and we can commence the proceedings of the meeting. I take pleasure in introducing our Board members and other officials. We have Nawshir Mirza, Chairman, Audit Committee and Risk Management Committee; Mr. Harsh Mariwala, Chairman NRC, I can't see him, okay, but I did see him log in; Mr. Pheroz Pudumjee, Chairman, Stakeholder Relationship Committee; Dr. Jairam Varadaraj, Independent Director; Ms. Rajani Kesari, Independent Director; Dr. Ravi Pandit, Independent Director; Dr. Ravi Gopinath, Independent Director; Mr. Ashish Bhandari, MDM CEO; Mr. Rajendran Arunachalam, CFO; Ms. Janhavi Khele, Company Secretary and Compliance Officer; and myself, Meher Pudumjee, Chairperson. I would now like to proceed further. Request from corporate shareholders for their representatives has been received and considered. Since there is no physical attendance of members, the requirement of appointing proxies is not applicable. The requisite statutory registers, auditors report and secretarial audit are available for inspection. These will remain available to the members for inspection electronically before desired. Since the notice has been circulated to all members, I take the notice of the AGM as read. The Chairman of the Audit Committee, the NRC, Stakeholders Relationship Committee, representatives of the statutory auditor -- of auditors and statutory auditor are present at the meeting. I will now spend about 20 minutes to take you through the organization and my presentation. Can we have the presentation, please? Thank you. So a warm welcome again. Next. So like always, I'll take you through each of our stakeholders. And at the end of it, I'll give you the Q1 results for this year. Next. First, start with our shareholders. Next. So the order bookings for this year is -- for last year, sorry, INR 8,788 crores, 7% lower than the previous year. We haven't had many large orders during the year, but we clocked the highest in our channel business, which is our small product. Our order backlog has increased by 11% to INR 9,752 crores. Total income for '22/'23 has increased 32% and PAT jumped 45% compared to the previous year. What I'm really happy is that every division in the company has done a lot better than the previous year. And this is not just our numbers, but on innovative offerings on building a growth mindset, challenging ourselves and learning to partner with others. On behalf of the Board, our thanks to Ashish for his leadership, our EC, our SPU heads, all our employees in the company and all our stakeholders. Next. This is a new segment structure, which reflects our current business operations. Since the company operates and reduce its businesses in these 4 major buckets, we have decided to project the same going forward to the 4 being Industrial Products, which is predominantly our product business, Industrial Infra, which is all our projects, Green Solutions, which is predominantly our build-own-operate solutions in the green industry and our Chemical business. Next. So reflecting on last year and looking ahead, on the positive external side with climate change and countries that have pledged their net-zero emission target including India, by 2070, the energy sector is going through a transition, which, of course, opens a lot of opportunities for a company like Thermax. Commodity prices and trade prices have stabilized, although Q1 last year was very high. But this reduction in commodity and sale prices have had a positive impact on our profitability at the year-end. Positive internal, I'd like to acknowledge the good execution across the entire organization. With our customers moving towards decarbonization as well as conservation of resources, we aspire to be their partners in energy transition. We've also started a new energy portfolio where we included solar, wind, hybrid captive projects, BioCNG using waste biomass and so on, which I will talk about as we move further. Business partnerships and small investments in start-ups will help us achieve some of these goals. Digitization is another offering to deliver customer-centric applications that add value to our customer processes. And again, we'll see that a little later. We've come up with a number of new product launches. And I'm very happy that within Thermax, we took a target of 25% reduction in carbon emissions from our 2019 baseline. We have achieved 17% from this 25%. And this is -- we've also improved our carbon intensity with regards to our revenue. So even though our revenue has increased, we have improved carbon intensity and come down in our carbon emissions. Not so positive externally is the increase in inflation across the world and, of course, in India. The war in Russia, Ukraine which has impacted the whole world, and we are seeing some signs of a slight slowdown with regards to large projects. They have not only reduced in terms of inquiries, but also getting delayed in terms of converting them into orders. Not so positive on the internal side. Our attrition is close to 19.7% or was as of March last year, it reduced a little bit this year. We had -- with all countries pledging towards net zero, there are many technologies and start-ups in the areas of hydrogen, electrolyzers, fuel cells, mobility, energy storage, thin film. So which of these technologies is really ultimately going to succeed? I think the jury is still out. We're also being dependent now on government policies, something that is new for Thermax to deal with. And the last is the arbitration award against us, which we are appealing right now in the high court. Next, our employees. Next. So we started many wellness initiatives within the company, which includes emotional well-being, meditation, yoga, medical camps and several sports and exercise opportunities for our employees. We've also started celebrating success. We recently held our annual awards night where we recognized best individuals, teams and businesses based on their performance as well as CLOCC behaviors. CLOCC meaning customer, leads, own, collaborate and create. Next. We've been running the Bhathena Foundation Camp for our employees' children for several decades now. These camps engage with our employees' children to develop creativity, connect with nature and just have fun in the summer holidays. On the right side, you will see that we've signed up to SoCo, which is the social compact which I spoke about last year, wherein we assure the dignity and equity of unorganized labor, especially migrant labor in our ecosystem. We started this activity in our own manufacturing locations and sites because we truly believe that a responsible business is a successful business in the long run. Next. We've also started various leadership development programs, both in-house as well as with universities, world over. This is not only to develop our present leadership talent but also builds the leaders of tomorrow. As an organization, we believe in gender, religious and all kinds of diversity and inclusion and we started a DEI policy within the company to be proactive on some of these initiatives. As an example, we've taken a target to double the number of women in our company from the present 7% to 14% over the next 3 years. Next. The next is our channel and vendor partners. Next. So you will see a picture. This is a picture of us celebrating with our channel partners. As I mentioned, we had the highest-ever order booking in the channel group. So many of our channel partners were taken on a trip to Switzerland, where we all had a very nice time. Next. Also multiple actions to assist our vendors. We've organized vendor meets at various locations across the country. We have green channel vendors, many more than we did earlier who are self-certified. We started training programs for the last few years on sustainability and covered a few vendors, although we'd like to cover many more as we go forward. And we've also started a bill-discounting scheme about 2 years ago where many of our vendors are participating. Next. Next is our customer, environment and new businesses stakeholders. Next. So Thermax is well poised to understand our customer needs in energy and environment. We would like to focus on clean energy, clean water and our chemicals. And therefore, we are being seen as a trusted partner in energy transition. And I'll give you a few examples. Next. The first is the nonrecyclable solid waste to energy boilers. So in the paper industry, they have a challenge in terms of the amount of waste that they generate. This is waste in terms of plastics and polymers. Clients have to pay money to dispose this waste to cement films. On the other hand, they need steam and power to run their process. So our 100% subsidiary, TBWES, launched a boiler that uses this nonrecyclable solid waste, where the waste is used as a fuel in the boiler, generating both steam and power. So not only did we save the customer on fuel, but also on transportation cost as well as land. Next. This is an end-to-end water management solution. This innovation has enabled a customer in the food industry to reduce their water intake by more than 80%. From 711 kiloliters per day to 129 kiloliters per day. Not only that, but we have also helped to reduce its operational cost by 30%. That's reducing their power costs and associated carbon emissions. This kind of application has the potential to make the food industry net-zero water in the future. Next. This is an interesting application in terms of -- I didn't realize that except phosphate through fertilizers in water, feed algae group making it green. And I think we saw this in the recent past in the newspapers. It degrades the condition that fish, bug, wildlife needs to try them. For Thermax, chemical divisions have come up with a nonphosphate-based corrosion and scale inhibitor for cooling water treatment applications. Next. This is an electric or zero-emission boiler, which operates on electricity. Today, they are very niche applications since the price of electricity is high and also moreover, like EVs, the Indian grid is predominantly coal-based. But where this really makes sense is in countries like Bhutan and others, where the electricity is predominantly from hydro and is very cheap. But this is one of our new products that we've launched. Next. So coming to our new energy portfolio. This is our Build-Own-Operate TOESL, T-O-E-S-L, where we have supplied reliable green steam to customers. In this particular case, we have developed a partnership with an FMCG nature, for 5 of the manufacturing plants across the country, where we offer close to 100% uptime, saving 130,000 tonnes of CO2 per year. Next. First Energy is 100% -- sorry. This is BioCNG -- sorry. BioCNG is -- we have -- on the one hand, we have the challenge of stubble burning which is a huge environmental challenge. On the other hand, our government is looking for ways to secure our energy needs. So BioCNG is generated from rice straw stubble which is actually the stubble burning that goes on in Northern India. And BioCNG is emerging as a strong alternative to fossil fuels, which is used as a fuel for transportation. Just as you see, the difference in cost is INR 7 on petrol versus INR 3 on BioCNG. BioCNG also lowered the amount of CO2 emissions, thus reducing carbon footprint. Next. Next is First Energy, which is a 100% subsidiary of Thermax that provides group captives, Build-Own-Operate solar and solar wind energy to credible industry users. Today, we have 80 megawatts of FEPL projects, which are operational and 129 megawatts, which is under construction. Next. The next is green hydrogen. Now green hydrogen can be produced 2 ways, as we noted, a, from biomass as well as through electrolyzers. So Thermax is looking at producing it from either biomass or electrolyzer. We're also looking at EPC or setting up green hydrogen plants for hard-to-abate industries like steel, fertilizers and the like. The government has come out with a PLI scheme, and we partnered at the moment with FFI but right now, everything is too early, so it's too early to comment on what's going to happen, how are we going to take part. We will be deciding that in time. Next. This is Thermax EDGE Live. So with so many products over 40,000, 50,000 products that we have in the field over the past decade, Thermax has an opportunity to value-add to our customers and on an income from digital services. We introduced EDGE Live last year, and this helps to improve plant performance for our customers, enhance uptime and reduce costs. It's still very new, but I'm very happy to say that it is picking up. Next, our community. Next. So this time, apart from all the good work that our NGO partners, Akanksha and iTeach do in education, I thought I'd highlight a few other partners that we are working with. So on the left, we see a collaborative farming project near Solapur factory, where we partnered with Manavlok to supply machinery, train the farming community on scientific farming techniques, fertilizer pre-farming, earthworm composting, increasing yields, forming farm-produce organizations so that they can add more and more value at its products from their farm produce. On the right side, we see TOESL, our Build-Own-Operate subsidiary, where we have inaugurated our first community facilitation center with an NGO called Saaras Foundation. And you can see Khushboo, who is the CEO, cutting the ribbon. This is to serve economically weaker sections of society in order to get benefits to government welfare schemes. Next. We've also supported 2 worker facilitation centers through our social compact. We started one in PCMC in Pune and the other one in Savli in Gujarat. This is again to facilitate entitlements of government schemes, 3,500 beneficiaries. We have almost 3,500 and this is mainly to help them to get their Aadhar cards, their PAN cards, how do we link their Aadhar cards to bank accounts so that they can receive entitlements? How do we get them to get to E-shram benefits, which is medical facilities, DOTW benefits, all sorts of benefits. I think there are about 8,000 that have been brought out by the government, but the poor really don't know how to access them and so we are helping them do this. And I'm really very happy to see our own Thermax workers at our Pune factory, who have come forward to help the unorganized labor in Pune to access these benefits. Next. So we come to the Q1 results. Next. So our order book has gone up by 11% from INR 2,310 crores to INR 2,567 crores. Our order backlog has now gone to INR 10,505 crores, up 10%. Revenue from operations has gone up 17% to INR 1,933 crores, our PBT has gone up 75% from INR 81 crores to INR 142 crores. We have an exceptional item, which I spoke about which is INR 51 crores towards the arbitration award that we've taken on. So our profit before tax has been gone up to 12% after exceptional items to INR 91 crores and our profit after tax has gone up 2% from INR 59 crores to INR 60 crores. So with that, I'd like to say thank you, and we can move back to the procedural compliance of the meeting. Since there are no audit qualifications made by the statutory or secretarial auditor, I will take both reports as read. The company has provided e-voting facilities to all shareholders to cast their votes electronically with respect to all businesses mentioned in the notice. Therefore, there is no need to propose and second the resolution set out in the notice of the meeting as the same are already put for e-voting. The Board has appointed Mr. Sri Mudaliar, partner of SVD & Associates, Company Secretaries Pune, as the scrutinizer for conducting the e-voting process in a fair and transparent manner who will submit their report. Members who have not voted earlier through remote e-voting can cast their vote during the course of the meeting through e-voting. There is a small vote tab on the bottom left of your screen. You can vote any time during the AGM, while listening to the proceeding or during the e-voting session at the end of the meeting for all the resolutions contained in the notice. The results of the e-voting will be declared on receipt of the scrutinizer's report within 2 working days of the AGM. It shall be placed on the company's website and will also be disclosed to the stock exchanges. I invite the members to offer comments and seek clarifications on the resolutions contained in the AGM notice, Series 1 to 5. In the interest of time and because we have provided e-voting facilities, I will not read them out. Once the Q&A session starts, the moderator will announce the names of the shareholders who have registered as speaker shareholders one by one. The speaker shareholder will thereafter be unmuted by the host to enable him or her to speak. To start speaking, shareholders are requested to enable the video option. If the shareholder is not able to join through video for any reason, he can -- he or she can participate through audio mode. While speaking, we request the speaker to use earphones so that they are clearly audible. In case there is a connectivity problem, we would ask the next speaker to join. Once the connectivity improves, the speaker shareholder will be called again to speak. We would request shareholders to kindly limit their questions or comments to 2 minutes or less so that everyone gets an opportunity to speak. During the AGM, if the shareholder faces any technical issues, the helpline number mentioned in the notice may be contacted. We will listen to all the questions before we answer as many as we can. Can we now go to the Q&A?

I request the speaker, [ Mr. Arun Kumar Bopanna ], to kindly unmute your audio, switch on your webcam and proceed with your question.

Maybe we can go to the next and come back to Arun.

I request our next speaker, [ Mr. Keith Tisha ] to kindly unmute your audio, switch on your webcam and proceed with your question.

[Foreign Language]

I request our next speaker, Ms. [ CE Macraner ]. We require you to kindly unmute your audio, switch on your webcam and proceed with your question. No response. I request our next speaker, [ Yousaf Yunus Rangwala ]. We request you to kindly unmute your audio, switch on your webcam and proceed with your question. Audio is not connected. I'll call our next speaker, [ Mr. Rajesh Kibalraam Chanani ]. We request you to kindly unmute your audio, switch on your webcam and proceed with your question.

Yes, respective Chairperson, Meher Pudumjee, MDPO, Ashish Bhandari and a very highly distinguished Board of Directors and several shareholders. My name is [ Rajesh Chanani ]. I'm speaking from Mumbai. First of all, I thank the secular department with [ Rami ] and the team for sending the e-mail notice a very well on time which is full of all the detailed factors presented, and I went through the Chairperson's speech also in which you have covered a lot about the results and everything. Ma'am our price was INR 1,830 was a low price. And from there, it is the higher of INR 2,728. So it's a very good appreciation in the price also. And today also it's trending at INR 2,520 which is fantastic. The entire Board has really done great and they're good. And Mr. Harsh Mariwala is also there a very decent -- a very, very decent person. I'm a shareholder of [ Marico ] also. So he has also met me, gave me a very good return. I must say Bharindar also. Madam, my share capital is INR 22 crore and reserves are surplus are so good, excellent it is. So now I won't tell you to go for the stock display. We are already at INR 2 face value. But can we not declare a bonus? It's a very high time and I know it. It won't affect the equity, let the equity go. But I know with the way the company is working, you know, we will be back again to the same price level. So that's my wish, if you can. And I want to say for the coming festivals, the month of festival coming, [Foreign Language]. With this, I support all the resolutions and support of the company and very best wishes. [Foreign Language].

I request [ Mr. Arun Kumar Bopanna ]. We request you to kindly unmute your audio, switch on your webcam and proceed with your question.

We continue with a few others and then come back to Arun.

I request our next speaker, [ Mr. Ramesh Shankar Gora ]. We request you to kindly unmute your audio, switch on your webcam and proceed with your question. No response. I request our next speakers Ms. [indiscernible] to kindly unmute your audio, switch on your webcam and proceed with your question.

[Foreign Language].

Shall we try Ms. [ Macraner ]?

I request [ Ms. CE Macraner ], we request you to kindly unmute your audio, switch on your webcam and proceed with your question. I request [ Mr. Arun Kumar Bopana ] we request you to kindly unmute your audio, switch on your webcam and proceed with your question.

How will I miss this, this is wonderful family, Meher, Pheroz, Nawshir Mirza, [ Rajisthar ], thank you and [ Parvi ]. So nice of you to reconnect. That icon was not there for -- the icon came just now. There are 3 instruments and 3 mediums going on, I mean [indiscernible]. Good afternoon to everybody. Thanks to Janvi and team for [indiscernible] and compliments for the highest revenue and profit in history, the First Energy Private Limited commissioning its solar and wind hybrid farms. Thermax on-site engineering solutions segment growth and revenues, too. The challenge is energy and energy industry is highly competitive. Economic fluctuations can impact capital investment, environment, regulations and policies can be a challenge that keeps changing from time to time. But challenges lead to opportunities to budget, provide a push to green growth, such as bioenergy and green hydrogen are constantly looking for economically viable solutions that have a lower carbon footprint. Growing economies in Asia, Africa, Latin America, present opportunities for Thermax. I wish you all the best in that. And the world moves towards the low-carbon future with retrofitting and upgradation with existing infrastructure for energy efficiency provide that was a great opportunity for the wonderful TPS. And the questions are the part of green energy or bioenergy per unit somewhat wasted to bioCNG, used in vehicles. With so many housing complexes, do you make the mini ZLD, zero-liquid discharge? Partnership in ever-evolving technology can Thermax -- what can Thermax expect in 5 years? What are 4 major buckets and industrial products, industrial infra, green solutions and chemicals? Renewals and use of coal with carbon capture to bring down the dependence on oil and chemicals, I will be happy if there's a reduction in oil imports that will reduce the terror funding at least. Uptake of orders in the refinery, steel, power and chemical sectors in wastefill recovery of cement and steel. What is the forecast for green hydrogen, energy for decarbonizing? National green hydrogen mission and productive link incentives, what will be the Thermax fight? What are our plants financial storage solutions? Lastly, Thermax may have, Meher you're very philanthropic, where the human being has dipped the planet of all the environment and is Thermax to set this right? I wish you all the best. Thank you very much.

Again, Mr. [indiscernible], otherwise, I'll go to answer the question.

Ma'am she's not available at the moment.

So maybe I'll start answering the question. The first one, Mr. Sha spoke about the INR 51 crores. So the matter is subjudice, but I'm going to read out what we have given in our press release which is that during the quarter, the company received an arbitral award against the company for repair, payment of damages, for breakdown of third-party gas turbo generators, the GTGs for a customer projects. As per the award, the company was directed to repair and reinstate the GTG under the defect liability obligation. Further, among other matters, the award also allows the customers to claim on additional expenditure along with interest, which is currently estimated at INR 245 crores. Pursuant to independent legal opinion, a, for the quarter ended June 30, 2023, the company had made a provision of INR 50.63 crores, and for the balance amount, no provisions have been considered necessarily. B, the company is in the process of filing an application before the Bombay High Court for setting aside the entire Fed award and is reasonably confident of the issue being ultimately decided in its favor. Yes, that's where we have with regards to the INR 51 crores provision that we made. Thank you very much for [ Mr. Chanani ] to your appreciation. With regard to bonus -- bonus shares, we will certainly look into it, and we will come back to our shareholders. With regard [ Mr. Gola ], thank you very much. Mr. Sharma, you've mentioned, first of all, thank you for your congratulations. And I know you come to the AGM every year and since I knew you were coming, I did take feedback in terms of where we are with regards to your matter. And I just want to say that as a matter of principle, we normally don't interfere in any family business dispute. And at our end, apparently, there is nothing pending other than our security deposit of INR 2 lakh. And once we receive confirmation from the company, the same will be deposited. This is the feedback that I have got. And we are very happy to return this INR 2 lakh deposit as soon as we get some information from the company. With regards to Arun, a few questions, he spoke about mini ZLDs. Yes, we do have small products that we manufacture, whether it's fab or whether it's [indiscernible] or various small products that we have called ZLD, which we supply to various housing societies. And this is actually very difficult for retrofitting in societies. That means for all societies, it becomes very difficult because of all the pipe work. But if there are new societies, that's where we are supplying these products and the products are doing quite well. So I completely agree with you, these mini ZLDs would be a great one. With regard to EverEnviro, you asked about the difference in cost between BioCNG and petrol. Well, right now, it's about INR 3 on BioCNG as against roughly INR 7 on petrol. So there is a huge price difference with regard to producing BioCNG. We've tied up with EverEnviro in a 65-35 JV and as you see, I mean every winter, we hear about stubble burnings in North India, but it's not only stubble burning, BioCNG can be produced from various biomass waste. We're looking at press mud from the sugar industry. We're looking at cow dung, which can generate BioCNG. So there are many, many applications that we can look for and so this business has a great future. Right now, we're just struggling to get our first project off the ground because it's a first of a kind for the country, actually, more than anything else. And so as soon as we get that off the ground, I think there should be a lot of opportunity that's coming through. You spoke about green hydrogen, where, as I mentioned, we're looking at various ways to generate green hydrogen. We're looking at both biomass as well as the electrolyzer route for green hydrogen. And right now, it's a little early. We are also looking at PPP projects. We're looking at maybe if there is an opportunity for BOO for some hard-to-abate industry. So PLI has come out. It's a bit too early. We don't know whether we will participate or how we will participate if we decide to do so. But right now, that's exactly what we are discussing as a team. Yes. I don't think there was anything else that was mentioned. But with that, thank you very much for the questions asked. And as there is no other business to be transacted, the meeting is declared concluded. I'd really like to thank all our shareholders, directors and auditors for joining the meeting. I now authorize the company secretary to conduct the voting procedure and declare the results to stock exchanges. The e-voting facility will remain open for the next 15 minutes to enable those members who have not casted their votes and would like to do so. Once again, a big thank you to all of you. Please stay safe. Look after yourselves and your families. Thank you.