Thermax in streamline mode, disposes electronic unit - Views on News from Equitymaster

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  • Feb 21, 2000 - Thermax in streamline mode, disposes electronic unit

Thermax in streamline mode, disposes electronic unit

Feb 21, 2000

Heat engineering major, Thermax Ltd., has outlined plans to dissolve Thermax Fuji Electric, its loss-making joint venture. Also on the anvil are plans to sell off its electronic division and sell 70% equity of Thermax Software Systems to Novasoft of USA. Thermax Ltd. is engaged in the businesses of (manufacturing) packaged boilers and heaters, heat recovery systems, chilling and air-conditioning systems, water treatment systems, air pollution control systems and chemicals.

According to a news report appearing in a leading financial daily, Thermax is in the midst of a restructuring process and will group its businesses under four heads - energy, environment, power and chemicals. It is therefore dissolving/selling other businesses that do not fit into these four areas.

Thermax has decided to dissolve its 50:50 joint venture with Fuji - Thermax Fuji Electric as the business was getting unwieldy, and accumulated losses at Rs 140 m (over the last 3 years) showed no signs of abating. The situation worsened with the strengthening of the Japanese Yen and weak demand for its transmitters in the domestic market.

The company is showing a lot of focus in its operations and has shown the will to discard businesses that are unrelated. At the same time the company is willing to go along with core businesses, even if they are loss-making. For instance, it is going to pursue its water JV with Culligan of USA - Thermax Culligan, although the business has suffered a loss of Rs 50 m, as water constitutes one of its core businesses.

These moves will have a positive impact on its bottomline (net profit) over the long run, although revenues will decline. But profitability is more important for the company and its seems to have realised that.

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