Thermax sees green hydrogen, chemicals as key investment areas

Bhandari explained that green hydrogen and chemicals will primarily be areas of significant investment, with significant revenue expected to commence towards the end of a two-to three-year horizon. Green hydrogen can power clean transportation, and is used to manufacture chemicals and fertilizers.

Dipti Sharma
First Published15 May 2024
Thermax managing director and chief executive Ashish Bhandari.
Thermax managing director and chief executive Ashish Bhandari.

Mumbai: With a strong push for green hydrogen production, electrolyzer manufacturers have come under increased focus. Thermax, a provider of energy and environment solutions, sees green hydrogen, produced by splitting water molecules in an electrolyzer using green energy, as a key investment segment, significant revenue from which will likely start flowing in after about three years, its managing director and chief executive Ashish Bhandari said.

The company is exploring partnerships to manufacture and supply electrolyzers, and working on this space with a long-run horizon extending to 2030 and beyond, he told Mint. The Pune-based company is also actively pursuing partnerships in other sectors, including its industrial product segment.

“The interest in electrolyzers for hydrogen continues to be very high at Thermax, and it is something that we are continuing to work on and are evaluating partnerships, doing some fair bit of our own R&D (research and development) as well. And these are all areas where we expect to make announcements in the coming quarters,” Bhandari said.

India aims to produce of 5 million tonnes of green hydrogen annually by 2030, as it seeks to gradually decarbonize its economy and cut the imports of fossil fuels.

Bhandari explained that green hydrogen and chemicals will primarily be areas of significant investment, with revenue expected to commence towards the end of a two-to three-year horizon. Green hydrogen can power clean transportation, and is used to manufacture chemicals and fertilizers.

The entire green hydrogen sector is still at a very nascent stage, and analysts are a little cautious about how and when this trend would unfold for the industry.

Also read | Thermax share price rises 94% in a year: 2 key reasons why Jefferies expects more than 16% gains for the stock

The government has unveiled a production-linked incentives plan to bolster green hydrogen production and local electrolyzer manufacturing. Players such as Reliance New Energy, Torrent Power, JSW Energy, CESC, UPL, Welspun have won bids to set up green hydrogen manufacturing facilities in the country.

Avendus Capital, a financial services firm, estimates the green hydrogen ecosystem in India will provide a cumulative investment opportunity of about $125 billion by 2030.

“Given the 2030 ambitions of achieving around 5 MMTPA green hydrogen capacity coupled with approximately 10 MMTPA green ammonia capacity in India, we expect the installation of over 30 GW of electrolyzer in India alone,” said Prateek Jhawar, MD and head-infrastructure and real asset investment banking, Avendus Capital.

Even though the current electrolyzer market globally is over-supplied, Jhawar believes that once green hydrogen plants start getting commissioned, there will be a significant rise in demand for electrolyzers. Higher manufacturing costs, though, have raised red flags. Jhawar expects electrolyzer costs to drop by over 50% from current international prices, along with an increase in efficiency by over 20% by 2030.

In March, Thermax had partnered with Australia's Fortescue Future Industries to explore green hydrogen projects – including new manufacturing facilities – in India. Both the companies were to explore opportunities to jointly develop fully-integrated green hydrogen projects for commercial and industrial customers in India.

“So, the Fortescue partnership currently is on hold because we could not come to an agreement on some specific areas,” Bhandari said. Consequently, both parties have decided to pursue their own paths for the time being. However, there's a possibility of re-engagement in the future, depending on the development of their respective technologies, he added.

Bhandari highlighted that Thermax will remain active in its traditional areas such as chemicals, apart from green energy.

Electrolyzers will fall under the green solutions business for Thermax. Out of the overall order book valued at 10,111 crore, only 791 crore worth of orders came from the green solutions business as of March 2024.

In Q4, the green solutions business order inflow tanked 93% year-on-year, which Bhandari termed as "just a temporary blip”. He said that one of the reasons for the decline was the slowdown in the biomass-based build-operate business, which was influenced by both falling coal prices and a general slowdown possibly related to the ongoing national elections. The second factor was some order cancellations and reclassification in its First Energy Private Ltd (FEPL) business, which negatively impacted the January-March quarter.

“So as a net impact, we did not book as many orders as we would like,” he said.

Even so, Bhandari pointed out that the pipeline remains promising, and he anticipates a robust rebound in the green solutions business during FY25.

Meanwhile, analysts believe ordering in the green solutions business will fructify over the long term as the company scales up its investments.

During Monday's earnings call with analysts, the company's management emphasized that alongside a large capital expenditure in the green solutions segment, Thermax sees its chemicals business growing in the coming time.

Bhandari pointed out that the chemicals business is a long-term growth story. While it did not see growth in 2024, Bhandari said that Thermax aims to significantly expand its chemicals business in 2025.

Over the past few years, Thermax has introduced several new products to meet the evolving energy transition requirements of its customers. These offerings encompass a range of solutions from Thermax Onsite Energy Solutions Ltd (TOESL), FEPL, coal gasification, and electric pumps to bio-CNG offerings, thermal HVAC (heating, ventilation, and air-conditioning) systems for MHCV (medium and heavy commercial vehicles), thermotron, and flexi source boilers, among others.

Also read | Thermax focuses on clean energy growth, expects positive margins ahead

The company's order pipeline continues to look promising for products like thermotron, flexi source boilers, and electric heaters. Additionally, hydrogen, heat pumps, and thermal HVAC systems are expected to gain traction in the future. Meanwhile, in the industrial products sector, the initiatives and efforts undertaken by the company are gaining momentum and strength in the market.

In Q4, order inflow was up merely 2% year on year. However, order pipeline has strengthened, and traction is anticipated in the first half of FY25, the management said in the earnings call.

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