No slowdown; ABB India sees robust demand from different segments of the market: MD

“There is a strong uptick in our export numbers but again our main focus is a strong demand growth out of the country and then we will make use of the opportunities that we get in the exports,” says Sanjeev Sharma, Country Head & MD, ABB India

On ABB India operations and market engagement
As a company we have 20 business lines or we call them as business divisions and they track about 20 market segments. They are all cyclical and keep going up and down and that makes our portfolio and our engagement with the market quite robust.

At this point of time, there are certain market segments which are growing 15% plus, namely data centre, renewables, food and beverage and others and then there are eight market segments which are growing 10% plus. There are segments which are very capex oriented. They are sub-10% but we are seeing that a lot of capex is forming as a lot of projects are being discussed in those large companies. As they come up, we will see growth in those segments as well.

The reason why I asked you this is that a lot of these domestic traditional industries are facing headwinds whether it is the steel sector on account of the export duty rejig or the cement sector which is facing the elevated coal prices and inflation is derailing the capex story a bit. Are you seeing some sort of slowdown in inquiries or delay in decision making on account of this macroeconomic headwind?
The majority of our portfolio now is very industry oriented and I would call it the fast moving industrial goods (FMIG). We are not seeing any slowdown. We are seeing strong, robust demand from different segments of the market which is coming from end users directly rather than from the OEMs which supply machines and equipment to the end users and also the distribution channels which are supplying residential, commercial, utilities and renewable space. At this point of time, we have not seen or observed any slowdown, on the contrary we are seeing the demand is quite robust.

Are you saying that the quarterly run rate that we have seen of order inflows of Rs 2,500-3,000 crore is likely to see an uptick going forward?
As we look into the market and the market formation, we are seeing the strength and good order inflows to us.

The other trigger for the company is the export demand that we are seeing. The global parent has increased their mandate and that has been flowing into the company as well but how confident are you of this as a sustainable revenue driver going forward?
As a multinational company, which has been operating and manufacturing in India for the last 70 years in 20 business divisions, our main purpose is to serve the growing India demand. But as we make our operations to scale and make them more sophisticated, these productivity measures play in and our global managers naturally get interested in such factories to become part of their supply network globally. That is something we are seeing for the last few years.

There is a strong uptick in our export numbers but again our main focus is a strong demand growth out of the country and then we will make use of the opportunities that we get in the exports.

Exports have already scaled up from 5% of revenue to 15%. Where do you see it headed in the next three to five years?
I have worked for ABB for about 30 plus years and I understand the landscape globally and locally and how the geopolitics and the overall formation of the market is taking place going forward. I think we are at a very early stage of our export potential out of India.

This government has been quite vocal about the entire atmanirbhar (self reliance) push. One of the issues with a lot of MNCs has been that they still have a lot of dependence on imports when it comes to their small components. What is ABB doing to increase their localisation and what kind of levels should we expect 12 months from here on?
As far as ABB India is concerned, we are very long on India. What that means is that we not only manufacture and supply into the country but we continue to localise our production here. We continue to spread that into the manufacturing sectors of our suppliers and we have a very high level of localisation already achieved.

There are certain products in line where we have 100% localisation. There are certain products where we have 95% localisation. There are certain components which are not produced in India for example, power electronics, the products where the power electronics goes in. That is something we import but we hope that with the PLI schemes and other nice initiatives in the country, more production comes in the country we are able to localise even more. There are no bars for us on how much we can go in terms of localisation as long as the local supply chains allow.

I am guessing this will also help you to manage your margins in a better way because we have seen a lot of volatility when it comes to commodity prices. How are you dealing with volatility, given that we have seen a bit of a cool off in the commodity prices? Should we expect rollback in the price hikes that you had taken for some of your products?
Yes, we have seen a lot of supply chain challenges in the last few months and I think being part of the global supply chain network, I think we would assure the supplies for our customers and we have ensured that whatever commitment we take from the market we are able to deliver. That is also one of the reasons why demand for our products is strong because we are seen as a reliable supplier to our partners in the marketplace.

Now as far as the price hikes are concerned, all our customers are equally informed about the inflation and the changes that are happening in the supply chain and they have been very supportive and they are participating with us in terms of taking the price hikes which are coming due to the inflationary pressures.

Given the entire setup with respect to commodity prices and revenue execution has been quite strong, should we expect the PBT margins to head to the early teen levels?
It is difficult to predict and we do not give a forward guidance but in terms of our portfolio, which is about 70% made to order, made to stores and engineered to order, it is mostly value added within the company and also 15-20% services and rest is projects which is formation once the demand is strong in the market and the volumes increase and you use your capacities to a good level. I think the results are positive.