Deep Dive | ABB India's Business Outlook & Order Pipeline | Business News | CNBC TV18

Summary

The video script discusses ABB India's strategic divestments and subsequent order book recovery, which saw a 40-45% revenue drop but was fully recouped within three years. It highlights ABB's focus on sustainability, with all factories running on renewable energy and a commitment to zero waste to landfill by 2026. The company also addresses opportunities in sectors like Railways electrification, PLI scheme benefits, and 'Make in India' initiatives, emphasizing the importance of localization for competitiveness and market resilience.

Takeaways

• 😀 The company divested its power grid and solar inverter businesses in December 2018, which accounted for 40-45% of its revenues.
• 💼 They have successfully recouped all the divestments in terms of orders within three years, and expect to show the same in revenues this year.
• 🚀 The current portfolio is about 70% products and mix of products, 15% ETO (engineered to order) business, and the balance in project business.
• 🛤️ India's decision to go all-electric in railways has created new opportunities for the company, making them a significant partner in various metro projects.
• 🤖 The company sees indirect benefits from the PLI (Production Linked Incentive) scheme through their customers' increased production capacities and automation needs.
• 🇮🇳 'Make in India' is a strategic focus, with an aim to localize supply chains and reduce dependency on foreign exchange, enhancing price stability and competitiveness.
• 💹 The company has 18 businesses and is continuously looking for bolt-on targets for inorganic growth, both globally and locally.
• 💰 They have declared a dividend of 275% and are considering options for returning cash to shareholders, such as special dividends and buybacks.
• 🌱 Sustainability is a core focus, with all 27 factories running on 100% renewable energy, 97% recyclability of waste, and a goal to be zero waste to landfill by 2026.
• 🌐 ESG (Environmental, Social, and Governance) is seen as an investment rather than a spend, with a focus on how these investments can scale businesses for the future.

Q & A

What significant change occurred in ABB's order books a few years ago?

ABB decided to divest its power grid business and solar inverter business, along with a few others, which were not part of their core focus for the future. This change happened in December 2018.

What was the size of ABB's order book at the time of the divestment?

At the time of the divestment, ABB's order book was over 10,000 crore.

How much of ABB's revenues were divested as a result of the business changes?

ABB divested about 40 to 45 percent of their revenues due to the business changes.

Has ABB managed to recoup the revenue lost from the divestments?

Yes, ABB has managed to recoup all the divestments in terms of orders within three years, and they expect to show the same in revenues in the current year.

What is the current composition of ABB's order book?

About 70 percent of ABB's current portfolio consists of their products and mix of products, along with Engineered to Order (ETO) business, with about 15 percent in services and the balance in project business.

How has the COVID-19 pandemic affected ABB's business?

ABB faced a disrupted year due to the pandemic, but they managed a solid comeback, which they consider a remarkable achievement.

What opportunities does ABB see for its business in India, particularly in the areas of PLI, Make in India, energy transition, and railway capex?

ABB sees opportunities in the electrification of railways, indirect benefits from the PLI scheme, and localization of supply chains as part of the Make in India initiative. They are also involved in energy transition and railway capex, providing solutions for electric locomotives and new generation passenger trains.

What is ABB's strategy regarding localization and how does it benefit the company?

ABB's strategy includes localizing a significant portion of their product lines to make them more competitive, reduce dependency on foreign exchange, and improve price stability in the market.

Does ABB have any plans for inorganic growth or acquisitions to expand its business?

ABB is continuously looking for bolt-on targets for their existing business models that can deliver more value to their customers. They have a culture of empowering their divisions to identify such opportunities globally and locally.

What is ABB's approach to sustainability and how does it reflect in their operations?

ABB focuses on sustainability as a core value, aiming to consume less water, use renewable energy, reduce waste to landfill, and become water positive. They have made significant progress in these areas, with all their factories running on 100% renewable energy and a strong commitment to recyclability and reducing plastic usage.

How does ABB view its investments in ESG (Environmental, Social, and Governance) initiatives?

ABB views its investments in ESG as an investment rather than a spend, expecting a return in terms of better business operations and remaining competitive and relevant in the market.

What are ABB's plans for utilizing its cash reserves and returning value to shareholders?

ABB has started to declare dividends and is considering options for utilizing its cash reserves, such as inorganic growth opportunities, to provide better returns than keeping the cash in banks.