Siemens, the German engineering giant, has split its global business empire into 20 clusters for fast-tracking growth and avoiding structural duplication. The Rs 17,500-crore India business has a significant role in the new structure as headquarters of the South Asia cluster, which includes Sri Lanka, Bangladesh, Bhutan, Nepal and Maldives. Siemens MD ARMIN BRUCK is also the cluster chief exe-cutive. The expatriate CEO told Nevin John the company is streamlining its operations for doubling growth:
How is the current financial climate and where does Siemens India stand?
Until the beginning of downturn, we were doubling the revenue year-on-year. But the situation had become grim across the globe with the market slump, collapse of banks and tight liquidity. In India, the growth had slowed, but the condition was much better than the rest of the world. Siemens had struggled and survived in the first half of the year. Now I feel the wind is on our side. Siemens weathered the downturn well and maintained the position at cash surplus and zero debt. So, we can say the “light at the end of the tunnel” situation is over. We are in the light already. The market will go back to the golden years soon.
Has the downturn hurt badly?
At the Kalva factory, we had cut weekly working days to three from six during the downturn. We also reduced the production at the Aurangabad facility and the other two. Overall, the product cut was 15-20 per cent. In the last one month, the production has come back to normalcy. Now we are looking for expansion of the transformer factory after a huge order from Adani Power.
The order backlog is stable at Rs 9,000 crore. The average overseas order is 10-12 per cent and it will vary according to the order size. One huge overseas order can change the proportion.
Do you think the demand situation has improved? How are you placed to cash in on the emerging situation?
The economic climate has completely changed in the last four to six weeks. Orders started flowing. Siemens is well positioned, focusing on process, people and products and the synergy of it. Adding value to our products, we plan to serve our customers better. In the last 12 months, we have opened another three factories as part of the localisation programme. Every year, we plan to add two-three factories to our fold and will bring design know-how to also cater to the export market. At present, we are doing 100 projects in the country.
We have about 20,000 trained employees, which is a huge asset. Our attrition level is low, compared to the industry average. But I want to reduce it further from the current level of eight per cent.
There is feeling that Siemens is restructuring its business, as you give emphasis to verticals rather than the entities now.
About a year ago, Siemens global had initiated complete structuring for consolidating the businesses under three major verticals — industry, energy and healthcare. Beyond that, the group has recently split into 20 clusters for business purposes. India is part of the South Asia cluster, which includes six countries. The Mumbai office is now controlling the South Asia business.
In Sri Lanka, we have a representation office. After the war, the environment has become investment-friendly there. We don’t have huge operational teams in other countries, so the Indian headquarters will support the units. In future, these countries will have strong teams in place for exploring business opportunities. The cluster has a single human resource department and one general council of lawyers, all based out of India.
How is the business oppor-tunity in these countries?
Power, airports, ports and roads are the major areas that will be opened for private investment. For instance, Asian Development Bank is spending heavily for the redevelopment of Sri Lanka.
Will the overseas business of Siemens India be affected by the clustering?
Globally, we have a system at Siemens to avoid competition of clusters with each other for the getting business. For example, India has clients in the Middle East and Africa, among others. Also, we have clusters in these geographies. So, there is a team of 15 global division heads in Germany, which will decide who should deliver. Depending on the technical skill and price competency, the global team allocate the cross-cluster projects.
Will there be any change in the India business model?
In India, most of the 20 legal entities are wholly-owned subsidiaries of Siemens Ltd. The 20-entity structure might change. One or two entities might integrate to Siemens Ltd. The consolidation of similar businesses is aimed to maximise synergy.
What is your investment plan?
Similar to the past, we will continue doing investments, especially in setting up factories. In the last financial year, we built three factories and invested Rs 200 crore.
What kind of profit margin do you get from in-house pro-jects of other Siemens firms?
We follow the “cost plus” model for captive businesses of Sie-mens, while we pick outside projects on the basis of profit margin.
What is your outlook for the coming quarters?
In the overall revenue, energy constitutes 50 per cent, industry 40 per cent and healthcare 10 per cent. Owing to the high demand for electricity, the company will continue to be bullish on the energy sector. The industry segment is also coming back to normalcy after the slowdown.
