)
Bazmi Husain, the managing director of Swiss-Swedish engineering firm ABB India, tells Aneesh Phadnis that 2015 will remain challenging as business opportunities will come two-three quarters after economic recovery. ABB India, however, will not see a significant impact due to the appreciation of Swiss Franc, Husain says. Excerpts:
ABB India posted 43 per cent growth in its net profit and 50 per cent growth in order inflow in the December quarter. Is that a sign of economic momentum. Are we seeing a pick-up in orders?I do not see this as a sign of any change in market conditions. Increase in order and profit is a reflection of our discipline in order acquisition and execution. Our focus has been on short-cycle orders and we have been selective about taking large orders. There is still an uncertainty on when economic recovery will set in and we do not wish to remain stuck with large low-margin orders. We have focused on improving efficiency and offerings. Our mantra is profit over volume and cash over revenue.
What is your outlook for 2015. Which sectors are promising?
Renewable energy is a growing area and looks promising. India is a high-growth market for solar energy. Except solar panels, we manufacture all components required by the solar sector and we expect traction from there.
However, core sectors, such as steel and cement, continue to face issues. Capacity utilisation in these two sectors is under 70 per cent and the utilisation has to go up before fresh investment takes place. I cannot predict when recovery will take place but opportunities will come two to three quarters after economic recovery. Year 2015 will be largely challenging. ABB will continue to grow but the rate will depend on the market.
ABB has been focusing on growing exports. Have these increased in 2014?
Growing exports has been our strategy. Exports grew 30 per cent in 2014 and accounted for nearly 20 per cent of the revenue. We are making products to suit local conditions in India and foreign markets. Earlier, we had not looked at neighbouring countries but now we are focusing on that market, too. Our power system division bagged orders from Bangladesh and Sri Lanka last year.
ABB India pays a royalty and a technology fee to its Swiss parent. This accounted for Rs 200 crore in 2013. What impact will ABB India face due to the Swiss National Bank's decision to remove the cap on the Swiss Franc?
I do not see a significant impact. We have hedged our requirement. More, our exposure to the Swiss Franc is limited and about five per cent of expenses are accounted in that currency. ABB is a global company and has manufacturing facilities around the world and we can also procure from other markets in case we need to offset the currency impact.
Is ABB looking to invest in India? You had said the firm had been investing $100 million each year.
We continue to invest in upgrading the facilities, resources and manpower. India is ABB's largest location for research and development (R&D) and about 1,200 of our employees are in engaged in R&D work. Outside Sweden, high-voltage DC projects are designed only in Chennai. About 70 per cent of control systems for sectors are designed in Bengaluru. For us, India is not just a manufacturing centre. As a ballpark figure, we will invest $100 million this year.
