The focus of the company will remain on short-cycle orders in power generation space, said MD Bazmi Husain, adding that exports grew at a robust pace of 30 percent in Q4.
ABB India has registered a whopping 42.4 percent growth in profit at Rs 84 crore for October-December quarter. The bottomline growth was driven by strong execution, enhanced productivity, other income and cost take out programs.
Discussing company’s result, MD Bazmi Husain said Q4 order inflows benefitted from the spillover of few orders from Q3. The power and automation technology provider is targetting double-digit margins going ahead.
The focus of the company will remain on short-cycle orders in power generation space, said Husain, adding that exports grew at a robust pace of 30 percent in Q4.
Below is verbatim transcript of the interview:
Q: The big positive this quarter was that 49 percent jump we saw in your order inflows and that is a marked improvement from your typical quarterly run rate. Which segments have contributed to this order run rate?
A: We have had a decent growth in order intake this quarter. If you look quarter-on-quarter (QoQ) it is about 50 percent, year-on-year (YoY) we have grown about 20 percent in order.
External market in India continues to be quite challenging but like I mentioned the previous quarter, there were some orders that because of the timing of the finalisation slipped into this quarter. So what we see is basically an addition of those orders that slipped from last quarter to this quarter plus what we got in this quarter. So, it has been a healthy growth.
Regarding the sectors it came from, I think on both the dimension of looking at it from projects and product side that is the base orders or the large orders and the other dimension being domestic and export. We have seen growth across all these areas.
Q: If we understand it correctly the jump in orders was on account of spillover of orders from the previous quarter. So, in that case is it fair to assume Rs 2000 crore quarterly run rate of order inflows?
A: No, the thing is that we are betting on market revival and then this growth that I said repeatedly is muted growth. As soon as the market revives we expect to be able to gain a lot from that.
Q: Even your margins at 8 percent have been quite strong this time, do you think the company can maintain?
A: For several quarters now we have been saying that we are exercising a lot of discipline not just in order acquisition but also in the execution side. The mantra that we use of profit over volume on cash over revenue and what you see is a result of that.
We are happy with the progress; we are not quite satisfied with it because we haven’t reached yet the levels that we want to. However, for that we need the market to recover a little it more.
Q: What level of margins would make you happy?
A: Double digits are always better.
Q: While T&D ordering should continue to hold up, one of the fears of the street is that the power generation segment will revive with a lag. Would you concur with this view?
A: When it comes to the orders for power segment here in India, we have said several times that our focus is more on short cycle orders at the moment because the market is very depressed.
We don’t want to pick up long cycle orders, take in at a time which is essentially a buyers market and have to execute them when the market begins to turnaround.
First of all our focus has been on shorter cycle orders. However, also this is one area where we have done quite well, also in exports where we have looked at newer business models such as having engineered solutions for project export where we basically do the engineering and supply the products but we de-risk from the installation and commissioning part in further countries. So, that is also been doing quite well so with all that combined we see good growth.
Q: Exports have been driving your power business in a goodish bit, how much did you do in the quarter gone by as well as full year?
A: ABB is already a global company for over 100 years. Our focus in India primarily is to look at our market here. Having said that, ABB in India is also a crucial element of ABB’s strategy in growth in many markets and so, there is a lot of export that is increasing out of here.
Right now we have grown about 30 percent in export but there is something that we already said well over two years ago that we will now begin to focus more on exports and what you see is just a result of that focus that is beginning to give us result.
Q: What would you guide for in terms of revenues as well as profits for CY15?
A: As a matter of policy we don’t give guidance but what I would say is that we are ready for growth.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.