Siemens India will continue to exit, acquire businesses to align to parent’s strategy: CEO   

Siemens India will sell its low voltage motors and gears business to parent Siemens AG’s subsidiary Siemens Large Drives India. What’s the strategy?  

Siemens AG’s intent is to carve out this business into a legally separate company. This is based on their decision to form a company called Innomotics, which will be an integrated provider of motors and large drives. From the first of July, the carve-out in Germany will be complete. Innomotics GmbH will operate as a legally separate, independent company within the Siemens group. In the second step, they have informed us of their intent to review options regarding the best future ownership of Innomotics; these options include a public listing as well as a combination with a strategic partner or long-term-oriented financial investor. The IPR (Intellectual Property Rights) for these products are with Siemens Germany, and they intend to move this out of the company. Siemens India’s thinking is that if they move it out or sell it to a strategic partner, the IPR will not be with us, and therefore, it makes sense to approve the sale and transfer of the business right now.

You are selling the business for Rs 2,200 crore. In which quarter would you book the proceeds? 

It will be the October-to-December quarter.

We are selling it to a subsidiary of Siemens AG, which is Innomotics. The subsidiary of Siemens Innomotics in India is called Siemens Large Drives India Private Limited. They will be the buyer. This is a company that was carved out about a year ago to which we had sold our medium-voltage motors business. This is a large drives and medium-voltage motors business and now it will have low voltage too; this completes their total portfolio.

So does that mean you will not have any motor products in your portfolio? 

No, we don't have motors. We will not have motors, because our strategy is to move up the value chain– from electrical to automation to digital. We want to move more in that direction rather than get into a business that could eventually become more commoditised.

The other transaction Siemens India announced was the acquisition of Mass-Tech Controls’ EV division. What’s the rationale behind this acquisition?  

In the direction that we are moving in, EVs is definitely one of the core competencies that Siemens is entering globally. Now, we are a digital industry and we are looking at synergies within the company. Our digital industry business is able to support customers on battery manufacturing. Our smart infrastructure business is able to do everything from grid to socket for EVs. And the business that we have acquired is in the area of AC (alternate current) and DC (direct current) chargers. This will enable us to provide charging stations that meet the local requirements at local price levels to address the EV vehicle market in India. We have already entered into an arrangement with Switch Mobility, which is a subsidiary of Ashok Leyland, for EVs and charging stations. We have got a global portfolio, but we were missing a local portfolio. We found a company with whom we were actually already working on the Switch Mobility projects in the area of charging stations and we are now able to take over this business to scale it up to address a portfolio and a market that we were earlier not present in.

This is your second acquisition after you announced in 2021 your biggest acquisition in India thus far- C&S Electric. What are the gaps now that you would look to fill through acquisition? 

We already have 32 factories, we are heavily localised so the product-wise is fine. First, we will continue on our journey of localisation as we see advantages in doing that. Second, we are looking at different segments of the market. In a lot of our business, we are in the premium segment. The last acquisition that we did, C&S, brought us down from a premium segment to a mid-segment market. One would do an acquisition if there is a new product or a niche product or a new segment of the market. Now we are looking at spaces in digital technologies that can ride on the top of our automation and digital softwares that we've got already. So anything that adds value to our customer that we don't already have, that is what we are continuously scanning the market for.

Mass-Tech Controls’ EV division acquisition is worth Rs 38 crore; a small ticket transaction. What’s the acquisition strategy and the average ticket size you are eyeing? 

Potential acquisitions could be small or medium. I do not see large targets on the horizon because we are heavily localised ourselves. But at some point in time, if there is something that fits our strategy, it needs to be a bolt-on acquisition.

The ticket size could be anything starting from the current deal size of Rs 38 crore; we don't have an upper limit. The important thing is it needs to be able to add value to us. And we should be able to scale it up in the country, and ideally also for the global supply chain.

Siemens has globally been tweaking its portfolio and the Indian subsidiary has been exiting certain businesses in line with it. Are there any more businesses that you may exit to align to the global strategy? 

Today, to be honest, I don't know the global strategy with micro details. What I do know is the direction in which we are moving, and if I look at our existing businesses, they tie in very well with that. The idea is to get synergies out of what we have, so that we are not only doing product supply, but we are able to enhance at the solutions end. A lot of what we currently have, does have that digital underlying layer that one can build on.

We have proven over the last 10-15 years that we continue to reinvent ourselves, to move up the value chain. And that is exactly what we are doing. Sometimes we carve in, sometimes we carve out. Admittedly, there are some more carve-outs than carve-ins, but that is here in the country. Globally, they are doing a lot of carve-ins as well, and we are kind of benefiting from that in our respective businesses.