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that's also governed by the current prices which happens in the market. And so, it's a matter of |
how we execute the existing backlog mix with the capacity utilization and the service |
composition. |
That remains the key. So, our endeavor has been to remain in that material cost level. So, what |
could basically upset that? That would basically be the volatility in the FOREX, anything which |
could happen on the economy with respect to the demand situation with respect to metals, right? |
So, this is what we see. As far as technology is concerned, we have more prudent offerings in |
that particular space, right? So, this steel order will get executed over the next 18 to 20 months, |
that’s what I was saying. Over to you, Sanjeev. |
Sanjeev Sharma: So, with respect to forward outlook, we respond to how we see the market developing close to |
our nose. So, we engage, and if the market responds positively, we continue to engage and |
continue to create capacity to deliver on time for the customers. So, even if the market is very |
robust, we always make sure that we make commitments in the market which we can deliver |
and honor on time, be it supply chain disturbances or any other disturbance which could be there |
in the marketplace. So, I think that has been our trademark. Now looking forward, when I look |
into our distinct themes because ABB, of course, is one company, but then we have 18 |
companies within one company. As when I interact with each of the division leaders, they're |
really engaging very well with the market. Their targets are to expand from the base where we |
are, and they are quite positive. They see the market responding in a positive way at this point |
of time and also with the forward pipeline. |
There are certain pockets which are in a multiple market segment and multiple product lines or |
product division portfolio, you will either have one line or the other wherein some hotspots |
develop, which are very natural. Only on the minority side, there is a certain sluggishness here |
and there in the market segment or a product line, but not on the majority side of it, Renu. So, |
that's what we see. Now with respect to the election year, probably, I think we'll listen to your |
report, if you have done a better analysis so that we can learn from it. So, there is something, I |
think, we will learn from the market rather than have our own point of view on it. |
Renu Baid: Also, just want to comment and appreciate your efforts for being the first to automate the investor |
side of queries and requests. Thank you and appreciate your efforts. |
Moderator: We have our next question from the line of Deepak Krishnan from Macquarie. Please go ahead. |
ABB India Limited |
August 11, 2023 |
Page 9 of 20 |
Deepak Krishnan: I just wanted to understand, given that our cash position is substantially improving, you've |
indicated we could look at potential transactions. Where are we on that path? How close or how |
far is that event? And if not, then what do we do with such a healthy cash balance that we're |
sitting on? |
Sanjeev Sharma: So, we have both organic and inorganic plans. So, the organic plan is very well laid out, in line |
with the demand that we are seeing in the market and the capacity utilizations we have reached. |
So, those are very firm and very predictable as we go forward. And also, we have many of our |
global divisions coming to us, using India as a base to serve global markets. So, incrementally, |
different businesses have started showing interest in that area. So, we should expand in that |
direction as well. So, that's one way of utilizing it. |
Then what we have at this point of time is for every business area and every division, we have |
very clear targets what we are looking for, what kind of technologies, bolt-on technologies we |
are looking for in each division. And this is something which is a search at a global level as well |
as at a local level. And both will happen. So, some kind of acquisitions can take place at a global |
level with that targeted approach, and some will happen at a local level. So, that's where it will |
get utilized. |
And in this particular space, both should be ready, buyers and sellers. So, buyers should be ready |
to buy. We are ready. But then the sellers should be ready to also transact. So, we do have a |
pipeline there, but it will happen over a period of time. And I think that's how we will see |
utilization of cash going forward. |
Deepak Krishnan: Maybe just a follow-up. Just indicating that you indicated the pipeline continues to remain |
strong. And last quarter, you sort of indicated a 12% to 15% is the order inflow growth that we |
were expecting for this year. But given that 1H we are already at 20% plus. Do you see that we |
would be more at the upper end? Or do you see potential to back to even the price higher than |
what we were recently indicating? |
Sanjeev Sharma: What Sridhar said is that this is the first quarter generally for the industry, they are typically |
sluggish in this quarter. And then it picks up in the second quarter, third quarter and fourth |
quarter for the industry. So, we don't see. I think when we meet large corporates and mediumsized corporate and kind of upcoming companies, actually, we don't see any sense of passivism |
as yet. So, we will play by the market. It's difficult to predict how it is. But I think we will keep |
on making a deeper penetration in the market segment and the geographies. And none of those |
efforts are disappointing us at the moment. |
Moderator: We have our next question from the line of Sumit Kishore from Axis Capital. Please go ahead. |
Sumit Kishore: We read your press release, it says that base order inflow growth was 4% year-on-year. Is there |
a risk of the base orderings sort of plateauing out after for a while? That's my first question. |
ABB India Limited |
August 11, 2023 |
Page 10 of 20 |
T. K. Sridhar: Sumit, we have said that it would be on a high base of last quarter same year so, that's basically |
what we meant, that when we see the 4%. Last year, the same quarter was in a fast track, which |
was a rebound after the COVID period and people started to place orders. And that's exactly |
what we said that it was on high base orders. And so, in spite of that, we are able to grow. |
Sumit Kishore: So, I was saying that you mentioned in a certain business segment in the base quarter, which |
might have also slowed down the base order inflow growth in Q1? |
T. K. Sridhar: Actually, Q1 in robotics, last year, we had an electronics segment, which gave us an order, which |
was a one-off order. So, therefore, there were 2 large orders, which were booked in Q4 '22 and |
Q1 '23. So, that's exactly what we meant over there. |
Sumit Kishore: My second question is that your gross margins have been stable, there are operating leverage |
benefits playing out, which are showing up in EBITDA margins. Now as the cycle matures, |
would you lower the threshold on gross margin? Because essentially, with the operating leverage |
benefit, you would still make the same EBITDA margin and the same profit margin. So, in |
booking more orders, would market forces make you lower the gross margin that you're making |
right now? |
Sanjeev Sharma: Well, I think it's a very, very good question and insightful. But typically, as a company, you |
respond to the market forces as they present themselves. So, what we have right now is we are |
playing as the market demand is there and seeing the elasticity of the market to absorb the price |
points that are available in the market at large. So, I think this is something you don't predict, |
but you adjust as you face the market. |
Sumit Kishore: Because when we look at the peak of the last CAPEX cycle, we sort of see that your gross |
margins were a lot lower actually at that point versus what you are making right now. |
Sanjeev Sharma: Which year are you referring to? |
Sumit Kishore: I mean, towards 2007 and 2008. |
Sanjeev Sharma: I think all of us were very young at that time, but you have a point. If you may have seen the |
ABB portfolio now, it is very different relative to what was in 2007. We were very project heavy, |
very concentrated. But now the portfolio is very, very different. The character of the company |
as well as the penetration and our exposure to market segments, geographies is very, very |
different. So, I think on a like-to-like basis, it's not comparable. |
T. K. Sridhar: But Sumit, thank you for this question. Also, until now, we were always asked questions, when |
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