Ankity111/rag · Datasets at Hugging Face

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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

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