ABB Steps Up Focus On Manufacturing Amid Revival In The Capex Cycle

Capital goods maker ABB proposes to expand the number of factories it has in India as growing public and private capital expenditure (capex) in the country pushes up demand for industrial goods.

At the same time, the export market is also growing, explains ABB India's Country Head and MD Sanjeev Sharma in a conversation with Business Standard, prompting the move to enhance capacity, since the Indian unit of the Zurich-based multinational company caters to international markets.

ABB India derives 87 per cent of its annual turnover from the domestic market and 13 per cent from the export market. The plan is to position India as a global hub for exports as the order momentum from international markets, explains Sharma, remains high. ABB's export markets include countries in West Asia, Africa, South East Asia, South America and the US.

"At the moment, we have 27 factories in four cities in the country. This includes plants at Nashik, Vadodara, Faridabad and Bengaluru. We have enough land near our existing plants as well as cash on our books to undertake further expansion of our manufacturing units. At least one or two more plants should come up in the near future," Sharma said without giving further details about these new units.

For the accounting year ended December 31, 2022, ABB India had a topline of Rs 8,568 crore, a growth of 24 per cent versus the previous year. Net profit for the 2022 accounting year almost doubled to Rs 1,026 crore from Rs 532 crore reported in the previous year.

The consolidated order book of the company touched Rs 10,028 crore in 2022 versus Rs 7,666 crore reported in 2021, a year-on-year growth of 31 per cent. Touching the Rs 10,000-crore-mark in terms of orders, explains Sharma, is significant, since the company has identified key growth segments, including transportation, data centres, electronics, warehousing and logistics, water, renewable energy, food and beverage, pharma, healthcare, and automotive among areas of focus over the last few years.

This strategy has seen ABB move away from the power grids business, both locally and internationally, following the sale of the business globally to Hitachi in July 2020. In India, ABB Power Products & Systems India, which was listed on the stock exchanges, was rebranded in 2021 as Hitachi Energy India in line with the change in ownership globally. It continues to trade on the bourses in India.

The company's cash position, according to its financial results, remains strong at Rs 3,616 crore at the end of fiscal 2022 versus Rs 2,688 crore at the end of 2021. This has given the company the confidence, Sharma says, to consider acquisitions with the intention of filling need gaps in its portfolio.

"We have a robust cash balance, which can support bolt-on acquisition strategies to the extent of 50 per cent of the cash available. This is apart from organic expansion plans," he says.

The company also expects the order momentum to remain strong in 2023 led by sectors such as food and beverages, electronics, data centres, pharma and healthcare and automotive.