Mumbai: Siemens India Ltd, the listed Indian subsidiary of German engineering giant Siemens AG (SAG), is back on the growth track as it expands capacity, launches new products for the global market, and prepares to enter the nuclear power generation and water treatment markets, a senior company official said.
In an exclusive interview, his first after taking over from Juergen Schubert on 1 January 2008, Siemens India’s managing director Armin Bruck said the company will add one factory every year in India as it prepares 60 new products for the global market using local design and frugal engineering expertise available here. The India business, he said, currently contributes $2 billion (Rs 8,880 crore) to the group’s $71 billion global revenue.
The company will seek to enter nuclear energy whenever the sector opens up in India, he said.
“The water market is another area gaining traction and we will look at providing desalination technology which will take us to the big league,” Bruck said.
The German giant, which competes with General Electric Co. in a number of sectors, has put India high on its priority after Germany, America and China.
“Both China and India are racehorses for Siemens’ economic development,” Siemens AG chairman Peter Loscher had said in an email interview earlier this year.
When Bruck took over, Siemens was grappling with a crisis.
“When I joined, attrition was about 40%, and through a series of initiatives, Siemens managed to plug it to more modest levels of 8%,” he said.
Emerging countries such as China have always been a focus for SAG as an important market and India has also gained equal prominence in the company’s growth strategy over the years, Bruck said.
“It is this dual strategy that I have always pushed for India,” he added.
Siemens India, which reported net profit of Rs 1,044.8 crore on revenue of Rs 8,458.8 crore in the financial year ended September 2009, operates in three verticals—supplying the entire range of power equipment to producers and distributors, helping companies build airports and ports and manufacturing medical equipment at its 21 factories.
“We understand the full life cycle of any product and the development happens accordingly. So whether it is power plants, transmission business or distribution business, 90% of our products are indigenous with a ‘Made in India’ tag for the Indian market,” Bruck said.
In the last two years, the Indian unit of Siemens has introduced six products, generating €100 million of revenue globally, he said.
There are 60 products in the pipeline that will address a market that’s potentially worth €7 billion, he said.
Multinational companies need to worry about their global sales and innovative product development in India can affect competitiveness in the global market, said Paresh Vaish, managing partner at consulting firm Alvarez & Marsal India Private Ltd.
What starts off as product offshoring by Indian companies will move to the next stage of developing product capability, said Raj Kalady, India director at Project Management Institute, which helps companies with project management.
The challenge with such a model, he said, is to distribute and market it in the global market, while pointing out that Siemens India has got around those issues with its global reach.
“Normally, you size your market according to technology, we size according to market level in terms of high-end market, mid-end market, and low-end market,” Bruck said. “We have created basically two verticals—one vertical going for high-end market in terms of high-featured technological requirement market and the other which was probably neglected all over these years is mid and low level market.”
The power business, which contributes 50% of revenue, will help build coal-based power plants and solar power equipment and solutions.
“We build power plants for our customers and we will not own them,” clarified Bruck.
Siemens India’s higher margins in the power segment was due to profitable orders bagged three-four years earlier that are being completed now, Madanagopal R., analyst with Mumbai-based brokerage Centrum Capital, said in a report after the company announced its second-quarter results ended March. The company follows a financial year that ends September.
“We believe the Rs 62 billion orders won from Qatar during CY06 was the biggest contributor to better-than-expected margins and the company would witness margin pressure from FY11 onwards as the project is nearing completion,” the research report said.
The company has also managed to stave off high attrition — last year, the Indian subsidiary issued its shares to nearly 38% of its employees.
“In fact, we were looking at offering our mother company shares to our employees in India,” said Bruck.
“My strategy is to build an ‘employee-centric’ company. Others say that they are ‘customer-centric’ but I guess what differentiates Siemens is that we are ‘employee-centric’,” said Bruck.