Bangalore: ABB India Ltd, a unit of Swiss engineering group ABB, sees continued growth in order inflows despite early-stage projects getting a little delayed, a top executive said on Wednesday.
“In the long-cycle business, typically the decision making takes a long time and we are at the end of the chain,” Bazmi Husain, managing director of ABB Ltd, told the Reuters India Investment Summit in Bangalore.
“Even though there might be a general slowdown, we still see a fairly robust need for our portion of infrastructure projects.”
Order inflows were up 45% and 20% in the second and third quarters, respectively.
“At the moment, the enquiry banks that we have are still quite full,” said Husain, who has been with the company for about 30 years.
ABB’s Indian unit, currently valued by the market at $2.47 billion, makes power equipment and provides automation.
However, the company, which competes with Crompton Greaves , Areva T&D India and Larsen and Toubro, is concerned about the impact of credit tightening.
“The credit crunch is really an issue because we see a lot of people holding back,” said Husain.
The RBI has raised interest rates 13 times since the beginning of last year as it tries to tame stubbornly high inflation.
About 60% of ABB India’s business is power, while 40% is automation.
No Impact From Rupee Slide
The company, which was involved in the Delhi and Bangalore metro projects, still expects margins of 8-10% in the medium to long term and sees no impact from the slide in the rupee at this time.
“We have a global policy to hedge all our exposure at the time of commitment... short term we don’t have an impact, but if the volatility continues then, of course, hedging rates would go up,” said Husain.
ABB India’s average EBITDA margin has been 4.75% for the last four quarters, according to Thomson Reuters StarMine data.
ABB India, which has invested more than $250 million over the last four years, expects to invest at the same rate, said Husain, an electrical and electronics engineer and MS in physics from BITS Pilani.
Increasing competition from Chinese, Korean and domestic players in the transmission and distribution segment, has also dented ABB India’s margins.
“Competition in the domestic substation space has increased significantly ... The 765 KV segment, which is the forte of ABB, in which only big players and the Chinese were present, smaller domestic players are entering,” said analyst Rahul Garg of HSBC Global Research.
The India unit, in which the parent has a 75% stake, is not looking to delist at this point, Husain said.
Shares of ABB India have fallen about 26% so far this year, while the benchmark Nifty has fallen about 23%.