India has become an important stop for the chief executive officers of multinationals wanting a piece of the world’s fastest growing major economy. New Jersey-based Honeywell International Inc. (which had $38.6 billion of revenue in 2015) seems to be well-positioned in this regard in India, according to its new president and chief operating officer Darius Adamczyk, who is tipped to take over the reins of the American company from Dave Cote next year.
In an interview during his recent visit to India, Adamczyk said: “We made a bet on India a long time ago and that bet now looks smarter than ever.”
Globally, Adamczyk plans to more than double his company’s revenues to $100 billion in 15 years. The growth will be largely organic. Edited excerpts:
India’s gross domestic product (GDP) grew at 7.9% last quarter. How do you view the country now?
We have talked about that a lot. From my perspective, we look at two types of geographies: developed markets as well as high-growth markets. Now, as we look at prospects for high-growth markets such as India and China, Brazil, Mexico and the Middle East... (and) what the drivers are, I would say that India stands out and it is most likely our best bet in terms of overall economic growth vis-a-vis any other major economy out there right now.
We made a bet on India a long time ago and that bet now looks smarter than ever... I think the foreign direct investments speak for themselves. I think we are more bullish than ever.
How do you see your revenues growing in India?
We certainly expect to grow at 2x-3x of the GDP rate. If you think about the needs of India—whether it is smart cities, infrastructure, airports, aerospace, expansion of oil and gas segment, particularly in downstream where we have a disproportionate presence—I think we are extraordinarily well-aligned for some of the priorities in terms of continuous development in India.
Which of your businesses will see the maximum amount of action?
I think all of them. We are already seeing a nice recovery in the oil and gas sector in India. You look at aerospace, there is an expansion. We continue to grow due to increase in air traffic and increase in GDP. We look at our environmental and combustion controls business, whether it is security or thermostats or home comfort... it is a great fit (with India’s needs). I can’t think of too many businesses where we are not a fit.
Do you think India’s growth is that sustainable?
We certainly hope so. Some of the talks that we have had with government officials... their target is actually double digits and it has been proven that it can be done. It needs a continuous favourable regulatory environment, stability in the government, partnership between the government sector and business sector and flexibilities, which is what businesses always look for.
You mentioned flexibility. Do you see bureaucrats and government officials being flexible enough?
For the most part. We have not had major issues when it comes to flexibility. (The challenge) will be the acceleration of a lot of the initiatives that the government is trying to pursue. That’s part of the challenge and opportunity of operating in a democracy.
Do you have capacities in place to cater to double-digit growth?
I would say we are scaling up here. The nice thing is that we already have quite a bit of scale and presence in the country. Given our presence, scaling up will not be a challenge. We are investing ahead of time to make sure that we capture growth ahead of time.
You are next in line to run Honeywell. What’s your vision for Honeywell?
In terms of my personal agenda, I have been in this role for less than two months. If there are a couple points that I want to add, it is to emphasize organic growth and enhance the organic growth rate.
There is a kind of operating system at Honeywell, which is called HOS, which is something that I embraced in my older role as head of PMT (the company’s performance, materials and technology business). My priority is to make sure that this structure is embraced by all business units. There are two fundamental things that any business needs to do. Enhance organic growth rate with the tools in place to drive process, efficiency, productivity. And drive world-class design, innovation, thinking and the Honeywell user experience.
Maybe the third thing would be to just learn the business. I am doing a lot of travelling touching all the business units, getting to understand and do a lot of listening both from an internal perspective as well as from a customer and government perspective.
The vision is simple: to continue to create a structure for growth both in bottom line and top line and to continue to drive shareholders value. Most importantly, to drive the whole digitization and software play at Honeywell.
In the past, we have been classified more as a product and service company. There is going to be a transition. We are going to be much more of a software company.
My fourth goal is to accelerate a lot of software growth. We are expecting that to grow three to four times faster than rest of the Honeywell enterprise.
What are the takeaways from Honeywell’s failed bid for United Technologies Corp.?
I think we have moved on. That was a move that could have been beneficial for shareholders of both companies but in no way did we need to do that. Frankly, we tried, but it did not come to fruition. It does not change prospects or potential for Honeywell at all. It was not something that we had to do and which was core to our strategic growth.
While speaking about your personal agenda, you refrained from mentioning inorganic growth. Under your leadership, how much of your focus is going to be on mergers and acquisitions (M&A)?
The way I look at it, the focus should always be on organic growth because you should never count on any acquisition accomplishing your strategic objectives. In my opinion, that’s a failed strategy. Because, for whatever reasons, you may not be able to acquire a given company in a given market segment... When you do make that a complete objective and others make that visible, there is a very strong potential to overpay to distort shareholder value.
It is not something that Honeywell is interested in. We are very cautious and prudent buyers. We have a proven record in terms of mergers and acquisitions. That’s something that will continue.
I did not mention M&A because I believe it is a growth enhancer and we are going to continue to be very active in M&A. We will continue to optimize our portfolio. It’s never going to be a necessity for us to continue to grow at a robust rate. But certainly, you should expect us to be active.
Do you think $100 billion in revenues in 15 years is a plausible target?
I think so. I certainly hope so. When you look at our growth prospects, when you look at our balance sheet, core capabilities, when you look at the global trends and where we are today, there is a tremendous alignment. Based on the potential in our business as well as strength of the balance sheet and M&A activities, I don’t see any reason why we should not get there.
What’s your near-term target?
By 2018, we are looking for $45-46 billion (in revenue). Outside of India, we are stuck in this very slow-growth global environment.
Even some of the other high-growth regions, which were growing at 10%, are down to 7% or less. Frankly, some of them have gone into negative. In the end, markets are a mix.