BackThe government looks very action-oriented: Thomas Szlosek
Thomas Szlosek, CFO of Honeywell International, and Anant Maheshwari, president of Honeywell India, talk about the company's plans in India
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New Delhi: Thomas Szlosek, senior vice-president and chief financial officer of US-based industrial giant Honeywell International Inc., visits India twice a year. His job is to inspect new business opportunities and approve investments that will help the Indian unit of Honeywell, a major auto parts supplier, continue to outpace the country’s economic growth.
In the past 10 years, Honeywell India has succeeded in doing that, in the process expanding its revenue to over $1 billion. Indian policy changes such as the imposition of stricter emission norms and need for clean fuel have led to an increase in Honeywell’s order book.
Bigger expectations are from the aerospace sector where the company is in negotiations with the government on technology transfers. Szlosek was in India last week, and met NITI Aayog chief executive Amitabh Kant. He and Anant Maheshwari, president of Honeywell India, talk about the company’s plans in India. Edited excerpts:
In the last two years, have you noticed any changes in the way India functions?
Szlosek: A lot of heavy-lifting still remains to be done. But signals are all very positive and the government looks very action-oriented... I would admit that when we ask for something, it needs to be followed up on, re-requested and asked for it again. There is still an element of knowing who the right person to go to is and getting the answer that you want.
This is despite the government’s tremendous focus on ease of doing business?
Szlosek: I think it has got (to) be sustainable. Two years into it, it is hard to change a moving freightliner. You need to be careful on your expectations. I think all the right things have been said and sentiments are correct, and we are seeing some support in areas that we are seeking support (in). All I am saying is (that) it still takes a bit of time to get things through.
How was your meeting with Amitabh Kant?
Szlosek: I think it was great. He is a no-nonsense guy. He is a very busy man. So I never expect him to be on time but when you sit down and talk to him, he wants to get to the point straightaway. We just went right into a couple of opportunities that we have around Make in India and that we have been trying to get their support on because it is a win-win. It is a commercial opportunity for us as well as India.
What are these areas?
Maheshwari: A couple of them, but I would say that they are a little confidential because of the nature of technology transfer that requires to get that done. But these are very core. This is not just making consumer products in India. It is really getting in products and technologies which are critical to the country. That’s where it requires a lot of government interaction to drive it through.
How do you prioritize your four businesses—PMT (performance, maintenance and technologies), automation, aerospace and automotive—in the changed business environment in India?
Szlosek: From an investment perspective, I don’t think any of these will have a priority over any of the other ones. I think they all fit very nicely into what is going on in India from a macro perspective. We have talked about aerospace where we are trying to bring in a couple of technologies. In transportation, we are investing significantly. We have a plant in Pune. The idea of developing turbo technology for the automotive market is critical. You know the size of the cars here. So, what they need is more boosting, more output in those engines in order to accelerate faster and maintain speed; at the same time, they should have environment friendliness in terms of emissions and fuel efficiency. For us, it is about making our customers satisfied in meeting these criteria.
A lot of auto companies complain about costs going up with India jumping from Bharat Stage IV (BS IV) to BS VI.
Maheshwari: I would say it will require investments both on the fuel side as well as on the automotive side, but think about it. Why is the government driving from Euro IV to Euro VI? We are in a country which has been making headlines for the most polluted air in the world. I think it is an emergency...
We have already seen an uptick in the order book in our PMT portfolio because of this Euro IV and Euro VI issue and investments in the public refining space that all the oil companies are driving. So, in the last quarter of calendar year 2015, we have seen the uptick and we are seeing this as we go along...
You had said if India grows in a range of 4-5%, Honeywell will grow at 8-10%. Now India is growing between 6% and 7%. Will you grow between 12% and 14%?
Szlosek: Yes...or even more. We have high expectations. My expectations are even higher. But we have to be considerate about what we articulate publicly. We are very bullish and that’s why you see our chairman coming here at least a couple of times every year. I come here a couple of times a year. This is a place where we continue to invest. My role here is to look for more opportunity, inspect what we are doing.
I think our growth will be in the neighbourhood of what you talked about. Today, I would say all our operations are doing very well. I think you have seen a little bit of a down graph in PMT because of what’s going on in the oil and gas industry. I think that is temporary. All of them are good double-digit growers for us.
Critics say it is more about marketing than any real activity happening on the ground. Do you also get that feeling?
Szlosek: We travel globally and we see ‘Make in India’ signs everywhere. I think it is good for the country. I think they are trying to engender a momentum. They are trying to attract investments. I think it just takes time in a big country like India.
Maheshwari: If I may just add...there is a lot of change in terms of clean-up that was required. I think the whole clean-up of banks in terms of balance sheets is a great example. You have to clean up the pipes before you push more through.
Szlosek: I will just cite another example. If you look at a (power) distribution company, you have generation, transmission and local distribution. There are a lot of weak companies, like the banks. They just need to be cleaned up. They need to be restructured and in restructuring them, they are making them better operators as well. They are insisting them that they have technology, that they work through issues everybody hears about in terms of power loss on the distribution lines.
India also wants to be an MRO (maintenance, repair and overhaul) hub for airlines. What are the opportunities that you get from this?
Szlosek: We work with a lot of MRO providers globally. A very good example is Lufthansa. They do nose-to-tail maintenance, repair and overhaul, and we are a part of that. Certainly on the parts that have Honeywell content, whether it is mechanical or avionics. That’s the strong partnership that we have. It sounds simple but you really need to set up a supply chain and have the logistics so that you are giving them on-time delivery and you are helping them meet their turnaround metrics... How that plays out in India needs to be determined.
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