ABB India Limited (500002) Earnings Call Transcript & Summary

[Audio Gap] Thank you, and over to you, sir.

Thank you. Thank you, Margaret, and a very good morning to all of you. I think it's a bright sunny day in Bangalore, as I sit in my Disha office in Peenya, right? So welcome to the Q4 2021 and the full year results conf call with all of you. I should have absolute pleasure in discussing these topics as I have with every quarter. So along with me in the room, I have Mr. Sanjeev Sharma, MD of ABB India Limited. So I have Sanjeev Arora, who leads the Motion business for India. [Audio Gap]

Also invited in a listening mode all our division managers are. We have 18 divisions in the country. So all division managers are also present in the listen-in mode for us. Because as you all know, ABB is a company in India, which has 18 distinct divisions and sum total of all these divisions performance is presented to you as a cumulative result of ABB. So giving you certain business highlights. Some of the -- among many things we'd like to mention is that we have been investing in the smart factory and the manufacturing excellence over a period of time. And we have seen substantial productivity gain in our factories by employing robotic solution and also squeezing the space that is required to produce. And we have been able to, say, for example, in our Nelamangala factory, able to use the same space, reduce the footprint of our manufacturing by 30%, but increase the manufacturing by 30%. So there's a huge gain of productivity, recognizing that and many other initiatives taken by our teams Frost and Sullivan gave ABB India an award for smart factory and manufacturing excellence. This is something which we believe strongly, and we'll continue to invest in all of our locations and factory as and when the opportunity comes for upgrades as well as a continuous process. We also won a large order from -- for automation system for a second largest lube plant globally. And this is one of its kind order, and this is something we have started into a new segment, wherein new technology is being brought with ABB India and ABB France coming together to deliver this very complex, but at the same time, something which we are very worse with globally in technology, and much of it will be executed in the country. And this is something we are very proud and we believe that this will have multiplier effect going forward. We also flagged off our energy efficiency movement and highlighting the importance of energy efficiency in industrial world. And this is a sweet spot portfolio of ABB at this point of time as whole world wants to make sure that their assets are energy efficient. Our infrastructure is energy efficient and we are using energy. We are not only producing energies in the nonfossil way, but we are also contributing by saving energy, by deploying the equipment and technologies which save energy. So this movement has taken quite a momentum globally and also in India, and we are getting very good response. We also partnered with Indore Smart City Development Limited to provide continuous power supply with digital technology. So this is, again, all the smart cities or the cities which are very progressive, we find that they have a tendency to buy good technology now, and they want to go for these solutions, which are quite high end. And we are quite good -- that's good to see the trend that we are observing. Board also -- ABB India Limited Board also has approved divestment of our turbocharger business as a going concern on a slump sale basis to its wholly owned subsidiary, and this is in line with what you may have heard from ABB Group announcements around this business globally. ABB India also unveiled a new corporate office and a business office. It's an integrated office. You may know that earlier, our registered office was in World Trade Center, which was a leased facility, but we chose to make an investment in one of our manufacturing plants here in Bangalore, which is Peenya location. That is our registered office. And we have corporate office, and the business office is integrated. It not only brings the market-oriented synergies, but also we are very conscious of new trends post-COVID how we should organize ourselves to serve our customers and the market base. We have used a lot of ABB products in this building and every building that we do, and it is automated to its teeth. It is going to have -- likely to have 25% to 30% energy efficiency relative to similar sized business, which is operated without ABB Technologies. Now looking at the profitability and the growth that we have experienced. So these numbers are in front of you. They speak for themselves. We had a very strong year-to-year growth between quarter 4 '20 to quarter 4 '21, which means the December quarter for us. And also, if you see quarter 4 '21 quarter on a sequential basis with quarter 3 '21, there's a strong growth in all the parameters. And also for the full year of CY '21 versus CY '20, there's a strong growth in all the parameters. So we are quite pleased with this trend, given '21 was -- first half of '21 was totally kind of disturbed because of the COVID-related health emergencies that we had to deal with and several disturbances in the market, but we came back quite strongly. And this shows the underlying strength of our portfolio, our connection with the market segments, our team's performance as well as the market resilience to bounce back and reward with our engagement with them. Now if you really look into the qualitative side of the growth, we found that we had a quite a good uptake on the short-cycle orders. And also, we have 18 distinct divisions, which connect with about 20 market segments, and all these market segments have their own cyclicity. And we find that this connection and these metrics between our division proposition versus the multiple market segment, it really gives us a very robust and resilient base.

Members of the management, we cannot hear you at the moment.

Not one particular segment kind of affects and impacts us adversely. But what we have observed in the market segment is now there are more market segments joining in on the growth trajectory, and that is something which is reflected in our underlying numbers. Systems and Services. They made a good comeback. The system orders -- the integrated system orders and also the services and our ability to deliver services in at customer side improved, and that also is showing in our Services business. And also on the oil and gas sector and the customer activity in power generation, it remains stable, and it continued to reward us both on the fresh orders as well as on the service orders. And transport infrastructure in the buildings, renewables, data center, I think, and railways, we continue to see good traction. So these are some of the highlights, just to give a color to what we are talking about, the nature of solutions that we put into the market and the differentiated market segments we deal with, be it the conveyor system, wherein the electrification drives and automation was used by ABB. Be it ABB drives, which help the co-vaccine manufacturing facility on the emergency basis so that we can ramp up those manufacturing plants. Be it we expanded our capacity for low voltage motors at our Faridabad factory which, by the way, is powered by renewable energy. And also in the City of Surat, we continue to provide solutions, both electrification and instrumentation for clean water supply in an entire city. Next one. Likewise, we reached a 5-gigawatt milestone in the solar automation solutions delivery in India. Also, we completed a melt shop digitalization project for one of India's leading steel company, and they really are measuring the boost in their productivity and profitability because of this implementation. On the other side, the Ola, which is making a mega factory for electric scooters, that's completely automated by our robotics and automation solution, and it is finding -- it's scaling up as we go forward. And having chosen the robotic solutions and also the automation solution, that's a good base for a company to scale up. And last but not the least, we are very proud and we feel very good part of our engagement to help women as well as the child education. We have about 200 young girls who are meritorious, but from the poor families. They are being sponsored by us for 4 years for their engineering education and colleges in Pune, Hyderabad and Bangalore, and we continue to expand it. And we do it with our partners, Lila Poonawalla. And not only we sponsor it, we also do the mentorship as well as internship possibilities for these so that they come prepared when they come out of their colleges. Now we saw a strong growth in our exports. More and more allocations have come into our manufacturing plants and more markets are being solved by us here. And that shows that the confidence level of our global businesses to use India as a base to expand and use the manufacturing from here to go to the other market. And we have very stringent standards. We don't do it in a rush. We don't move one location to the other, but we had a very thoughtful decision and wherever all the divisions which have taken the additional mandate to export, they are doing a world-class job and most of the customers who we deliver to and the markets we deliver right from North America to Southeast Asia, customers are quite satisfied. And demand is growing, and that is also boosting certain expansion. Likewise, I mentioned earlier, services grew and they continue to expand, and we see that trend going forward in 2022 as well. On the sustainability in practice, we are running certain concurrent programs, and we are making investments. So we made a lot of investments in '21. We already saw some results in '21 end of the year with some certifications that we received for our factories. But at the same time, we will see much more of it in a traction and results in 2022 as those investments stabilize and start giving results. On the safety, we have a week day focus at the country management level, daily focus and every morning focused on safety in every location and every site. We collect hazards around our locations and plants, and we resolve it and our resolution rate was 98%. We increased the recycling of water by 25%. It will increase further in 2022. Green power, we are at 43% level. And the investments that we are making, it is going to go close to 70% to 85% by end of 2022. Waste recycling at the moment is 95%. We are committed to net 0 discharge from our plants, and we hope to achieve this by 2025, 2026. And we have programs and investments on the ground that will take us in that way. Health and well-being was top of our priority. We prioritized health over business during the COVID period, and that also has a kind of a good response from our teams as well as the communities we serve. On the sustainable business model. First, we made investment in green factory building. So all our locations, we have committed that they will be either gold or platinum standard green factory certifications. Already, we received certification in December for Nelamangala plant as a platinum and for Peenya as a gold certified IGBC certified. And also the Peenya location was also certified for single -- eliminating single-use plastics in last year, and we continue to do that. Our Nelamangala plant also was declared as a water positive location with an index of 1.24. That is we use less water. Actually, we contribute more water than we consume. And the same programs are being run for our Faridabad, Nashik and Maneja factories and all other large locations, and we will reach these parameters there. It's a very systematic and structured program, and that's something which we are committed to do within this year. Sustainability in practice. You can see some of the impressions about the actual work being done in our locations and plants. And also, on the right-hand side inauguration of our new head office, integrated business and corporate office called Disha, which is fully -- more than 5,000 ABB products are being used in this, 3 plus 1 floor building. And I think next time, when we have an opportunity to bring you here, maybe you can see it in action by yourself. Again, next sustainability in practice. We did talk about a number of CSR projects that we carry out improved the infrastructure of the industrial area where we are present, so that it's safer for women as well as for people and pedestrian and traffic. Substantial interventions there on the mobile health care units for Peenya, Nelamangala, Vadodara, Nashik and Hyderabad. And of course, we partner with many other charity organization as well. Now we do see a massive CapEx push by government to support growth. And they fall in our sweet spot of our portfolio, be it data center, food and beverage, water and wastewater, transport, warehouse and logistics, electronics, pharma and health care, power distribution, building and infrastructure, marine and port, cement, metals and mining. And many of these segments are already rolling well, and we are seeing the other segments which are of interest to us. They will find traction as the inquiry base is getting built in those market segments as well. So this will be a quick overview from my side. And I hand it over to Mr. T.K. Sridhar to take you through the financial highlights.

Thank you. Thank you very much, Sanjeev. So over to the performance overview for 2021, right? So if you go to the next slide, yes. So we booked an order of INR 2,243 crores, probably the highest after several quarters for ABB India. And -- but it's also notable to understand that, as what Sanjeev was mentioning, this also includes a large order from a reputed oil customer, right, which is roughly down about INR 400 crores included in this, right, and some steel customers as such. So I think even on the base orders, we have seen a good traction compared to the previous year, which was basically only the base orders, right? So we are having a strong order backlog, which will cover almost 7 months of revenue on an overall basis. But I think it also has project revenues, which will have to spread over the project schedule. So there will definitely be certain book-to-bill orders which will come through in the next 2 quarters to come, right? So -- and we did definitely have a strong bottom line in this particular quarter, right? And when I basically -- and we will also deal with it going forward in more detail in the subsequent slides. So we had 20 percentage growth on profitability, on profit before tax compared to the previous quarter. But on a year-to-year basis, it was substantially higher and similarly for profit after tax. So we -- they're definitely higher, and it included certain exceptional items of business sale, which happened during the last quarter. And also in the quarter 1, we had also another exceptional item of monetization of one of our plants in Mumbai. So then the cash balance, we are absolutely strong. So we see -- we saw that whatever profits we earned during the year. right, excluded by the dividends and the tax advances what we pay. I think we have made sure that, that -- those profits are reflected in the cash position of the company. And this actually is very much efficient for us for fueling the next set of growth which should come in the next [ earnings release ] '22 onwards. On the next slide. So we go to the -- this is quite interesting, as you see this particular chart. So one bit of an information, which I would like to share with you. This actually is slightly different than what we would see in the SEBI results. The other income in SEBI because as for the recent standards anything, if it is a foreign -- net foreign exchange gain, has to be included in the income as per the SEBI. But whereas the chart which is in front of you, is showing those results, which is purely an other income, right? And the corresponding changes, what has been carried out in the SEBI, is reflected in the exchange and commodity variation net line in this particular shot. So I think if people are sort of guessing as to why so much of income, and this is something what you'll need to understand. So last year, we had a INR 5 crore gain on a year-to-year -- on a full year basis. And this year, we had a INR 40 crore gain on the year-to-year basis. So that's why in the SEBI, for the full year, other income is around about INR 160 crores compared to INR 111 crores last year. And INR 160 crores includes this INR 40 crores, which is there as a net income, which is to be re-classed as per the standards, right? So other than that, if you see in this particular chart. So definitely, we did leverage upon the capacity utilization and the huge volumes which we generated in Q4. But that was also offset by the headwinds which we faced on the material costs, which is basically due to commodity increases. And that was mainly impacting EL and MO divisions as such, which had to really look at because it definitely impacts the short cycle orders because they're always in a fixed price contracts and the price increase is always for to the market follows after the cost increase is absorbed by the business, right? So that's something which we need to understand. But other expenses, probably the personnel expenses and other expenses are all absolutely in control and only those expenses related to revenue is what we saw. Travel as an element continue to remain muted for the reasons that the travel was not restricted, quite restricted in this year. And I think probably some time later, we could also see some freight costs, which will increase because of the fuel prices, which is increasing and also the volumes will increase, right? So overall, I think we could deliver a strong result in this particular quarter and so far for the full year as well. And I would also see the mix quite changing in terms of strong export content and services coming back. In 2020, we had lesser services due to mobility constrained, which was more easier in this particular year. The next slide. So now we're going to looking at how each business -- the business has performed. The first one is electrification. I think we are continuing their growth journey. And if you could really see on a quarter-to-quarter basis and also on the year basis, they have been pretty strong in their performance, both in orders and revenues, and they have a strong backlog of INR 1,316 crores, right, which is fully executable in the next few months to come. And they could see that the higher volumes, what they had in the first 2 quarters we could convert it to the revenues in the next 2 quarters, and they had benefited because of product mix. And the improved price realization could help them offset some of the commodity price increases that they had to face. Motion, right? So I think they had absolutely a bull run in this particular year. So we had the last -- the first 3 quarters, very strong growth, right? And definitely, that resulted in -- the revenue has also picked up quite strongly. And the only thing is that they also had to face the issue of material costs. And the good part is what we could note, how did we able to generate better capacity utilization this year is our integration with the global supply chain, which helps us to get the material on time and deliver it despite the economies really under the pressure of material cost disruption -- material disruption, supply chain disruptions. So -- but overall, I think, again, Motion had a good mix of service, good mix of exports and a good system orders, which could deliver the profitability what we see, strong profitability. Over to the next slide. Process Automation. I think process automation, this is probably a comeback year, right? I think there's always Balaji there. And so he has always a saying that when the situation becomes tough, the tough gets going. And so here is the division which has actually turned around in this particular year. We did have last year certain extraordinary items of legacy projects, which we had taken. But overall, I think this year, in terms -- it's an overall turnaround, both in terms of orders revenues, profitability and a strong cash, which could be reflected in the results. Robotics and Automation. I think again this is also an another division, which grew pretty strong in the first and second quarter, and they were able to make up their last year's muted growth in this particular year. And again -- and they have a good backlog of INR 130 crores ((sic)) [ INR 132 crores ], which will definitely be still augmented from the future pipelines what we have. So over to the -- a couple of the last clients, which I could say about here, there and now we have an absolutely and because it was in the year-end, so we thought we should also give us color of what's the constitution of our revenues. So the revenues predominantly, right? So it has taken a shift in the industry sector, right? And if you look at it, the channels are slightly lesser, but there is some integrated other ones have picked up. So it's also a good mix of what we see. And again, in the exports and the service offerings, we are absolutely as strong, we did not miss any opportunities, what is there. So while on this, I would like to just give a bit of an information on the slide, which you saw during Sanjeev's presentation, that was for the full year on the service and exposure results done for Q4. I'm sorry for the typo. So now going forward, so what should be our 2022 in focus, right? We will definitely have continue to focus on health and safety, including the probable threats from COVID, which will still exist in the economy. That's important to protect our human assets, who are pretty vital for delivery of the results in the next year. And we have a strong backlog, so that calls for a flawless execution of that backlog to reflect the revenues, maintain the bottom line and the revenues. And I'm not -- but last but not least is, of course, -- this has been our seed of success, which is our customer connect each tier 2 to tier 3 cities, which has helped us to grow on the base orders consistently. And as Sanjeev was saying, the positive momentum in the markets and also the policy decisions that has been taken by the government -- announced by the government, and if it reflects on the ground, I'm sure that we will take leverage out of that. Along -- we will continue our journey to focus sharply on the margins, and we would like to stabilize our margins going forward without any extraordinary income, we are talking of operating margins, clear margins from the business lines. And also, the risk will be pertinent when we run this -- when you run any business. And so what is pertinent for us is, of course, the commodity and the ForEx volatility risk, which will happen and to basically combat that particular risk. We will continue to focus on our supply chain actions, a. And two is, of course, look at hedging data upfront so that we do not -- we are not taken by surprise on the ForEx element of it. And also most importantly is that to have a good mix of orders from all avenues of services, exports and also fast-growing segments where we have better margins to do it. So lastly, I would come on the cash. Cash is strong, so we would like to consolidate further on this particular cash position. We will remain focused on cash collections and such. So while on this, I would say our DSOs are substantially reduced than what it was in the previous year, and that's probably because of the good connect, customer connect quality revenues, what we have done. So our mantra of cash over revenue still remains intact. So that doesn't take any preferential treatment. So overall, we look forward for 2022 as a year where we will have -- we expect less disturbances in terms of COVID, but we will be agile to manage that as well. And we see that the growth momentum start to slowly step in. So with that, we can close this call, and probably we can take up the questions.

We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Renu Baid from IIFL.

And congratulations for the strong performance last year. My first question is...

Sorry to interrupt you, Ms. Baid. We lost the line for the management. Request you to hold the line while we reconnect. Ladies and gentlemen, I request everyone to stay connected while we reconnect the management. . Ladies and gentlemen, we have the line for the management reconnected. Ms. Baid, you may go ahead with your question now.

Yes. So my first question is on your comments where you mentioned that few sectors have started to see a comeback in terms of demand environment and the outlook is improving. So if you can give more color in terms of which are the end markets where now demand is picking up. And this year, we also saw some system orders coming back in terms of inflows and driving growth in addition to the base orders. So do we expect the system orders to continue flowing in the next couple of years as investment in core sectors accelerate? That's the first question.

Yes, Sanjeev here. Thanks, Renu, for that question. So on a broader basis, we do -- just to give you a flavor of how we see the market segments tracking. So in terms of the estimated growth rate we see, we see -- I'll just speak it in the sequence. Renewables are on the top of the list based on water, then followed by water and wastewater, warehouse and logistics, electronics, food and beverage, pharma, data center, railway, power distribution, automotive, building and infra, marine and port. So these are the ones which are really tracking well. And the ones which still have to come out to the double-digit growth rates are in the cement, oil and gas, metals and mining, pulp and paper, rubber and plastic, and conventional power generation is really down right now or it's not tracking as strongly. Now when we correlate our view of the market and our engagement with the market with the union budget segment impact, we believe that this budget will create more traction in -- positive traction in renewables, water and wastewater warehouse and logistics, pharma, data center, railways and metro, automotive, building and infra, marine and port, cement and metals and mining. And already, that's a macro perspective. And the first chart, which I spoke about, that is our own perspective. Now as we -- typically, it is good to read macro. But what we do is we read the market strength based on the inquiry and the interest from both segments and the customers build up towards us. So we do feel that the ones which are already tracking well, they're already quite stable, but we are not seeing any dislodgement there. But we are seeing that the inquiry base in the core sector segment, I think it's increasing, both on the end-user side and also the OEMs who supply into them and also other integrators who are also our channel partners. So that's an overview for you, Renu.

Sure. In the Motion segment, if you see sequentially, there was weakness in inflows. So are there any pockets of concern or certain end markets which are flowing after a very strong growth or recovery that we saw in the last 12 months? Anything to worry or it's more of a timing issue or transiting them back in the market?

Renu, it's more of a timing issue, right? So we had some system orders which got finalized in Q1 and Q2, and the last quarters were more driven by the base orders.

Got it. Thirdly, on the cash utilization on exports. You had last year mentioned that the company is in the process of finalizing of certain CapEx plans to step up manufacturing capacities in the existing facilities. So any updates in terms of which product segments are we looking to expand capacity for exports. And from a cash utilization perspective, apart from dividend, how do we plan to really use the strong cash, which is your own books today?

Renu, Sanjeev here. So number one, it really feels good to have some cash in the pocket, Renu. It doesn't hurt, especially when we were in the middle of 2020, and we were really scrapping all the barrels, how to pass through the COVID period because that was something, which was a concern during lockdowns, et cetera. But now when we see how we have performed and to build up our cash reserve, that shows the underlying strength of our teams and our businesses. And that was good in 2020, and it is extremely good in 2021. Now to your question in terms of our export led quarterly quality. Yes, we have activated a number of divisions who have become more export-oriented, and some of them have grown double and maybe they will double again in 1 or 2 years. One is in the Motion division -- rather 2 divisions in Motion division. And already, you have seen the expansion of our capacity in Faridabad. And we also have the capacity expansion plans in our Baroda factory, where we do the large machines, which we are exporting across the world. At the same time, in the electrification as well, there is a traction now given our productivity and the operational stabilization and operational quality is quite high. It is the same standard as we deliver in a global basis. There's the increasing interest in our global growth to also ensure that they are meeting the demand in the different markets in the global side from there. Process automation already serves various markets outside India in certain applications and robotical automation, they help certain application support as well. So that's the spread. So we -- so you have to see us as a factory company, which is highly localized already for 18 divisions. And we -- our investments are always in increments on top of what we have. We don't have a need to make a big kind of a ticket expansion. It's more incremental expansion, but they are substantial in terms of what it cost us as we go forward. And at the same time for our cash reserves is not because we have more cash, that's why we are doing it, but we are also evaluating globally and also in India, some inorganic possibilities. And as and when they mature and as and where we like it, I think that will also be part of the place. So that's where, apart from paying dividends, I think these cash reserves, one is it provides us with good support supporting the operational growth and operational revenue growth, as we will see with the strong backlog. But at the same time, we have it for our expansion of our divisions as their business plan as they have capacities are saturated, they will make more investments to expand and then, of course, the play that will come on the inorganic side.

Sure. One question, if I can ask?

Sorry to interrupt you, Ms. Baid. I would request you to rejoin the queue for follow-up questions as there are several others waiting for the turn as well. The next question is from the line of Bhavin Vithlani from SBI Mutual Funds.

Yes. At the outset, congratulations to the entire team for an exemplary performance. So I have a couple of questions. The first one is if you could just help us understand any decision taken on the electric charging division globally that is going in IPO, what would be the impact for the Indian listed company? That's first. The second part is, you also roughly mentioned in your opening remarks and in the previous calls about building more machine and the warehouse automation, which is an area where ABB does not have a market-leading position and even Siemens perhaps has. If you could just give more color on where are we heading over the next 3, 5 years on this segment, that will be useful. And the last part is you did mention about capacity expansion at various division. With the current capacity, what is the kind of growth that you can fund from the existing facilities and the factories? And is there a need of a greenfield investment some time in the near future? These are my questions.

Thank you very much. Thanks for the question. Now with respect to building automation and warehouse automation, I think if you are following ABB closely, we acquired a company in Spain for warehousing automation. And also our core robotics also automation also goes into that space. So we are seeing a very good traction of it in Americas as well as in Europe. And we have a good dialogue also with certain large-scale warehouse manufacturing, because you see it's not only the money being spent by the smaller warehouse operators, but now we have the global money coming into those assets and they demand good space and good kind of productivity in those. So we are seeing those traction. So we do see a positive kind of a scope for us as the time passes because it is a global company that we have acquired, that will also become part of our offering locally, and that's how we will supply into the warehouse automation. Now when it comes to the building automation, our headquarter here in Disha is a testimony of how the building automation can bring the energy footprint down, combined with our motors, which are IoT enabled as well as the drives, which run the HVAC. So you can knock off almost 25%, 30% energy footprint. And the same thing we demonstrated by the building we have opened in Bangalore for 7-floor building for our R&D center, and those something which will be testimony available to all our customers. So we are seeing the increasing use of building automation in the hotels. The large hotel chains in this country have started converting their old hotels with the building automation and substantial business is taken by us with some leading brands of five star hotels. And also, we know that buildings consume about 30%, 35% of the energy consumption in an economy. And given the ESG, as well as the energy efficiency movement that is about to pick up or is picking up, we see this as a sweet spot for our portfolio, both for our electrification, our building automation, which also is part of the electrification and also for our motion portfolio with high energy efficiency machines as well as combined with the drives that add to further efficiency. What was the second part of the question?

The second part of the question -- there are 2 other questions. The expansions, how far current capacities can take you...

So you should know that on our balance sheet, maybe it's not visible to you, we have a lot of land adjacent to our existing plants, be it in Faridabad, be it in Manisha, be it in Nelamangala, be it in Peenya. So we have as much land available to double our capacity without really having to buy anything outside. So that's number one, and that is adjustment to our existing plants. So when we talk about greenfield, they're nothing called greenfield. We always have brownfield expansions. So it means it's the same facilities, they're the same utilities. So the cost of land is very limited. We have cash on our balance sheet. We don't need to borrow it. So as and when the demand shows up, first what we try to do is we always have a headroom of about 20%, 25% on our capacity. That's how we operate. And then we also have a possibility to run second shift, third shift based on how capacity and the demand, the peaks come our way. And the moment we start seeing that, the resilience of the economy as well as demand of the sector is strong enough, we start doing the forward planning it. And as we speak, I'm not at a discretion to tell you what. But right now, we are setting up a new plant, you can call it as a greenfield building in Nashik, wherein we have a certain expansion, wherein we will do very heavy localization of certain products, wherein we have a very strong market position, and we will -- we should do well with those kind of investments. So similar investments we did for robotics last year, and we have done the expansion for Faridabad plant, and now we have done doing the expansion in Manisha, in Faridabad, and we are also doing the productivity gain investments in many of our other units wherein we apply a lot of robotics. It's not only the building brick and mortar, you also what you do inside and how you do it. And I think that's another proposition we have towards where the customer is, not only the expansion of the building. how you automate and how you robotize your insight of your existing processes, that's where again you gain a lot of productivity. So this is a mix of things wherein we make our investments.

Just the last question [indiscernible] which I think is a...

Sorry to interrupt you, sir. Your voice is breaking up.

So the last question was on the impact of the IPO of EV charging on the India listed entity.

Well, I think this part is something still being dealt by the global group. And I think we haven't assessed that kind of impact locally as far as we know that this is part of ABB portfolio. And we continue to serve the customers. We continue to serve the demand. a very strong demand in the Western part of the world and also in Southeast Asia. And in India, it is picking up as the availability of the cars or high-end cars start coming in, that we find that the more traction of EV charging space is building up in the country, but it is not to the same level as we see it in Europe and Americas at the moment. So we will let you know when we get more information from the group on this.

The next question is from the line of Amit Mahawar from Edelweiss.

I have 2 quick questions. First is on the entire robotics and discrete market size. The way a lot of sectors are undergoing expansions, especially in the automotive chain. Or do you think the market in RDA will move from current level of $150 million to $200 million by '24, '25 to maybe around 2 to 3x. Are we up for that kind of sizing in the RDA? And similarly, on the low voltage side, where our product portfolio and maybe 35 below is pretty comprehensive, where are we positioned in that? That's my first question.

Okay. Can you repeat the robotics when I got? What is the second question?

The second was on the low voltage portfolio on the electrification side, how are we positioned to tap the market?

Okay. So on the robotics side, we -- a couple of years or 3 years back when we were talking, I think we had a consumption of about 4 robots per 10,000 workers in the country, okay? Now it has gone to 6 robots per 10,000 workers in the country, and that's 50% job. But it's a very, very low base right now. And if you look into similar economies of China, if you look into the economy of South Korea, Japan and many other countries which have manpower, but they want to do more automated work. it is 10x or 15x and 20x size of the market. So that's the scale you have to keep in mind. And we find lately -- earlier, there was less sensitivity towards robotics, but now we know that all the companies of scale, be it on the automotive side, which is a prime -- which have been a prime driver ancillaries, which supplies into automotive, they can't do without robotics. So that's number one. So as that area expands, accordingly, it will expand. All the processes are robotized there. Now the new areas in the electronics manufacturing, which is seeing a very good uptake and we are also participating in those areas. That's the area which is opening up in India, and we are supplying into many large electronics manufacturing place. In food and beverage, typically, in food and beverage, there are a lot of bottlenecks and they can be removed by robotics. And we are seeing that the large FMCG players are using our robotics solution at a much larger scale in the last 2 to 3 years. Then we go to areas like warehouse and logistics. I think that's an area which is developing. And that, again, we will have the proposition and the solutions provision there as well. So we do see this is working, and we are also looking into the battery manufacturing, which will scale up in the country, they will be able to use the more automated and robotic solutions. So to my projection is it will definitely expand to a much larger level, a much multiplier level of the current base because which is very low. So initially, the multiplier effect, it will come and maybe in a few years down the line, I think we will see quite a large number, 10,000 workers in the country. So that's my projection. Now when it comes to the low-voltage products part, we do have Mr. Kiran Dutt in the room. So question, Kiran, is what is our strategy and what we see, how we see the traction in the market.

Thank you, Sanjeev. I think on the low voltage side, I think we're doing pretty well, as you have seen that...

I'm sorry to interrupt. Sir, we cannot hear Kiran sir very clearly.

Can you hear me now?

Yes.

On the low-voltage side, we have been pretty aggressive in the market in terms of our positioning. And we have gained quite a bit of a market share over the past few years as well. As you can see, we have already grown and the numbers have been shown very clearly on the electrification side from both Sanjeev and Sridhar on that. And what's happening is that we also do the same part, as Sanjeev already explained, in terms of the segments. And there are very key segments, which we focus upon, which is practically growing on the double-digit side as well. So quite positions in terms of the segments operating in that particular market, which is actually contributing growth. Let me mention a few of the segments, something like the data centers, the renewables. I think we have been pretty well positioned in these kind of segments as well as railways and building and infra. So it's a pocket for growth. The markets have really opened up now, and we are really positioned there as well. The second point I would like to emphasize is the growth is not only happening in the metro cities, but also it's also happening in the tier 1 and tier 2 cities. I think many places, as you can see, Metro in terms of the infrastructure development, and we are trying to contribute ourselves in terms of the nation building activities as well. So Metrorail has been a very, very big part, and we have been into that in terms of pushing our products there and positioning it very well in terms of competition as well. So I think it's been a good gain of ground in terms of the positioning in low-voltage.

My second and last question is on EBIT. If you see the corporate EBIT versus segmental EBIT, now vis-a-vis last year, our EBITDA doubled on low base. But what is not changing is the unallocable item, which is roughly around INR 160 crores, INR 170 crores. My question is more, Sanjeev, about [ PBT ] does all the hard work from bottom up, all the divisions contribute to profitability. Somehow it is not translating to the corporate EBIT. And I know this question comes every quarter, but is it that this number is something beyond our control as a variable? Or do you think we have something to do about it?

Quite frankly, I'll let Sridhar answer it, but I don't understand this question given what we see in our results.

Okay. So let me give you a bit more color on this, right? So I mean, we have an entity to serve. So therefore, those costs which are at running this organization and certain common functions, which are to be held for the health of the businesses of those are those which are centrally hosted and which represents in the corporate sphere, right? So that is forming part of the non-allocated stock. But if you look at the nonallocated PBT, I mean PBIT, right? So between last year to this year. So we have INR 150 crores, which is similar to what it is. And this has got basically 2 elements or rather 3 elements, what we see. One is -- there are certain PG, Power Grid related non -- business was not transferred to them earlier the electrical balance of plant under rural electrification, which remained with ABB. So we are absolutely now closed out all those projects. There are some small costs which come in over there as we close it. So that's one element that's very minor. Other one is around the shared services cost, which is not a part of the ABB business results, but it's part of the corporate remnants effects what we take. And also we have the other branding and other communication costs, what we take. So I mean this is actually quite stable compared to the last 3 to 4 years. So now I think as the volumes increase, this would not see a corresponding increase, right? So -- and this is all well monitored. Well, the monies which are spent are well to -- more directed towards efficiencies, which would result in improving the profitability of the businesses.

The next question is from the line of Sandeep Tulsiyan from JM Financial.

The first question is pertaining to the eMart sales for the current quarter or from a full year perspective, if you can share what percentage of your EL segment has come from this? And what is the kind of growth specifically in this particular subsegment is what you're looking at?

So as far as this particular way of selling in the industrial market is concerned, one has to acknowledge this is a new approach in Indian market, and we are doing it with our own platform. So what it does for us is there are 2 sides of selling our product. One is the physical side and other is the reachability to the farthest corner of the country. So what eMart is doing is able to make these products available to the Tier 2, Tier 3, Tier 4 cities in a seamless way, wherein what we find is that the people are able to evaluate the portfolio and they are able to make selection. And then they choose whether they want to place the order on the eMart or they want to place direct orders through the channel partners. So we are seeing the earlier fact is that we are seeing the related growth of our eMart launch to be quite strong, but the flow of orders is still coming with the traditional channel of channel managers because each geography, we have the channels which have been established. So that's how the physical interface and the virtual interface takes place. But we have seen also a lot of customers who are now moving towards buying it from the eMart channel itself. So we have to allow the market to adjust itself because it's an industrial product because which has to be carefully selected with the parameters and the customers selected. But then they will like somebody to verify it for them to listen, they have done the right selection. So that when the product comes they apply for their application, it is the right fit. So it's a behavioral change. And also, as we gather those queries and kind of information they want, we also learn on our side what kind of questions are coming, and we keep on standardizing our configurator based on that so that the customers are able to choose those products effectively. So that's the kind of an effect we are seeing with eMart at this point of time.

Got it. Second question is pertaining to your turbocharger business sale. If you can give us some indicative numbers on top line and what would be the net asset sale value that we can fetch from this asset?

So right now, we are not -- so it's not sold to a third party, Sridhar?

Yes. So I think at this point of time, what the Board has approved is forming a fully owned subsidiary under ABB India Limited, so which is under process at this point of time. We expect that process to complete in the next 2 to 3 months of time. And probably, I think when they come for the second first quarter results in the month of May is what we'll be able to provide more color on it.

But sales percentage, if you can share from last year?

We don't give that at this point of time. We'll give it to you a bit later.

And last, third question is on the other expenses in the quarter. They have seen a very sharp jump, although you mentioned that raw material price pressure has been there to some extent, which has impacted margins by some of the other travel costs and freight costs have not normalized. So do we expect this cost to increase disproportionately from your -- when the other costs normalize? Or if you can highlight some of the major cost items, which have seen an increase over here, please.

Yes. So I think if you refer to the slides, what I put in the Web, which is Slide #18, right? And there, if you look at it compared to the previous year of INR 1,011 crores, we are at INR 1,162 crores. That means we're talking about a INR 50 crore increase, while the revenues have jumped substantially, right? So yes, there will be certain -- if you look at these expenses, there are typically 3 categories of expenses, one which is volume driven. One, which is more of a sort of fixed expenses, what we have and something which is semi fixed, right? So variable expenses, which form almost 30% to 40% of other expenses will increase with respect to the revenues compared to what it has, which is the travel, the packing, the other contracting services sort of elements will have an impact, but the others would remain probably stable.

Mr. Sridhar, out of this INR 50 crore annual, you're around INR 40 crores, INR 45 crores increase is coming in this quarter itself, if you look at it on a sequential basis, where my question was.

I didn't get it. If you can...

Slide 18, which you mentioned, if you look at the other expense line item for the fourth quarter itself, it's up INR 336 crores, which is a jump of about INR 46 crores versus your third quarter of CY '21. That is the change that I'm trying to inquire about.

Okay. So very good. Thanks for asking this particular question. So I think if you look at it, I think the majority of it has come from freight, right? So because if you look at the sales for the quarter, right, I think it has increased substantially compared to the previous quarter. So that's one of the key drivers, what we have, right? And the next element is around -- not the travel, travel is not as much as what we should be worried about at this point of time, right? So the other one is around packing, which is also important because it's also an element which has led to the listing. And also, we need to stop certain stores and spares that is also another element what we have. And of course, the repairs and maintenance, which is also now we are trying to link up our capacities to make sure that we are able to have the headroom for the growth. So these are broadly the class of expenses, what we see as something which is increased and also quite a few things. We have outsourced and do a subcontracting basis. So that's also another element which we have. So to answer to your question, we don't have any untoward one-off expenses. It's all normal expenses, which is more driven by the volumes, what we need to execute.

We'll take our last question, which is from the line of Renjith Sivaram from Mahindra Manulife Mutual Fund.

Yes. Congrats on good set of numbers. Sir, just a small clarity like now that our -- the Hitachi energy has become completely independent and on its own feet. So just wanted to get some clarity. Is there anything that is stopping Hitachi from introducing this medium-voltage, low-voltage product of Hitachi in this Hitachi energy subsidiary? Is there any noncompeting kind of an arrangement?

Renjith, I'm sure you will get this opportunity to ask this question to Hitachi Energy. So we can't comment on a portfolio of independent company, and I think that's a good order.

So. No, I just wanted to clarify whether is there anything that you have an agreement that -- or is the completely independent on their own?

It's a completely independent company under the umbrella of Hitachi Energy, and they should do what is suitable for the portfolio and what their market demand is. And of course, whatever has been written as an agreement in terms of portfolio globally, I think that will apply to them as well as to everybody.

Okay. So Renjith, let me answer this question in a different way. So ABB in India is basically focused on the medium voltage and low voltage market, and we have no restrictions to not to offer or to offer only to certified market. So the market is freely available and what we have to do is what we will do. What Hitachi does is their prerogative, that is absolutely something which we would like to clarify.

Okay. That's helpful. And sir, one more thing, like on a small competitor CG Power has become more active in the market. So are you also facing more of competitiveness in the related market there? Or you don't -- you feel that it doesn't impact much on for us?

Well, I think the nature of competition is that whenever the market expands, more and more players will come. It all depends upon what our relative spend is in the eyes of the customers. I think that's all matters for us. And what we do is we work more towards the customer to have our proposition clearly defined. That's the only thing which we can control and manage. What impact a particular competition will have, I think that's something which has to be seen with their strength and by the customers to acceptance. So we can't make much comment on that.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Sridhar for closing comments.

Thank you. Thank you, everyone. I thank for joining this call. It was always a pleasure to answer to these questions and also give clarifications wherever possible. But I think in case still there are unanswered questions, please feel free to reach out to me or Sohini, we will do our best to make sure that you get the immediate clarification. Thank you very much for joining the call and look forward to you in the AGM on the next quarter, right. Thank you.

Thank you. On behalf of ABB India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.