ABB India Limited (500002) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the ABB India Limited Q1 January to March Quarter CY 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded, and any unauthorized recording of this call is strictly prohibited. The recording will be made available on the company's and SEBI's website subsequently. I now hand the conference over to Mr. T.K. Sridhar, Chief Financial Officer of ABB India Limited. Thank you, and over to you, sir.

Thank you, Rayan. Very good morning once again to all of you. Thanks for joining the Q1 2025 call. So along with me on the call is Mr. Sanjeev Sharma, the Country Managing Director; and we have Kiran Dutt; Ganesh Kothaadee, who lead Electrification divisions. And then we have G. Balaji, who leads the Process Automation and Subrata Karmakar from Robotics. Sanjeev Arora could not join this call as he is traveling, but therefore, we will handle the queries relating to Motion by ourselves. Okay. So over to you, Sanjeev.

Thank you, Sridhar. Good morning to all of you for joining us to know more about January to March 2025 quarter. This is our first quarter of CY 2025. Just to give you an idea about what happened in this quarter, just to give you a glance about how we are structured as a company, we operate with 4 business areas, namely electrification, which all deals with the distributed solutions, which distributes electricity in large cities, industrial complexes, large infrastructure projects, be it commercial buildings, tunnels and residential buildings. Then we have the products which also go into the manufacturing, which is the installation products, which are kind of add-on products to the industry. So Electrification portfolio is quite full, and it's one of the -- it's the largest business area for us in ABB India. followed by Motion, which has drive products, system products, system drives, NEMA Motors, IEC LV motors, large motors and generators, traction and service. It's all about energy efficiency and mobility-based solutions. And process automation, which caters to energy industries, process industries, marine and ports, measurement and analytics. This is all about productivity and energy efficiency for our customers in the large process operations. Robotics and Discrete Automation is all about robotics, that is we supply for automotive, ancillaries of automotive, electronics manufacturing and many other applications. As manufacturing expands in the country, robotics is expanding as well. We operate our operations in India, which is in the 75th year of manufacturing. We operate out of 5 manufacturing locations, namely 2 plants in Bangalore, Nashik, Faridabad, Maneja. And we have 25 shop floors, operate with 28 sales offices and also combined with the service offerings to the customers spread across the country. And we have more than 750-plus partners who take us to the deeper end of the market so that we can cater to and serve our customers in the -- even in the remotest part of the country, and we continue to expand that. And as we speak, we are expanding our capacities. And as and when we are ready, we will also announce those to you. Next, please. So for the January-March quarter, the financial performance is that our orders expanded 4%, revenues expanded by 3% and profit after tax by 3% on a comparable basis year-on-year, and our cash balance stands at INR 5,756 crores. We expanded our portfolio with low-voltage frameproof motors in higher frame sizes for IE2, IE3 and IE4 efficiency classes, and we are seeing a good uptake of this class of offering that we have in the market. They offer much higher reliability, safety and efficiency. We also in -- recently, we also launched the range of modular LIORA switches from Electrification Smart Buildings for commercial and residential spaces. It expands our portfolio to really near retail experience for our customers. On the sustainability side, on Scope 1 and 2 GHG emissions, we have reduced by 87% comparable to our baseline in 2019. And our Nelamangala campus in Bangalore has achieved Mission to Zero status as part of ABB Global's sustainability journey to deliver net zero emissions. We were also awarded Best Sustainability and CSR practices company by Asian Center for Corporate Governance and Sustainability. We don't apply for such awards. We were just picked up by their own independent research. So that shows that our focus of doing the right thing in this area gets recognized by the serious third-party companies, which really analyze the publicly declared data as well as the data available through the databases. Now in the quarter 1, we had a stronger momentum in core segments and also complemented by a few emerging segments, namely in transport, building and infrastructure, discrete, process and our exports grew by 40% in this quarter. Order backlog is up by 11% and INR 9,958 crores. That gives us a very good visibility going forward for the revenues that we have planned for year 2025. Some of the highlights to you, just to give you an idea about how this company, with 18 divisions operating with 23 market segments, impact customers in different segments of society and applications. Like in the case of Indian Oil's Centralized Pipeline Information Management System, we have provided automation and digital solutions. We have also provided for an electronics industry major some localized user language-based standing automation solutions. We have revamped a distributed control system for a flue gas desulfurization for a leading energy company. For an integrated energy major, we have supplied SCADA and PLC for a major offshore project. And of course, the traction systems for railways were also part of our significant wins. And switchgear and other power distribution technology for a data center major was part of our kind of win and smart power solution for a water treatment plant and technology from system drives for the tire company. So you can see it gives you kind of a spectrum of applications and industries that we serve. And that gives us the basic resilience in different cycles of the market because we are exposed with multiple businesses to multiple market segments. And that's why we have the confidence always to continue to navigate whatever changes that come into one segment to the other because economic cycle plays through different market segments at different times. And we continue to have a portfolio which applies in multiple market segments, and we continue to navigate ourselves forward. Now when it comes to the part of our business kind of ethos is to continue to find new customers and continue to serve our existing customers effectively. So we always have very wide and deep engagements with our customers in multiple forums and each of the businesses engages with the customers and also sometimes they come together and then they have the common customers together so that the customers know what our offering and business proposition is. And in these forums, we detect a lot of new customers, and we start the journey with them for many years to come. Now when it comes to the diverse businesses, which are catering to 23 market segment, I mentioned. So this gives you a picture in terms of which market segment from our portfolio point of view are on the high growth side, moderate growth side and the low growth side. Growth level doesn't mean that the low-growth segments so called growth segments still form a large part of our offering. And these cycles and they sometimes are in low, they go to moderate and the moderate segments can switch between high and low. And that's the reason we continue to maintain focus on our offerings, including our service offerings, to all these segments and the customers in these segments, so that we are effective and customers always appreciate whenever their cycle turns that they have a consistent partner with them. We will take a bit of a theme for this quarter, deep dive, which is cement. So just to give you granularity. So India is the second largest cement producer in the world, and accounts for over 8% of global installed capacity. Cement volumes are increasing by 6% to 7% year-on-year. And as of 2024, India green cement market is valued at approximately USD 2.31 billion and is projected to grow at CAGR of 5.85% through 2029. So we have a lot of offerings in this and there are key drivers and trends, as you can see, which are led by spend by the government and also expansion of infrastructure, transport, mobility. And we see that this is a long runway and long highway for us to travel. And our solutions, which essentially aid in supplying energy-efficient technologies for cement plant because it's a very energy-intensive process. And also the process automation and export systems, which helps cement manufacturers, not only produce cement efficiently, but also manage the grades based on the market demands that come from the marketplace. So we have quite a good suite of portfolio in this particular area. Now when you look into sustainability in practice and our goals. So as I've mentioned before, we have the Scope 1 and 2 GHG emission 87% reduced compared to 2019 level. Zero waste to landfill units, in 2025, we will have 4 units qualifying for that. And in supplier engagement, we are increasing, and it will be -- we'll be training our suppliers to be also focused in this particular area. Now our CSR activities, be it climate change module for teachers, developing an external road project to make sure that the communities around the industrial areas have a more safer access to their locations and the children, the women they can walk around in a much more safer environment, well-lit roads, well carved out road and there's no mixing of traffic with the pedestrians. We continue to develop such projects so that the communities are safe, and the women have confidence to come to industrial units to work so that we can expand even our diversity rates. Green school campus programs, then skilling 400 across locations, aiding and modernizing the hospitals in Nelamangala, which we handed over. And of course, special health camps, including assistive devices distribution across locations for specially abled people. And also sponsoring a project in Himalayas, wherein it helps waste collection and recovery centers because a lot of tourists bring lot of stuff, which cannot be left in -- as plastic cannot be left in the hills. So there are volunteers who collect it, and we sponsor collection and distribution of it in the right places. So factors to watch out for in 2025. We see, well, there are different years and different cycles, and we are experiencing that cycle. So we are building ourselves upon consumption, investments, premiumization, domestic economic strain and global trade uncertainty. A mix of this is on our table, and that's where we decide where the opportunities are. And we focus on the opportunities rather than we get too worried about macros. And there are always opportunities. We have done it for a long period of time, and we focus in the right areas to make sure that we navigate the uncertainties and at the same time, keep making most of the opportunities. So with this, I will hand the presentation over to T.K. Sridhar to take you through financial highlights, and I'll join you back later when we have a question-and-answer session. Thank you.

Thank you, Sanjeev. So I think we'll get into another interesting part of how did we perform in Q1 '25, right? So the first slide. So base orders grew up by 10 percentage. I think this is despite the fact that we had also had a large order in the last quarter, and we could make it in this quarter as well. So overall, I think it's more encouraging is to see the base orders growing, while the large orders is definitely something, which comes as per CapEx cycle, which get decided. So this is something that is healthy part of it. If I remember correctly, the market was concerned in the last quarter in 2024, why were the orders not growing, and we did say that some of the orders were delayed and it went into Q1 -- it may go into Q1 '25, and that's the result why we could say a large order of INR 200 crores, which is there for the particular quarter. So I think the order backlog INR 9,958 crores gives us a good visibility of what could get executed, and for the future revenues, 2/3 of it will get executed in the coming quarters and the balance will go to the next year based on the project schedule and the long-term service order, what we have for traction converters in the years to come. So revenues, 3 percentage up. And I think this was more because the market was volatile, so customers had a preference to schedule their supplies according to the tune of the market. They were slightly lesser. But having said that, we are clear that as the volatility topic cease down, so I think they should also pick up going forward. So profit before tax, 20 percentage is what we are going to maintain at this point of time, again, coming from a good mix operating leverages and also price realization, which we had. And not to forget, we did have a favorable ForEx impact in this particular quarter contrary to an unfavorable one in the last quarter, which is basically more to the movement of the foreign exchanges and the commodity prices, which we do, so this is something which impacted the margin. But operational EBITDA, which excludes all the foreign exchange variations or any other onetime impact as what we see, still standing robust at 16.7% -- 16.4 percentage for the quarter, and it is in line with what we had done in the previous quarter. So Q1 '24, it is definitely lesser and that's more because the volumes in Q1 -- Q4 '24 was INR 3,300 crores, so INR 150 crores roughly, compared to INR 3,150 crores in the current quarter. So in other words, we did not lose out on any of the structural issues, it was only more about an operating leverage, which was missing due to lower revenues. So cash balance, INR 4,700 crores (sic) [ INR 5,700 crores ], I think our collections were able to keep speed with the revenues and also the overall collectability. We did not find any drastic liquidity issues in the market as what we go forward. So that's something which we think we will continue to focus on, and we would definitely go forward to have different options to help deal with this cash. Just to give a bit of a trend as to what it has been. I think what it used to be at INR 3,000 crores, INR 2,500 crores, we are now stabilizing at a base order of INR 3,500 crores. That's what we could see on an overall -- at this point of time plus some large orders which came in, in this particular quarter. So there have been large orders in the last several quarters in the past, and that's more from the demand, which was coming up after the COVID CapEx cycle, which was rejuvenate in those particular quarters. And that helped us as well. And also the market focus into fast-growing market, the medium and large, also has a reflection in this particular large orders what we have been receiving. So order backlog, 11% up year-on-year, so all 6 plus -- 2/3 of them are executed in the next quarters to come, and the balance would go to the year after. So this is an academic slide for those who follow the press release and also try to look at what is the -- correlate it with the local performance. So overall, ABB Group would have announced 1 percentage or a flat demand environment from India, whereas we declared 4 percentage, including the large orders what we have. So a bit of a view into the P&L account. So material costs held at 58.3 percentage holding robustly at that point of level, and it's more from the -- coming from the mix of revenues, operational efficiencies and also some price realizations, which are favorable during the quarter. So that was something, which helped to keep the material cost 58 percentage. Personnel expenses higher than the previous quarter and definitely slightly higher than the previous quarter. I think the deviation to this effect is more from the point of view of A, number of people have -- we have recruited more; and also, we had to them salary revisions, was done in this quarter. And accordingly, the actual valuations get done once in every year, as in the month of March because that's a financial year, which is applicable for all actual valuations. And so that gets recalculated based on a higher salary base and that has a momentary impact for that particular quarter, and is consistent across all the first quarters in several years to come, at least what we are going to see for this organization, that is quite typical of it. And other expenses, the same level. So I think there have been no, I would say, one-off expenses, which has more is more in line with the volumes and the inflation rate and quarters happened and also in line with the marketing efforts, what has been going on to make sure that we remain competitive and deliver in the market. Exchange rate case, as is what I told, is a swing of almost INR 20 crores compared to the previous quarter same year and the last year, so same quarter previous year. So that's something, which is more on account of mark-to-market impact, which we have on the derivatives, commodities and the foreign exchange statements. And it is momentary, sometimes we have a gain, sometimes we have a profit. But at the end of the day, operating profit what is important for us, and we are steady and strong on the operational profitability. So this is something, which is there on the financial statement as what we see. Yes, go to the next, getting a bit deeper into business segments at this point of time, electrification, continuing its strong run of INR 1,600 crores minimum. So I think -- and to be honest, in INR 1,791 crores of Q1 '24, they had a large order from a data center, which is not there in this particular order. It is a more base order. So that way, Kiran is very happy that he is able to get more of base orders in this particular quarter. So I think overall electrification is able to have its focus on the sector, which is relevant for them and able to get their share of business over there. And revenue is slightly lesser. And of course, Q4 2024 is always a good quarter for us because of the last quarter of the year. And therefore, there is something which is very strong actions which happen to make sure that we reach business performance levels compared to the previous year. So that's something. But on an overall basis, INR 1,200 crores revenues in the last 4 quarters. And now we are talking INR 1,300 crores revenues overall, I think an upward trend has been maintained. And profitability, yes, 25.7%. I would say, it's in all standards, pretty much decent from electrification divisions and where they were coming from. Motion, again, we had a large order of INR 200 crores from a railway segment now again. So I think that's something for the traction converters and business, and so we're able to keep up that particular momentum of INR 1,200 crores. Revenue, steady at INR 1,000 crores, INR 1,100 crores every quarter, and that should slightly go up going forward as the backlog starts to execute itself from the project orders it is there and profitability remains solid at 22%. Process Automation, I think this is where I think people would be interested to understand -- we have Balaji as well, so there could be any direct questions to him while during the Q&A. But overall, I think Process Automation is dependent on the CapEx in decisions, which are very relevant for them, a large scale CapEx decision, right? As I was mentioning, due to the volatile factors, which were there, which were hovering in the market, I think there was a bit of a cautious approach, which were taken by the customers in the core segment and that resulted in decisions getting delayed, number one. Number two, and also April to March being year-end for quite a few private industries, that is also considered to be a place where they could have decided to preserve cash and watch out for the moment -- macro factor as it's supposed to play out. So there is no opportunity decline in the market, but it's more the definition of decision-making, which is slightly moving up the quarter as we go forward. I think it's -- and that has definitely left resulted in a backlog, which is lesser than the previous year. But I'm sure that with the orders, what would in case if we are successful, it gets decided in the future, this should also help us to do it. But a good part of it is that even though the orders are down, we are definitely -- on the revenues, we're not so bad of because had a good service revenues, which can go over there, which definitely helps the profitability as well. Robotics and Discrete Automation, large order from an electronics sector, so helped upshore of the orders, and this is also something which we expect in the last quarter, but from an effective side in this quarter. And I think all of them trending in the same -- in the right direction, including the profitability for Robotics business. This is just another slide, which is good to understand where are we and how we are. In this particular slide, if you look at it, so TA -- sorry, an RA, PA, MO and EL still dominate the product offerings for us, so we are at 74%, 75% of the business, which comes from this particular 2 segments. And the balance is driven by Process Automation and Robotics. So it remains constant, here and there a couple of percentages quarter-on-quarter, but I think overall, it's better. In terms of offerings, again, products then are 73 percentage and projects 13% and 14% is what we see, definitely in line with what used to happen in the previous. In terms of channel as well are constant. And in terms of exports, this quarter was slightly definitely higher in export. That's what we could see. And there is an order -- in revenues, but in orders, we were higher in exports is what we see. So this is something which is pretty interesting. And as we see another thing, which I would definitely look at it is that our -- the orders from Tier 3 and 4 have improved substantially compared to the previous quarter. This is a welcoming fact and there's also resonating with our efforts, which is happening by reaching out to the interlines of the country to be more relevant in those particular markets as well. So overall, I think a good quarter according to us, other than revenues, which is slightly off the mark, and that's more driven by the macro factors, but all the other factors -- I mean, all the other topics in place, that's what I would say. So this is the last line. Did I forgot one? So now I think we can open up the meeting for Q&A.

[Operator Instructions] First questions comes from the line of Renu Baid Pugalia from IIFL Capital Services.

My first question is, Sanjeev, you did mention that macro is not looking so exciting, but it concerns more -- you are focusing more bottom up. But what we saw in PA, in the last quarter, with respect to order getting postponed from customers and execution, does that phenomena concern you in terms of the likely execution for this year that we may slip from double-digit growth to single digit or flattish execution this year or bottom, we have a fair amount of confidence that double-digit revenue growth trend should be intact? That's the first question.

Thank you, Renu. So in our view, the process automation business represents largely the project business, which is about 10% of our total portfolio. And they do depend upon how the customers feel confident in the process industries as well as in the large government infrastructure projects, say, in the oil and gas and the other power generation area. So there, many projects, which were on pipeline, are still on the pipeline, but because of the uncertainties which are floating across the world and also domestically, I think certain customers held back the decisions. And we do believe those projects are still in the pipeline and those decisions will -- so I think that's what it is. So it's very difficult. We have just finished the first quarter briefing. So it's difficult to say what happens end of the year. But as far as our base business is concerned, that continues to be robust. But it is to be acknowledged that as for the large projects are concerned in the market, they are there, but they are sluggish in decision-making, at least in the first quarter. And we'll see how the second quarter for us and third quarter plays out. And then that's how we will be able to comment to you more specifically when we have the commentary for second quarter and third quarter.

Got it. The second question is just pulling few inputs from the annual report, within the Product segment, others as a category in the last 2 years has grown very smartly from INR 1,400 crores to INR 2,400 crores plus revenues, fast with CAGR. So can you share some insights in terms of what type of product portfolios become a part of others here? And what is the kind of localization efforts, which ABB has put in to improve the local manufacturing footprint of this fastest growing segment for us?

So if you have been -- Renu, you've been hearing our commentary for last almost at least in my history about 38 quarters. And so we have maintained that we play the market from 3 or 4 angles. So one angle is we continue to expand our portfolio, and then we continue to localize it, so that it becomes more attractive price point wise to the customers. And as the economy is growing, it continues to kind of become more sophisticated, so more and more ABB sophisticated products keep coming and we kind of localize and spread it in the market. So that's one effect which is playing out in this year as well. And other part is our geographical penetration because the India growth is moving into Tier 2, Tier 3 cities, and Sridhar mentioned that, that expansion is causing expansion of our portfolio intake from the market. And last but not the least, the economy continues to expand and the market segments, which were moderate in size early or small size, I think they have become substantial size now as we go forward. So these are the few things which cater to it. But you're absolutely right, especially in the electrification and motion, we have expanded our portfolio, and that portfolio is playing out in favor for us, yes. And definitely, as you mentioned, localization of the product after we have tested the product in the market that there's a good demand and acceptance, then we go ahead and we manufacture and localize and we expand on top of it.

Any particular products to call out or nothing specific here?

In the case of the motors, if you can see that we have expanded our portfolio there. You can see that in the case of MOLM, I think we have good intake of export orders there. I think that has contributed, and that's on back of localization. Likewise in MODP, which is our drive products, there, again, we have expanded our portfolio and also have localized. And same thing goes for the traction side. Again, we have expanded our portfolio for mass transit, locomotives, electric bus, truck and they are playing out in our field. Now just to give you some granularity on the electrification side, I have Kiran Dutt with us, maybe he can paint some color around it.

Thank you, Sanjeev. Thank you, Renu. I think that's a very good question in terms of expansion of portfolios. On the electrification side, what we have done is, there are 2 parts of it. One, in terms of energy management solutions, where we started expanding our portfolio there, so which is very, very important for customers in terms of finding out what way the buildings are efficient or the industries are efficient. So that's one part of the portfolio which we expanded. It is also related with the digital portfolio, what we have expanded as well. The second part of the story is the launch of LIORA, which was also explained during the presentation. LIORA is a modular sitting, which is for the commercial buildings and the residential buildings. This portfolio has really expanded a lot, and we are seeing lot of traction in terms of orders and revenues coming in during quarter 1.

In the case of ELDS, our Distribution Solutions, Ganesh, would you like to mention? Ganesh, we are not able to hear you. All right. Maybe he is not. So if you recall that we had inaugurated an expansion of our facilities in Nashik, 1.5, 2 years back, and that production of GIS facility is on. And that really has created quite a large base for us to serve the market. Wherein the market has become sophisticated because they required small footprint switchgear, which can go into the basement of buildings or it can be small urban area because the land is something which is more premium in those areas. So we are seeing quite a good expansion of our portfolio and the investments that we made in that area. And also, we continue to expand in Nashik our localization efforts. And there are certain products, which I can't say directly, the name of it, but those are the products which are only produced in one country in Europe and another country here which is India, and we have started exporting that as well apart from very high consumption within our own product, which has localized our product as well as you have a much better uptake in the market, and that also reflects in our profitability and growth.

[Operator Instructions] The next question comes from the line of Mahesh Bendre from LIC Mutual Fund.

Sir, industrial, the process automation business is showing a weakness in terms of negative growth for the last 3 quarters. So when do we think we'll be able to come back on a growth path in this segment?

Thank you, Mahesh. So as far as when we talk about ABB present in this market with 18 divisions and 23 market segments, so we are the true reflection of what market is doing. So I think what we'll do is when the market can -- and the customers that we are trying to serve, they're ready for decisions, they show up in our books. So as I said, process automation is 10% of our -- large projects of the process automation is 10% of our portfolio. And largely, we have fast-moving industrial goods. So that base order continues to perform well because the country is expanding and is absorbing those products quite effectively. But when it comes to large projects, they are cyclic in nature and it all depends upon how the private CapEx and the government CapEx is forming in the marketplace. So I would say, indirectly, if we watch these market segment and set CapEx formation there and the government CapEx release, I think that should have a direct correlation with when the recovery in the process automation businesses will come.

Sir, last question from my end. Last 2 quarters, the order inflow has been soft overall with single-digit growth this quarter, and previously, we had a negative growth. So going into next 2, 3 quarters, will the momentum remain the same?

So we are coming on back of last 5 years, wherein we grew CAGR 22% in the last 5 years. And our revenues grew 20.5% on back of economy growing 6%, 6.5%. So we have had a fairly strong run over a period of time. And then what happens is that once they you have a strong run, just like in the markets, you have a time correction and you also have a price correction. But in this case, you can say that certain market segments take a breather and then the next cycle of investment comes, and that's where it reflects in it. I believe there has been a bit of -- 2024 has been quite eventful and 2025, as you can imagine, right from new government coming in U.S. and also now the recent week events, so there are a lot of events which are playing out in the minds of our customers, and that reflects into our books at the moment. But I believe the moment this uncertainty is cleared out, we believe the underlying of Indian economy as well as Indian spend capacity is quite high, and it will pick up. Whether it happens in running quarter or it happens in the next quarter, it's difficult to say. But we are very optimistic going forward that we'll have reasonable rates of growth in this market for us.

The next question comes from the line of Subramaniam Yadav from SBI Life Insurance.

Sir, just wanted to have a color on this chart of high, moderate, low, what we give every quarter. So how do we read into this? When we see Q-on-Q changes in a couple of sectors moving to moderate, what is the view we take? Is it a quarterly view we take or yearly view we take on the sector, and then we move that segment to moderate from the low?

That's an interesting question. So one is that this particular picture, it's both for our internal as well as external consumption. Internally, what we do is we make sure that all our sales team and businesses are laser-focused on all these segments, in the low, medium and high because that's where the capital formation takes place and the serviceability of us have to be very high, both on the sales side and also post order side. So that's one part. And on the second side, we look at it from kind of a holistic trend that these particular market segments are relevant for us for long to medium term, and we will stay focused on that. So ideally, it is not quarter-to-quarter because it's capital formation of the size we look for and we track. It doesn't change quarter-to-quarter. I would say calendar year basis is a reasonable way to look at it. And also, another way to look at the high, medium and the low is that these high segments are the ones which are relatively new market segments. Say like data centers started picking up in 2016 and '17, they were next to nothing. Now it is a substantial part of our portfolio and the rate of growth is still quite high. So that's where they stay. So I think we have a bit of a metric and more granularity to it, which we drive. But yes, answer to your question, I think yearly adjustment is more relevant for it rather than quarterly adjustments.

Sir, but when we look at the number of sectors moving from low to medium, but in terms of power inflows, which are not matching to that thing, so hence, my question was related to that.

So as far as if you see, the low segment, I think still they form quite a substantial percentage. I think it's almost 45%? 45% of volume comes from the low market segment. So we see that as an opportunity because those segments are actually primed to spend more in CapEx because they haven't done it for a very long period of time. So if you look at it from that angle, it's just a matter of time when those kick in and when the market conditions and the confidence in the large CapEx spender is there, then this low segment starts priming both on the OpEx and CapEx side. So you can just imagine that given the growth that we had of 22% CAGR in the last 5 years, how well it will play out once these low market segment or some of those segments also start joining the medium side of it.

Sir, finally, if you can give some color on the service income because that pie has been increasing and leading to a better margin for us. So how do we look at that service mix going ahead?

Service is almost every time between 12% to 13%. But ideally, I think our aim is to get to 15 percentage, but as I have been -- but with more orders coming in, so service as a percentage looks pretty much this thing. But if you look only at the growth of service and exports, they are more very robust, I would say.

The next question comes from the line of Mohit Kumar from ICICI Securities.

My first question is on the motor side. As per the annual report, the penetration of IE3 and IE4 was 54%. What was this number for CY '23? And what will be the market share in IE3 and IE4 motors?

So Mohit, actually, it's a very good question. I am also interested in those numbers, but today, Sanjeev Arora is not here. He's traveling. He is responsible for that business. We may not be able to give that answer immediately, plus we typically don't go to that granularity of information because it's very kind of sensitive to the business.

So any color on what was this number for CY '23?

Sorry?

He was asking for CY ' 23?

What was this for CY '23 versus CY '24, that 64%, how does this compare?

Well, as Sanjeev was mentioning, we don't give those numbers. Otherwise then, I think we will have different set of calls.

Or if you can next time, you can bring us the base reference our competitors' numbers and say, "Hey, how they compare against them, then probably we can bring some granularity.

Understood. Sir, how does the acquisition of Siemens Gamesa renewables electronics portfolio can help ABB India? What was the revenue for this business in India in CY '24? And how does this expand our portfolio?

I'm not able to understand the question.

Sir, you acquired the Siemens Gamesa electronics portfolio, right? What was the revenue for this business in India in CY '24 and how does it expand our product portfolio?

Okay. That is a global acquisition. What has happened, in India, we have no great footprint about it. So we are buying only some inventories and capital equipment is what we informed the stock exchange in the last quarter. So they are very much -- they are players in wind, right? And that's how we need to find out and -- wind and renewable players. We need to find out how it works out going forward. So not much of relevance for India, at least as what I say.

At the moment, I think it becomes a product part of the global portfolio, and the global team will guide our local teams how relevancy of that portfolio in the market becomes. I think we should allow it some time before we can be more specific about it.

The next question comes from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on a decent number. Sir, first question is, given slight sluggishness in the market and the muted growth, so how are the prices for the products holding on? So have you seen any price cut or has the competitive intensity increased?

Well, generally, on an overall basis, you're right, I think there is a bit of a sluggishness in the marketplace, more especially on the large project side, I would say. In certain product categories, of course, there is an increased competitive intensity. Whenever there's an increased competitive intensity, you will see an effect on the prices, price realization. But I would say that is on the minor side of the portfolio. I would say the main story is that the large projects, which are being held back, they should be released in coming quarters. That's something we watch, and we are working with the clients. As far as the price adjustment, in minor product categories, there are definitely the pressures, which we are seeing, mainly due to the competitive intensity as such.

Any commentary on the margin guidance? I mean still maintain that 13%, 15% band or like how it will be now on the net margin level?

So I think we have been saying that 12% to 15% is where we are talking at the PAT margins at this point of time. So that's how it is. So now we are reaping the benefits of the earlier quarters of good priced orders are getting skewed at this point of time and also the leverage on the capacity which is playing out. So that's something which we will continue to watch out for.

The last question, sir, on exports. So any benefit you're getting on exports because this quarter, growth has been strong and any impact of the global trade friction, which is currently going on in the U.S.? So will it likely benefit us in India because we don't have much of exposure to the U.S. in parent company?

Too early to say. I think the global landscape is under formation, with too many conflicts, both on the economic, trade and some kind of a hot spots in the market. And all of them, at least in this week, we find some resolution is being found. I think U.S. was talking to China last week in Geneva, some positive news is coming there. Next Monday, coming Monday, Ukraine and Russia is talking to each other, some maybe a resolution comes there. And we also had day before yesterday, the hot shooting war going on our western border, that came to a halt. So these things have to play out. And for a company like us, or rather simple people like us, who just look at the customers when they are going to decide orders, I think it's too difficult to decipher how that will play out on our portfolio. But on the export side, we have allocated certain export markets. We are doing quite well there. And India, as such, I think the way the trade system is, looks to be -- seems to be net positive for us for our industries. And whatever portfolio that we are exporting, we are not seeing any kind of dampening effect. In fact, we have quite a good expansion of our export orders compared to last quarter. I think it was about 40%, I think. So our exports increased 40% year-on-year basis in orders.

The next question comes from the line of Umesh Raut from Nomura India.

My first question is pertaining to exports and services only. So if I look at your trend, as a percentage of contribution from exports and services, it is remaining range bound with a range of about 10% to 14% since last few quarters. So how do you see a pickup happening here? Whether your installed base can lead more of uptick in the services business for you in the medium to longer term? And would there be any change in strategy from parent side as well in terms of supply dynamics so that you can have better traction on the export side?

So a growth of 40% on export side, I believe, is quite a healthy growth. And this is something, which is available. When we talk about percentages, as long as the domestic market growth is strong, then the percentages of export even after 40% growth looks nominal, right? So I think that's what -- as on the domestic side is stronger, I think it will continue to be -- percentages will continue to be playing out that way. But we are quite happy in terms of how our export markets are developing. As far as the group is concerned, yes, our prime focus is on Indian market, being a multinational corporation present in India. But given our -- the facilities here are world-class, more and more global divisions are using our base for opening new export market. It is a gradual, but very steady process, so that we are able to serve both domestic as well as global markets, and our teams are doing a good job there. And we will see, it will be a more steady path. But at the same time, there's a long path of continued gain on the export markets from India.

Okay. And my second question is with respect to capital allocation ...

Umesh, sorry to interrupt you there. Your audio is not coming in clear right now. Could you please use your handset?

Hello? Is it better?

Yes, better, go ahead.

So given that you have cash balance of INR 57 billion and some time back, you have also mentioned that you're looking forward to inorganic opportunities in domestic market, but nothing has fructified in the last 2 years. So any color here how you want to utilize this capital going forward?

So we are expanding our capacities organically to meet the market demand. So that's how some of the balances are. We have increased our dividend, so that's how our shareholders are benefiting out of our cash balances. And as we speak, there are quite a few inorganic opportunities in our crosshairs. But then it takes 2 to tango. So as and when we are able to kind of secure that, I think we will announce it to you. But yes, definitely, there's a plan, both organic and awarding shareholders plus inorganic opportunity. And there's no rush for us. We will wait for the right opportunity at the right price so that, that creates more value for our portfolio as well as value for our customers. But definitely, it is on the plan.

The next question comes from the line of Jonas Bhutta from Birla Mutual Fund.

Congrats on a great set of resilience considering the environment. Just a question on the stickiness of the electrification segment margins. When I look at it from a recent quarterly perspective or even from an annual perspective drawing on information from the annual report, just could you help us connect the dots in terms of, while the last 2 quarters, order inflows for this segment have sort of moderated and you were -- the base quarters are sitting with large project orders that coupled with a higher or, let's say, no [ detorious ] or the foreign exchange used or the import content remaining more or less the same as a percentage of sales. The margin for the segments seem to be really sticky and probably even trending upwards. So would appreciate if you can give us some strategic decisions that you've taken that has put Electrification as a segment at these margin levels. And what happens when growth resumes in order inflows? Directionally, do margins for the segments sort of trend even higher from these levels? That's the only question.

So as you know, Jonas, the profitability is a net result of multiple factors that flow through order margins. And then how productivity measures that we do within our location, and that's where a lot of investments go. So every year, our units are more productive than previous years plus how we manage our supply chain, our suppliers, that's another factor and also how we are kind of localizing continuously our portfolio. So it is a combination effect that comes. And sometimes, it is largely aided by the margin realization. And at times, it is realized by the supply chain realization and sometimes, it also is a localization and a combination of those factors. So going forward, we feel we are committed to this journey. And we do see that the volumes will continue to come. So it means the utilization rate of our plants should remain good going forward. And also the quality of customers and the market segments that we are dealing with, they reward the people with a good portfolio, right? But at the same time, as far as the factor of pricing is concerned, it stabilizes after some time, but then we continue to use the other leverages, which are available. Anything, Kiran, you would like to add?

Thanks, Sanjeev. I think very similar to that. One point to be noted is with respect to the order inflow, if you look at it with respect to even Q4 of '24 and then in Q1, we are at around 71% growth compared to that. So the order inflows are always there. And when I look at the order backlog, the order backlog have really increased by 36%. So for sure, it is going to give us a good visibility in terms of the revenues which are going to happen. And we are sure that, that would support in terms of the profitability as well.

Got it. And if I can just squeeze in one quick one for Sridhar. Sir, if you can help us, when we see this line item called foreign exchange used, which tantamount to roughly 50% of sales that INR 60 billion order, most of these imports can be attributed to which segments, if at all, you have to put in some directional thing, not asking for exact numbers?

Jonas, imports subdivision [Foreign Language] right? So it's only a question of in which division is higher and which division is lower. So I think...

Yes, the density is higher.

Exactly, right? So technically what happens is, in the Projects division, it is slightly lesser on a direct import basis because they do more of projects, but they also draw from the motion and electrification wherever needed, who import, right? So definitely, I would say, in terms of imports could be pretty higher in Robotics because they depend quite a lot on the imports from the outside countries because the ecosystem for Robotics in the country is yet to be developed as what is needed. And the next one is the power electronics, which is system drives and drive products, which depend quite a bit on export, and also definitely in EL where we have the electronics piece, which is required. So overall, just to sort of sum it up for you, I think while on the export, if you look at exports per se, I would say, because the volumes are pretty much higher in EL and MO, they would do almost 70% of imports will come only from these 2 segments. And the balance, 25%, 30% come from Robotics.

The next question comes from the line of Amit Mahawar from UBS.

I just have one question, sir. The outlook for CY '25, particularly on base orders, can you throw some light on some high growth segments, particularly propulsion, semi Azi propulsions and renewable low voltage and motion order? Do you think there's a risk of this year being 10% or less growth in orders? That's my question.

You are talking about base orders, right, if I'm not wrong?

Yes, Sridhar.

So I think it is very difficult to predict, let me be very honest, because given the situation, a lot of moving parts at this point of time, which one would never have expected. So naturally, so then at this point of time, Amit, we're not able to say that whether it will go 10% or less than 10% is what we see, right? But our intent has always been to be aiming for a double-digit growth, right, and then be in line with what the market could sort of decide as a result of these particular macro factors, which is beyond our control, right? So that's how I see, to be honest, Amit.

Sure. And secondly, a quick one is on capacity creation. ABB has always been realistic and measured when they think of capacities, and we've seen that many times, which also helps at the time of low growth. This year and next year, anything particularly 1 or 2 items where we are thinking of heading capacity or capability? If you can be specific without going into much details whatever is allowing.

Since you asked, we will have a capacity expansion, especially in the units, which are relatively small in the business, so now they are coming off the age. So we have to put them into the larger units because their volumes have grown and they are demanding much more space. So there are some in the process automation. We also see the same in the electrification on back of growth as well as on back of expanded portfolio, which needs to be localized. We also see something similar in motion. And you will hear from us once we are ready for it and willing to kind of show that as an available capacity to the market.

So Amit, as you alluded to, I mean, we are -- definitely before we go through with our CapEx plans, we are very measured in that to understand what capacity which we have, which we could first leverage upon, and what are the other options available, and then it's a well thought through decision before we start to invest in organic and inorganic options.

Last question probably, I think. So we are 6 minutes past 11.

So we take the last question from the line of Aditya Mongia from Kotak Securities.

My question was linked. So I wanted to get a sense from you, across your segments of the level of sophistication of the product, as you suggested on the call, I wanted to understand, a, in which segments is it driving the margins up because on a relative basis, we are very strong? And b, from hereon, do you see the customers -- directionally, which our segments can incrementally benefit as the customers further moves in this direction?

So if you go back to the slide where we have these 18 divisions coming across 23 market segments, I think the margin accretion would definitely be very attractive in the first sector where we are growing faster because that's a place where the technology plays a differentiating factor to quite a large extent, right, and where the speed of execution is also important. And also new solutions are very relevant in those particular market segments. Therefore, the margins there would definitely be, at this point of time, attractive for the reasons because they're also starting from a lower base and trying to set up their shops in India as what we see. I think this run should come -- can continue for some more time till the base expands and comes to a stabilization level. In the second category where we call of realistic growth of between 8% to 10%, 12 percentage, I think there, it's a bit of a mixed bag, where you have factors, which offer a margin for the value which we deliver and some of the factors go by tendering model, which could be more competitive in nature. And while we come to the last sector, which is the low growth sector, but a high volume impact there, there, I think margin accretion comes more from leveraging on the capacities and the delivery and the volumes what we build rather than just by our ability to push prices over there. So according to me, Aditya, all these 3 segments have characteristics that are quite different, right? And while the first one is very good to be in because it has the highest margin potential, but it does not have the base through which we could really drive the margin. So naturally, we need to have a good balance between all the 3 market segments, which give us the growth what we are in today at a pattern of 12% to 15% is what we see.

Ladies and gentlemen, we take that as the last question and conclude the question-and-answer session. I will now hand the conference over to Mr. T.K. Sridhar for his closing comments.

Thank you. Thank you very much, once again, on behalf of ABB for taking time out to to understand what's happened in Q1 2025 and definitely look forward to interacting with you more, and more as we go into Q2 2025 and also the other macro factors is what we see today sort of ease out and it becomes a more level playing field for all of us. So thank you very much for joining the call, and thanks to the ABB management also who could take time out to listen in and also to answer appropriately to the investors. Thank you very much.

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