ABB India Limited ($500002)

Ladies and gentlemen, good day, and welcome to ABB India Limited Q1 January to March Quarter CY 2026 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 Service 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. Thank you, Sia, and good evening, ladies and gentlemen. Thank you for joining the Q1 2026 results. So on the call with me is Mr. Sanjeev Sharma, Country Managing Director for India. Kiran Dutt and Ganesh Kothawade, who are business divisions in electrification. Sanjeev Arora is not able to join because he's traveling but we have Balaji the process automation, automation division in right? So over to you, Sanjeev. I think we have the presentation up. But the press release is in the process of getting uploaded, right? So some technical glitch not from our side, but from the other side of it. So I think they're trying to get it sorted out. So in the meantime, we will take the liberty of talking you through the presentation. which is definitely going to give some color about the press release also. Yes, over to you, sir.

Thank you, Sridhar, and good evening to all of you, and thanks for showing interest and joining in on Friday evening this late. And we will keep it sharp and brief for you -- as for both of you who are joining it for the first time and also those who would like to have a bit of a reminder. ABB in India at a glass is a company, which is focused on electrification, motion and automation solutions. And we have a very strong footprint for manufacturing in the country. And we represent all ABB Group business divisions in the country, which are highly localized and also are connected with the customers. And at the same time, we serve our customers from our 28 sales offices, an increasing number of channel partners who take us to the deeper side of the market and also do value-added services closer to the customer. And from this country, we are exporting to about 30-plus country, which are increasing as we progress with our portfolio and footprint of the manufacturing in the price. Next please. So those of you who have been following ABB on a constant basis. So last year, we did see there was a bit of a market corrections. And then I think that were also reflected in our number. But for last quarter of last -- 2025 and the first quarter, we see demand has become resilient, and we are seeing quite a good uptick of it in our books. And this is across all of our segments. As you know, we have 16 Divisions, which are distinct business models, which are connected with 23 market segments. And we see all the market segments with profits to us, they are showing good resilience and good CapEx formation and also good ordering. So we had a 25% order growth, 6% revenue growth and we continue to have a good cash position within the company. And also, we have a good backlog, which gives us sequel revenue possibility. Sridhar will take you to the profit after tax numbers when we break down the financials later on. But some of the highlights that we announced about $75 million investments to expand manufacturing and R&D in the country. And we also dispatched first locally manufactured wind power converter from the Nelamangala facility, which is, again, one milestone and also opens up another revenue and order stream for the future. And we also have our two formula, a next-generation low-voltage car platform, which is used by our partners in the market to give a value-added solution to power distribution industry. And on sustainability side, we have Scope 1 and 2 greenhouse emissions down by 82%. And we have secured rank 3 in electrical electronic sector and ranked 9 across industries in BW business world more sustainable companies award. Next, please. If you see the order momentum, it is coming across core and emerging sectors, namely in transport, building infrastructure, data center, food and beverage, process industries and renewables and which just gives us good visibility going forward because the customer interest and the order pipeline formation is robust at the moment. And given our backlog, we see very good revenue execution going forward. Of course, we will see what impact the West Asia issues come in, but those will be temporary as we go forward. Please continue. So you can see that we have a portfolio where in -- we are seen by our customers in the segments like data centers, renewables, industries, infrastructure and transport as the best-in-class supplier of products and solutions, and we continue to gain and enjoy that confidence from our customers. And these are some of the examples that you can see. Next, please. So among the market segments, we are in our 16 businesses, our focus, which is the 23 market segments. You can see the emerging industries, which are growing quite strong. And infrastructure and transport that is on a healthy scale we have highlighted by colors. And core industries, which are modest, but they also form a fairly large part of our portfolio. And we continue to see strength in some of these market segments, which are cyclic in nature. And that's exactly what is interesting about our portfolio, 16 business models operating on 23, and we continue to show resilient results over a period of time because there is a cyclicity among the among the market segments. So that's a good place to be, and that's what we have observed over a period of time. Next continue. Just to give you an idea about what we do in the data centers because that's a flavor of the day. So we have a lot of products and solutions, especially in the low-voltage power distribution, which essentially powers up the computer racks in the data centers and also the medium voltage and primary secondary distribution, which brings in the power into the data center and the alternate power sources like generators, battery energy storage that also become part of that solution. UPS is another power protection facility, which goes from us. And then we have a number of drives and motors that go into the cooling system components and number of installation products and also automation solution for data centers plus medium-voltage substations. So this combination is enjoyed by customers, especially the hyperscalers. We have a good demand globally for these products. In fact, very strong demand globally as well as in India, and we are kind of serving our customers quite effectively, given our capacities available and our capability is available locally to support not only in installing the solution, but also provide long-term service and support to the customer. Let's continue. Sustainability in practice, as I mentioned to you earlier, our GHG emissions are down by 82%. Water recyclability is up 46%. And you can read our BRSR report, which we have released and there, again, we have highlighted in much more details about what kind of focused effort our company does in this particular area and we continue to get recognition for the work that is done by our teams across the country. Next, please. On the CSR part, we continue to stay focused on three areas: education and skilling, diversity and inclusion, communities and environment. And we have our track record for the last 10 years that we spent 100% of our commitment and we really measure not by spend, but by impact. And we also do audit for the impact of all the spend done in the areas we mended to begun. And our Board and the CSR Committee always really review it, and they have been quite satisfied in terms of the impact that we create with our CSR spending. Next, please. Now factors to that we are watching for 2026 are the economic power, then green energy and sustainability, urbanization is smart infrastructure, automation and AI, consumerism and lifestyle upgrades and of course, coupled with the global uncertainty, this is a combination plate that we have. Quite frankly, we have seen many cycles in this country, we are manufacturing for the last 75 years. We have probably seen most of the events that we can record in the history. So our team and the businesses are pretty resilient in terms of not to over kind of below the uncertainties because every year, there is something. Last year, it was tariff, this time is the West Asia and a few years back, it was COVID. we have all gone through those cycles. But the team really knows to keep focus on the customers, what the customer is demanding and to keep fulfilling what customers' demands are. And I think that's a simple recipe for us to stay resilient. Next, please. On the financial highlights, now I hand it over to T.K. Sridhar, who will go on more granular on the results.

Thank you. Thank you, Sanjeev. So just to have more effect about how did we perform in Q1. Orders were pretty strong. I think 25% base orders 9%, but large orders is something which we got. And it was from the data center space and the railway space, right? So not to mention what the order values, but these are the two market segments from which we got this large orders. But overall, I think we are in a very solid position in terms of order backdrop. INR 11,000 crores. I think this is a good backdrop, which gives the nice visibility for the coming quarters. That's what we can go through. Revenue, INR 3,184 crores, slightly subdued, I would say. I think we were sort of good, well positioned to go to INR 3,300, 400 levels. But the last minute topics which we had to deal with in our content West Asia crisis, sort of stifle with the offtake as well as the supplies. And that's something which we had to state where we are at this point of time. So -- and this naturally had an impact -- cascading impact on the performance and the profitability level. But apart from that, we also had a quite interesting development on the metal side of it, which is copper, silver, and aluminum. And apart from that, we had our -- the currency, Indian would be depreciating pretty sharply against the European and the U.S. dollar. So that's something which really led to a to a new debt performance as far as profitability is concerned. I'm sure that this is not in line with the expectation of the market. But I think that this is the best possible option with the revenue mix, which we had and the crisis which we have to deal with the last slide. So this is something about what is the factors which led to an muted profitable growth on profit growth. So that's what it is. But the cash is definitely strong. So we have, at this point of time, INR 6,042 crores, but this is without the cash which we got from the sale of robotics. If I include that, it is roughly down about INR 7,600 crores, right? So that's the overall strong cash position, what we are in at this point of time. Yes, we go to the next slide. So to deal with what really impacted the profitability a bit more the granular with I think other income, of course, included the interest which we had been getting on the advances and the cash balance which we have. So that's been increasing. So from that, if you look at the material cost stood same level, the 61.3% and 61.4% sequentially. But that compared to in the Q1 '25, we are definitely up by 3.5% or 3% should be done to be precise, right? So that's what it is. And now if you look at what it leads to the debook margin, I mean, the higher material costs in 3.7% I would say I would attribute basically three factors to that, which is one is definitely competition intensity and when the commodity and the rupee depreciation part of it and the revenue mix of it, so the competition and the intensity probably a possibly a percentage commodity price increase in rupee depreciation, almost 2% and the revenue mix the balance 1%. So roughly, this is the cut between the between what was the material cost in Q1 2025 versus Q1 '26. That's the sort of stuff. And personnel expenses as a percentage, it remains the same, but higher in terms of value, more relating to a people increase and the salary increase, which happened and a slight stator the pan or the labor code impact on the revised salaries what we have. So that's how it is. But I think on the expenses part of it, -- so because we were well positioned to do a larger revenue. So we had revenue expenses, which is slightly higher -- and if you look at it, as we mentioned, the thing -- there is also a swing in the exchange commodity ag commodity losses, which is this time INR 27.5 crores impact. on issues, which are well known to us. So overall, I think this is a quarter where there has been a correction, there has been a bit of an unprecedented headwinds and due to which we could see profitability, which is going down and revenue slightly could have been a bit more higher compared to what we are doing at this point of time. So but a good part and a more positive part of it, which we are all looking forward to is the development in the orders and which is going to give a good runway for revenues in the coming quarters. Next slide, a bit of a color on how did the division, how did the business segments perform. So electrification. So it picked the percentage up? So I think on year-on-year, year-on-year solid percentage is what we see, and that's more driven by the data centers in the building segment in other quarters, what we are getting from this. and revenues also driven by backlogs, but coating still more higher. That's what that could be something which you wish for. And profitability, 21.4% to 15.2% and last year, we had a very big data center order, which we got executed in Q1, which is not there in this quarter it was. That's what we mean by revenue mix. and more importantly, the cost impact on account of copper and silver price, which has been definitely to a high level in electrification segment. And to add to that for the rupee depreciation. So this is something which we saw. But I think we have a backlog of INR 400 crores, which is actually over the next 5 to 6 quarters. Motion. A motion is actually also grew by 22%. We are maintaining their quarter-on-quarter growth consistently a band of plus 20% despite the competition intensity what they see. And it is more driven by orders from the rail segment and also the renewables and private industries, which we have also been able to do for the drives part of it. So -- and -- but there's a slight decline in the exports, right? So but I think which will -- it's more indicatable because of the prices, which we had to undergo in the last minute over here in the month of March. Revenues INR 1,200 crores and profitability at 12.8% as you see. So I think that's with subdued and also here, the material cost was definitely higher, and that's also attributable to the same reasons as what we do. So overall, if you look at these factors, it has impacted the major product divisions of electrification and motion to quite an extent in system. Yes. Next, automation. Automation, while electrification and motion should have less growth in orders automation depending on the -- which depends on more on private CapEx and the public expenditure is more subdued on the order intake part of it. And -- but I think we have a good opportunity pipeline, but the decision-making speed is slightly slower at this point of time as what we see for the few what we see. So I think a good opportunity pipeline, but slow decision-making is the characteristic of automation is what we see at this point of time. But we are confident that this will turn out to be potential orders in the quarters to come. Revenues driven by weaker order backlogs. So the revenue pace is also slowing down, but the profitability is higher because of a good mix between service and project systems and also some good profitability, profit margin margination and the projects which are under execution and completion -- so this is the overall view on business in and order backlog, INR 2,100 crores, I think we will have to ramp it up forward. So this is a bit of the ordering of business models, what we see by business areas, if you look at it are now 81%. We don't have robotics at this point of time, so robotics this to be 5% so the 5% late, but now without robotics slightly changed, but not 19% to automation and 81% at MON-VA. In terms of offerings, projects at 8% a service at an service at or projects at 7, 8% for products and I mean by exports, I think it was 11 and 89%, slightly higher because of the bit of more export orders, which came in the revenue. So that's it. So I think we could probably try to take some questions between now and half past 6. We don't want to extend beyond 6:30. And just in case if there are difficult there could be some questions, later for next week.

[Operator Instructions]. The first question is from the line of Renu Pugalia from IIFL Capital.

My first question is on the private sector investment revival that you were expecting sometime around early this calendar year. So do you see -- as you have briefly here, but do you see the customer sentiments getting materially impacted on decision-making and closure beyond the process automation within the core business segments. And also any likely budgetary impact on cash flows, can that derail or postpone the infra spend which is in the moderate growth category that you have highlighted in terms of order flows? That's first question. And second would be on the recent CapEx that you've announced, how do we see the export portfolio ramping up and our exposure to data centers in terms of local product footprint expanding with the recent localization of plans that we've announced on the new CapEx?

Okay. So Renu, I think the first question is around the market. I think we have -- on the private CapEx, we have Kiran and Ganesh, who could give an elicification view of how the private CapEx happening, and we have Balaji and so for the motion piece of it, I think they will all be commentary also covering a way directionally that's because we don't have some deals on the line. So over that in will try to answer that from this, right? On the CapEx part of it, which is the $75 million, what we said or -- and not $75 million for the total ABB excluding the hydroblast probably better. So we will -- I will give you a color at the end. So Kiran would like to take the question and then we pass it on to Ganesh.

Thank you, Sridhar. Thank you Renu for the question. What we are looking at is quite a robust scenario in terms of investments in...

Does that answer your question, Renu?

I could not hear anything. I couldn't get the management...

Please stay connected. I will check the connection for management. [Technical Difficulty] Ladies and gentlemen, thank you for patiently holding. We have management reconnected. Thank you, and over to you, sir.

We lost a bit of a connection in between technical glitch, so but in our thoughts, we are now gathered together as to what will answer. Over to you, Kiran, back to you.

I think we were speaking about CapEx private CapEx. And then I was talking about data centers as well and look of hyperscale and colocation both getting into investments, and we are in some very good investments coming in at the same time, orders for us as well. I'm also talking about railways and renewables, rail, we are talking about both in terms of rolling stocks at the same, we're also talking about the station development and innovation projects, extremely good inflow. We are also looking at renewables, specifically, I was talking about the best systems, which is extremely promising for us, and we are able to get rate orders in the first quarter. The last point I wanted to make is on the building side is quite mixed scenario at this point of time. But some are seeing a very good numbers, but at the same time, residential side, while the mid and the lower end is a bit of a challenge, but at the premium segment, we see a very good ore. So that's work from my end. Maybe Ganesh, if you can add your thoughts.

No. Kiran, you almost covered the segments which are looking promising. Like what you see data center is very strong renewables is also coming off a very strong and it's reflecting in our order book also and the opportunity pipeline, which is getting showed. And there is a private investment, which is coming in even the industry side, we have seen all of our very strong inquiries, which are in the pipeline. So we are very optimistic about the investment,

Thank you, Sridhar. Thank you Renu for the question. What we are looking at is quite a robust scenario in terms of investments in... [Audio Gap]

Does that answer your question, Renu?

I could not hear anything. I couldn't get the management...

Please stay connected. I will check the connection for management. [Technical Difficulty] Ladies and gentlemen, thank you for patiently holding. We have management reconnected. Thank you, and over to you, sir.

We lost a bit of a connection in between technical glitch, so but in our thoughts, we are now gathered together as to what will answer. Over to you, Kiran, back to you.

I think we were speaking about CapEx private CapEx. And then I was talking about data centers as well and look of hyperscale and colocation both getting into investments, and we are in some very good investments coming in at the same time, orders for us as well. I'm also talking about railways and renewables, rail, we are talking about both in terms of rolling stocks at the same, we're also talking about the station development and innovation projects, extremely good inflow. We are also looking at renewables, specifically, I was talking about the best systems, which is extremely promising for us, and we are able to get rate orders in the first quarter. The last point I wanted to make is on the building side is quite mixed scenario at this point of time. But some are seeing a very good numbers, but at the same time, residential side, while the mid and the lower end is a bit of a challenge, but at the premium segment, we see a very good ore. So that's work from my end. Maybe Ganesh, if you can add your thoughts.

No. Kiran, you almost covered the segments which are looking promising. Like what you see data center is very strong renewables is also coming off a very strong and it's reflecting in our order book also and the opportunity pipeline, which is getting showed. And there is a private investment, which is coming in even the industry side, we have seen all of our very strong inquiries, which are in the pipeline. So we are very optimistic about the investment, which is coming from the private side.

Balaji if you're there.

Yes. From an automation side, firstly, I just want to qualify that is certain life cycle and of a project, especially in the early stages, and it follows a pattern and typically automation comes towards the end of ordering we see a strong pipeline. However, there are industries that are dependent upon petroleum products as their raw materials. There is a little bit of stress we see that this could be a temporary one. Having said that, from both public sector and private sectors, the inquiry bank is quite strong, and those inquiries, which is already issued, they are proceeding. Unfortunately, due to the nature of the stage I'm not able to call out those specific segments, but there are -- that is a very strong pipeline and quite a strong movement towards closure of owners.

Sir, can we conclude that basis, while you have seen execution headwinds because of the West Asia prices, the ordering momentum or process has not seen any derailment or postponement from customers because of the ongoing inflationary trends or the West Asia crisis. Is that right? Or there is some impact -- that was my question?

See, you have looked at our order growth, right? So that clearly reflects the way we are in the position now. On electricity side, we have [indiscernible] by test. So that shows the kind of robustness in terms of business in India. And that's where we are also able to get the portion of that pie and that's the reason why we are showing 30%.

Request, Renu to please rejoin the queue.

So I think there was one portion which Renu had raised about the investments, how much it is going to help us. I think -- as you have already said in the past, ABB sees that there is definitely a market which is developing for the products and services what we are manufacturing. So they were [indiscernible] as the future market opportunities to serve the market future market opportunities. So this is basically coming from dry products expansion. We have then the service expansion for motion and also we will have the [indiscernible] the smart products manufacturing also increasing quite extent going forward, right? So that's the plan what we have. And I think we will hear more as we go into the few quarters as these projects are getting commissioned.

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

I just have two questions. First is, do you think this is going to be a year where we will have a lot of lumpy orders, which is basically going to be part of the intake and more importantly, and you can specify that this is going to be a strong high double-digit growth year for orders? And second is on profitability. If I look at the parent commentary, obviously, EL was a very, very strong indeed. We also saw that some bit in your results in terms of top line growth. Do you think the profitability this year can be significantly better than last year. And I understand the short cycle weakness is still holding up. So any color on the profitability? I know we don't give guidance, but -- and we have variations in this quarter. But the balance of the year, any color on profitability because I can see the -- a lot of initiatives by the parent. So I just want to understand how is India positioned?

Okay. There is limited knowledge of how the parents are profitable, if you understand, they have the balancing power of care for again in countries, which are exporting, right? to economy have a weaker depletion in currency and that's an compensating upside, right? So which whereas you don't have it, so that's an intensive advantage what they have. And also their growth, if you look at it [indiscernible] in the which are out in the supply. And so there, the ability to get a premium is far, far higher, right? So therefore, what I mean to say is yard stick to -- of the global performance to compare the India performance is something I think we cannot work it, right? So that's this thing. So now coming to India performance as such. I mean going, we have in backlog of INR 11,000 crores, I think we'll have to execute. So what is probably a which we will have the lever is around the we absorption and give our capacity absorptions, which will really help us going forward. That means the velocity of revenue conversion has to increase depending upon what the customer take is, right? But whereas if you look at the pricing, the support to get more probability is something which is now saturated compared to the media. Right? So now you have a lever of volume, which could pull up the margins, but you have the other impacts of the ForEx and the commodity, which is not in our control, which is basically more than offsetting what you can also do on a volume basis. So I think what we expect is that, I think we should be able to mitigate this risk of ForEx and material volatility at this point of time. With the volume, which we see. But I think we need to work more on how the market develops in terms of accepting more price increases to the market. So which is more regular, which I could give at this point of time on it.

Can I sneak in one small one?

Yes, please. Short probably.

Yes, sure, sure. So when we talk to channel partners across you and your years. There's a very clear short cycle weakness as we speak for different reasons. It's been there for 2 years. Do you think this is a year where your base business can grow top line by 15% and large order, I can already see last 2 quarters are very, very strong, and we have a good pipeline. So collectively, the intake for it to move towards a different run rate -- do you think this is too early for us to comment or in next 2, 3 quarters, we can see base orders shifting because there is a restocking cycle for last 2 years. So when you comment on base business, Sridhar, that will be helpful?

So I think Amit base business, we grew at 9%, not the 15% of , right? So that means we definitely see the channel partners. I don't know home I think what we see is that there is a market velocity which is there. It's not that the market is bad, but I think it's more about the timing of it, right? So it could be a bit of a, as you rightly said, choppy bit of situation. But the good part is that there are opportunities, and we are confident these will convert into orders for ABB.

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

My first question is what kind of inflationary pricing actions we have taken across businesses to mitigate the fact on station can quantify the price house of data and come basis as long if you can quantify the price hikes you have taken across the business?

Inflation, okay. Commodity inflation Okay. So we are a product business, a product organization. That's what it is. If you look at it, we have more than 70% of our business is always -- I mean, even though we call it a short cycle, it will have some lag. So therefore, we always have a quart lag to impact the price that something, which we, as a business, take a strategic decision to revise the prices. So to give add more color to it, I think I could invite Kiran to give a bit of more insight on this as to how do you manage the price increases.

Absolutely. At the end of the day, there any price increase in the we have done -- so go for a price increase. We have already gone for two price increases is public anyway. And that's the way. And as Sridhar said, there is a lag between the prices which are impacting the costs which are impacting and the price increase in the market. And that's what we need to manage, and that's what we have done. We already get two price increases now.

And can you quantify, sir, how much is the percentage increase.

So that's something which is very sensitive for us to drive. I don't think it's an answer which we could say, please.

Second question is on data center, sir. So on data centers now, I mean we are maybe going from 2 gigawatt to maybe 10 gigawatt in 4, 5 years. And there would be a significant ramp-up from the hyperscaler side. So I think initially, inventory, you did mention about 4, 5 product lines there. So just wanted to understand how is the TAM increasing as hyperscalers gain market share in this tax effect -- and also if you can understand what are you doing on the substation side of it?

Ganesh?

Yes. See, as you very rightly said quite a lot investment, which is happening on the data center, not only in the hyperscale, but even the colos and the age data center. And our portfolio is very well positioned across the electrification as well as all other products to really take on into this particular job -- and we are also actually matching the capacities as per the requirement because many of these hyperscalers has already signed right contracts with us. and we are very well positioned to capture this particular market. In fact, we are building up the capacity to meet their demand.

Substation side, what I exactly going to do and also the opportunity in terms of TAM, what is like our per megawatt opportunity addressable opportunity now with the ramp up?

On the substation side.

On the data center, what code content and why station, of course, is not. Total content of ABB on data centers.

The CapEx is INR 80 crores, INR 90 crores or INR 50 crores, INR 100 crores, what would be our megawatt opportunity there? And on substations on what would exactly want to do it?

So as we have discussed in the past and also in a slide today that we have different opportunities in the data center, which is a direct opportunity within customer by the power supply bringing a medium voltage input to this where they want to set up the data center so that medium voltage, stay kind of switch gear and the associated equipment. That's where our scope is. And after that, it gets stepped down and goes into voltage distribution to the power rack or rather the computer racks, that's another scope. And by the UPS and also in the utilities and ancillaries, we have drives and motors going. So that's the typical scope we have in India as well as globally. Yes, we do know what is a factored megawatt, but this is something we don't publicly talk about. But yes, it's a substantial scope, especially when you have the larger gigawatt opportunities, I think the size is a very large opportunities that we see. So, so far, we have executed some contracts with the hyperscalers. I think the speed that they are executing it and also the quality they are executing it, the demand of our products is preferred in the marketplace. And that's what we are enjoying at this point of time in India as well as India. So I'm sorry, I'm not able to give you a factor, but we do know the factors.

The percentage of order book -- current order book in data center at if you can share to the total order book, what as a percentage of data center order?

Data center orders would be up to 12 to 13%.

It's not a FX percentage. It does vary in a band based on when the order gets booked and what's the size of the orders and the book. So it can vary between 12 to 16% as well. Yes please continue.

The next question is from the line of Atul Tiwari from JP Morgan.

Sir, in the month of April and May, have you noticed any incremental weakness over the month of March for your short cycle orders because of the customer sentiment around war and fuel prices, et cetera?

So let we do 90% of our business is in India and 10% is exports. Quite frankly, last year, there was a weakness in the market for different reasons, but those 2 or 3 quarters, we saw it. But starting last year and [indiscernible] what we are experiencing. We are fairly experiencing robust demand at the moment. So quite frankly, it is not adding to our concern directly what's happening in the West Asia at the moment. If there is a lag effect that comes up in the in the quarters later on, of course will share with you. But right now...

Okay. Good to know. And sir, my last question is on price hikes that you mentioned. So when you are taking the price hike, is it area acceptable to customer? And despite the price hike, are you able to kind of broadly maintain market share for the expected product?

So we have had quite a good experience during COVID period. We're in a lot of supply chain disruptions came, and we had to pass on some cost to the market and which we did. And now one thing. One phenomena we have understood and clients have understood pre-COVID and post-COVID is, the customers have become more kind of recipe -- they're more the kind of aligned with the thought process that when the market disturbances take place, they have to participate in the market with the suppliers to get the high-quality products. So one is that the demand for the high-quality products like we is quite high and the customers appreciate it. But whenever there is an inflationary issue or where the displacement of the supply chain takes place. Whenever we go with the better price in the market wise, I think customer responds positively. So that's where our team is quite sensitive to it, not that we have to pass on everything. We also optimize with the productivity in-house. And then whatever we cannot hold on, our customers are able to participate on that. And the increases that we carry it out is basically calibrated around that, yes.

[Operator Instructions] Next question is from the line of Mohit Kumar from ICICI Securities.

I have -- my first question is, do you have escalation clauses in long-cycle orders like Metro rail, which you've signed in this quarter?

Escalation for the...

Commodity inflation, if it happens, there is escalation clauses, which protect us?

Yes. Mohit, I think it's a very good question. Thanks for that, okay? So I think there are escalation classes. There are price variation classes in all contracts which we do on a long-term basis. But we should understand these price escalation process may also come with a ceiling, right? -- up to which it is there. So it's basically about risk mitigation and how fast we execute this for contracts. But the answer to your question, yes, we do have price escalation process in our contracts.

Even when you signed with the private parties, right? Is that right?

Yes.

If I can give one more question. Are you seeing the conversation happening for large data centers of 100, 200-megawatt size -- how do you think it's too early and expect it to materialize as we enter F '27 and F'28 -- F'28, F'29?

The person to give the color is Ganesh Kothawade.

What's the question? Can you please repeat?

Question is, are we seeing the conversation happening for very, very large data centers of 100, 200-megawatt quantum. Or do we think it's too early and those conversations will start in maybe CY '27 and CY '28?

No, it has already been started because whatever the hyperscalers has placed our in the previous years, those executions are ongoing and even whatever contracts now, which we are signing or discussing, there is already delivery schedules, which has been given for the '26, '27 and even up to '28. So conversation is already going on. So I don't see any delay into that.

For the very large...

Sorry to interrupt me we request Mr. Kumar, please rejoin the queue. Thank you. [Operator Instructions]. The next question is from the line of Puneet from HSBC.

In the beginning of the conversation, you talked about 1% impact from competition intensity. Can you give some more color on what are you seeing in the market and in what segments?

So we have 16 distinct businesses. And if you pick up each and every business, they have a very different profile of competitors. So if I collage it for the whole company, it was a very large kind of a country. So I would say, yes, you're right, there is a competition intensity as the size of the market grows. You have participation coming from Japanese. You have a participation coming on Korea, some Chinese. So you naturally have nontraditional players which they're increasing in the marketplace. So it's not the majority of our market segment. It's on the certain market segments we're in it is more [indiscernible] to be increasing on the competition side.

That's helpful. And if you can just give some more color on how should 1 think about the $75 million CapEx in terms of phasing and when do you expect it to capitalize?

It is about expanding our capacities, both in the development as well as certain businesses, which we had, they were small, but now they have grown to size that they require larger places to produce more. And also, we have introduced some new project -- new product pipelines, which are localized and they also have not only mandate for India, but they also have mandate for exports. So those are the places in this expansionary expansionary investments have been carried out. And this is a continuous process, and we will they will see that in future, there's always a run rate for it.

[Operator Instructions] The next question is from the line of Sameer Thakur from AMBIT Capital.

Can you give us the breakup of volume and price within the group? Is that possible?

Volume.

Volume and price mix?

Volume and price mix of what?

The growth. I mean within -- sales growth within it, how much is the volume...

Sorry to interrupt you Mr. Thakur. Sir, can you please check your handset more? We are unable to hear you clearly, sir. We have a line for the participant. We'll move to the next question, which is from the line of Rahul Gajare from Macquarie Capital.

So we have seen a sharp decline in margin over the last 2 years. And we understand this is a combination of QCO, ForEx and now the Gulf will be the latest variable. Now based on your assessment and on the back of the price hike that you have taken -- when do you think we can see ABB going back to 18%, 19%? Or if that is a 2-step process, when do we see the company going back to 16%, 17% margin?

Okay. So I think, Rahul, I think we need to deal with the problems one at a time, right? So -- but unfortunately, the problems keep coming. It doesn't seem to be any -- but having said that, I think there are continuous efforts to mitigate this particular business and go to market. It is a combination of both volume and pricing and also the inflation being available to take the inflation of commodities and to create -- it's a very bit of a I would say, not a simple game, but have work to do, right? So I think all efforts are on. We also aspire to be in the so-called once we had reached 15% and we have been -- we said that we will be there at 12% is what we ended up last year. So that is actually a good -- the range to be in and what we see with the current challenges, what we are -- what is ongoing in the market.

Mr. Rahul, is the question answered.

Yes. So do you see the entire year will be subdued in terms of profitability based on the backlog that you'll have, having the limited price hike that you have been able to take?

So normally, we don't give any guidance about what could be the future.

No, no, I'm not looking at guidance. This is your cost and you have taken x price. So price. So have you been able to take price hike higher than the cost. That's the only thing I'm looking at?

They are short cycle orders. The price hike which we take today is not valid next quarter because of the commodity and the ForEx rates faster than the price hikes what we have.

Okay. So regular price is the answer.

Because I think there is always a lag between what the inflation in the market is behaving on the input cost vis-a-vis the pricing which you could take. We are taking into account the competition intensity and the market dynamics.

The next question is from the line of Sameer Thakur from AMBIT Capital.

I got disconnected earlier. So in data center in a 12% to 14% of backlog -- so it's mostly an electrification, if I'm not working, should we so like 24%, 25% of the backlog in electrification? And is that margin equity should be margin equity? So mix can be positive going forward? Is that the right?

You mean what is the percentage in electrification. I think we haven't calculated top our head, but we've given you on the company basis. But yes, it is a substantial in the books of our distribution solution led by Ganesh and also on the smart product business, SmartPower product group as well. So yes, this is definitely positive for our books as well as on the margin side, yes.

Okay. I got disconnected earlier. So I'm not sure whether it's a rapid question, but any split on the price and volume in the growth?

So is the first quarter. So we have another 4 quarters to go probably then we will be in a good position to say that what could be an aggregated impact of this. So I think...

Understood. Just last question. In data centers, generally give the base orders or generally there are large orders only?

We have both. There are two ends of it. One is you have the hyperscale asking for a very large-scale power supply into it. But then also we have the partners and integrators who supply into the mid-level and colo data center and they supply power supply into those. So those are not as large, but that's where we are able to address different market segments in the data center.

The next question is from the line of Subhadip Mitra from Nuvama.

My question was on the margin side. We've seen the impact over the last 4 quarters also because of the QCO impact? And my understanding was that the QCO impact should probably taper off over the next 1, 2 quarters. I just wanted to get an understanding that with the price hike that's already been taken and hopefully, with the QC impact going away probably over the next 2 months, can we see some recovery in margins going on?

So yes, I think your answer is yes, and that's why we come every morning to our office to make sure that, that happens. But what our observation over a period of time is that whenever the markets are disturbed, whether it is because of the COVID reasons or some use reasons, these are not very good things because what you require is you require certain amount of certainty and linearity for businesses to operate based on how the business models have been constructed. But yes, last year, because of tariffs, uncertainties than QCO and this year now whatever is going on to West Asia, there is some kind of a disturbance that comes to the linearity. The moment things stabilize. I think given our equation with the gross margins we get out of the market and we we do it on top of the stable supply chain, I think you have seen that whenever that happens, we have a good margin availability into our business. We had to allow a little bit of a sustained period of stability, not so much variations every few quarters, yes.

No, understood. Understood. Just one last question from my side on the data center a bit. While we are hearing of a 2 gigawatt annual CapEx is what the government is targeting. Are you seeing the annual ordering now in the 2 gigawatt was because our understanding was that the current bidding pipeline is probably somewhere between 500 to 700 megawatts. And secondly...

We do see it in the project pipeline that buildup is there, yes.

Perfect. And would you be also catering to the overseas market for data centers where you produce in India and supply to parent for data centers overseas.

So we have organization all over the world, and we have capacities to serve. But right now, you're right, the demand on the global system is quite high. So there are certain specific products, which our global businesses pick up from India. And yes, we do participate in that.

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

Thank you. Thank you very much. Thank you, everyone, for joining this particular call at a very short notice, but we thought that we should complete it immediately because we have some extraordinary results to tell about it. So what I think we'll again definitely connect in the next quarter. And in case in the between, if you have any queries, anything which you need to know more, feel free to drop a line to us. We will answer to your queries. Thank you very much and to the team who could make and join the call.

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