This Capex Cycle Is Broader, Says ABB India's Sanjeev Sharma

The current cycle is much more distributed, and 'targeted in the right segments of the market', says Sharma.

ABB India Office building (Source: Company website)
ABB India Office building (Source: Company website)

ABB India Ltd. maintains a 'long' position on the country as demand is expected to grow, according to Sanjeev Sharma, country managing director at the company.

"It will be a different cycle," he said. The last cycle, in mid-2000s, was very capex heavy, especially on power plants — coal-based power plants, gas-based power plants, expansion steel plants, and much of it came under non-performing assets in the mid 2010s, he told BQ Prime's Niraj Shah.

The current cycle is much more distributed, and "targeted in the right segments of the market", according to Sharma.

What's Different for ABB India

ABB India has changed its product mix in the last three to four years, Sharma said.

"You would know that we had a power grid business, which is not held by us anymore. Now overall, our portfolio is 80% products and the engineer to order products, which are fast-moving industrial goods," he said.

The company is set to benefit from this, as fast-moving industrial goods have a "very quick conversion cycle".

The building segment is expected to experience maximum traction, according to Sharma.

"70% of the buildings that will exist in 2030 are yet to be constructed," he said, and as the country grows more energy conscious, production must become sustainable.

ABB's building management system manages the entire mechanics of a building from one control center and consumes 30% less energy.

A typical large process industry could consume 40-65% of the energy used in motors, Sharma said.

IE2 standard motors consume more energy, compared to IE3 and IE4 standard ones, which can lead to a 15-20% reduction in the energy costs.

Another area where ABB expects growth in India is robotics.

India has grown from using four robots per 10,000 workers to eight robots per 10,000 workers, Sharma said. The number, however, pales in comparison to China, which uses 120 robots per 10,000 workers, and South Korea, which uses 800 robots per 10,000 workers.

However, India continues to enjoy an advantage, which is its relatively cost effective labor, compared to Europe and other South-East Asian countries, says Sharma.

A Shift Away From Large-Scale Capex

"I think there's a marked shift of the capex story, as we used to see 20 years ago and how we see it now," said Sharma.

ABB India has observed a shift away from what earlier used to be large expenditure by large companies on plants, such as refineries for petrochemicals, to now medium-sized plants which are getting refurbished or upgraded.

More medium-scale industries, machine manufacturers, and original equipment manufacturers are being introduced, increasing the breadth of the market, Sharma said.

"So even if you don’t have a very large-scale capex, which hasn’t kicked in, you have a base which is much broader now," he said.

New Segments

The company is also adding new segments, such as data centres and electronics manufacturing. While value contributions remain relatively low when compared to core segments, the rate of growth is much higher.

While new segments experience higher growth, ABB India's core segments remain strong.

"More than 750 locomotives in the country use ABB technology. Eight out of 10 metro projects, which are running around across the country, use the ABB technology," the MD said.

The company also provides more sophisticated technologies produced locally, which are now in demand owing to the Vande Bharat trains, he said.

Watch the conversation here: