Ladies and gentlemen, good morning and welcome to the ABB India Limited Q1 January to March quarter CY 2025 earnings conference call. As a reminder, all participant lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star, then zero on your touchstone telephone. 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, Ren. Very good morning once again to all of you. Thanks for joining the Q1 2025 call. Along with me on the call is Mr. Sanjeev Sharma, the Country Managing Director, and we have Kiran Dutt, Brenna Hogan, and Ganesh Kothawade, who lead electrification divisions. We have G. Balaji, who leads the process automation, and Subrata Karmakar of Robotics. Sanjeev could not join this call as he is traveling, but therefore we will handle the queries relating to motion by ourselves. Okay, 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 the four business areas, namely electrification, which all deals with the distributed solutions which distribute 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.
Electrification portfolio is quite full, and it is one of the largest business areas for us in ABB India, followed by motion, which has drive products, system products, system drives, NEMA motors, IECLV motors, large motors and generators, traction and service. It is 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, and robotics and discrete automation is all about robotics that will be supplied 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 five manufacturing locations, namely two 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. 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 even in the remotest part of the country. We continue to expand that. As we speak, we are expanding our capacities, and as and when we are ready, we will also announce those to you. Next, please. 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 crore.
We expanded our portfolio with low-voltage frame-proof 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. 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 one and two, GHG emissions, we have reduced by 87%, comparable to our baseline in 2019. 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 the Asian Center of Corporate Governance and Sustainability. We don't apply for such awards.
We were just picked up by their own independent research. 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 data available through the databases. Now, in quarter one, 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 crore. 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 impacts customers in different segments of society and applications.
Like in the case of Indian Oil Centralized Pipeline Information Management System, we have provided automation 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 fuel gas desulfurization for a leading energy company. For an integrated energy major, we have supplied SCADA and PLC for a major offshore project. The traction systems for railways were also part of our significant wins. Switchgear, another 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 Drive for the entire company. You can see it gives you a kind of a spectrum of applications and industries that we serve.
That gives us the basic resilience in different cycles of the market because we are exposed with multiple businesses to multiple market segments. That is why we have the confidence always to continue to navigate whatever changes that come into one segment to the other because economic cycles play through different market segments at different times. 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. We always have very wide and deep engagements with our customers in multiple forums. Each of the businesses engages with the customers.
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. In these forums, we detect a lot of new customers, and we can start the journey with them for many years to come. Now, when it comes to the diverse businesses which are catering to 23 market segments I mentioned, this gives you a picture in terms of which market segments from our portfolio point of view are on the high growth side, moderate growth side, and the low growth side. Growth level does not mean that the low growth segments, so-called growth segments, still form a large part of our offerings. These cycles, and they sometimes are in low. They go to moderate. The moderate segments can switch between high and low.
That is the reason we continue to maintain focus and 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. Just to give you a granularity, 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%-7% year-on-year. As of 2024, India's green cement market is valued at approximately $2.31 billion and is projected to grow at a CAGR of 5.85% through 2029.
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. We see that this is a long runway and long highway for us to travel. Our solutions, which essentially aid in supplying energy-efficient technologies for cement plants because it is a very energy-intensive process, and also the process automation and export systems, help cement manufacturers not only produce cement efficiently but also manage the grades based on the market demands that come from the marketplace. We have quite a good suite of portfolio in this particular area. Now, when we look into sustainability in practice and our goals, as I mentioned before, we have the scope one and two, GHG emission 87% reduced compared to 2019 level.
Zero waste to landfill units. In 2025, we will have four units qualifying for that. In supplier engagement, we are increasing, and 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 pedestrian. 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 range.
Green school campus programs, then skilling 400 youth 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 especially abled people. Also sponsoring a project in the Himalayas wherein it helps waste collection and recovery center because a lot of tourists bring a lot of stuff, which cannot be left in plastic, cannot be left in the hills. There are volunteers who collect it, and we sponsor collection and distribution of it in the right places. Factors to watch out for in 2025, we see, there are different years and different cycles, and we are experiencing that cycle. 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 is where we decide where the opportunities are. We focus on the opportunities rather than we get too worried about macros. 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. With this, I will hand the presentation over to T. K. Sridhar to take you through financial highlights. I will join you back later when we have a question-and-answer session. Thank you.
Thank you. Thank you, Sanjeev. I think we get into another interesting part of how did we perform in Q1 2025. Right, the first slide. Base orders grew up by 10%. I think this is despite the fact that we also had a large order in the last quarter, and we could make it in this quarter as well. I think overall, what is more encouraging is to see the base orders growing while the large orders definitely are something which come as per the CapEx cycles which get decided. This is something which is a healthy part of it. If I remember correctly, the market was concerned in the last quarter in 2024 why were the orders not growing. We did say that some of the orders were delayed, and it went into Q1.
It may go into Q1 2025, and that's the result why we could see a large order of INR 200 crores which is there for the particular quarter. I think the order backlog, 9,958, gives us a good visibility of what could get executed and for the future revenues. Two-thirds of it will get executed in the coming quarters. The balance will go to the next year based on the project schedules and the long-term service order what we have for traction converters in the years to come. Revenues, 3% up, but I think this was more because the market was a bit volatile. The customers had a preference to schedule their supplies according to the tune of the market.
They were slightly lesser, but I think having said that, we are clear that as the volatility topics sees down, I think they should also pick up going forward. Profit before tax, 20% is what we are able to maintain at this point of time. Again, coming from a good mix of operating leverages and also a price realization which we had. Not to forget, we did have a favorable Forex impact in this particular quarter, contrary to an unfavorable one in the last quarter, but it is basically more of the movement of the foreign exchanges and the commodity prices which we do. This is something which impacted the margin, but operationally, which excludes all the foreign exchange variations or any other one-time impacts, is what we see still standing robust at 16.7%-16.4% for the quarter.
It is in line with what we had done in the previous quarter. Q1 2024, it is definitely lesser, and that's more because the volumes in Q4 2024 were INR 3,300 crores , which is INR 4 00 crores roughly compared to INR 3,160 crores in the current quarter. In other words, we did not lose out on any of the structural issues. It was only more about operating leverage, which was missing due to all of our revenues. Cash balance, INR 4,700 crores . I think our collections were able to keep speed with the revenues and also the overall collectibility. We did not find any drastic liquidity issues in the market as what to go forward. That is something which we think we will continue to focus on, and we will definitely go forward to have different options to how to use this cash. Next slide.
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 crore, INR 2,500 crore, we are now stabilizing at a base order of INR 3,500 crore. That is what we could see on an overall at this point of time, plus some large orders which came in in this particular quarter. There have been large orders in the last several quarters in the past, and that is more from the demand which was coming up after the COVID-19 CapEx cycle, which was rejuvenated in those particular quarters. That helped us as well. Also, the market focus into fast-growing markets, the medium and the realistic also has a reflection in this particular large orders what we have been receiving. Order backlog, 11% up year -on- year.
Two-thirds of them are executed in the next quarters to come, and the balance would go to the year after. Yeah. This is an academic slide for those who follow the press release and also try to sort of look at what is correlated with the local performance. Overall, ABB Group would have announced 1% or a flat demand environment from India, whereas we declared 4%, including the large orders what we had. A bit of a view into the P&L account. Material cost held at 58.3%, holding robustly at the point of level, and it's more coming from the point of mix of revenues, operational efficiencies, and also some price realizations which are favorable during the quarter. That was something which helped to keep the material cost 58%.
Personal 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 we have recruited more. Also, we had certain salary revision which was done in this quarter. Accordingly, the actual valuations get done once in every year as in the month of March because that is a financial year which is applicable for all actual valuations. That gets recalculated based on a higher salary base, and that has a momentary impact for that particular quarter. It is consistent across all the first quarters in several years to come, at least in the agency for this organization. That is quite typical of it. Other expenses with the same level.
I think there have been no, I would say, one-off expenses which is more in line with the volumes and the inflationary trend that has happened and also in line with the marketing efforts that have been going on to make sure that we remain competitive and relevant in the market. Exchange rate gain, that is what I told, is in swing of almost INR 20 crore compared to the previous quarter, same year, the last year. Same quarter, previous year. That is something which is more on account of mark-to-market impact which we have on the derivatives, commodities, and the foreign exchange reinstatements. It is momentary. Sometimes we have a gain, sometimes we have a profit, but at the end of the day, operating profit is what is important for us, and we are steady and strong on the operational profitability.
This is something which is there on the financial statement as what we see. Yep. Go to the next. Yeah. Getting a bit deeper into business segments at this point of time, electrification, continuing its strong run of INR 1,600 crore minimum. I think, and to be honest, in INR 1,791 crore of Q1 2024, they had a large order from a data center, which is not there in this particular order. It is more base order. That way, Kiran is very happy that he is able to get more of base orders in this particular quarter. 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. Revenue is slightly lesser.
Of course, Q4 2024 is always a good quarter for us because that's the last quarter of the year. Therefore, there is something which is very strong actions which happen to make sure that we reach the business performance levels compared to the previous year. That's something. On an overall basis, INR 1,200 crore revenues in the last four quarters. Now we are talking of INR 1,300 crore revenues overall. I think an upward trend has been maintained. Profitability, yeah, 25.7%. Good, I would say. It's in all standards, pretty much decent from the electrification division from where they were coming from. Motion, again, we had a large order of INR 200 crore from a railway segment now again. I think that's from the traction converters business. We are able to keep up that particular momentum of INR 1,200 crore.
Revenue is steady at INR 1,000 crore, INR 1,100 crore every quarter. That should slightly go up going forward as the backlog starts to execute itself from the project orders which is there. 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 doing a Q&A. Overall, I think process automation is dependent on the CapEx in decisions which are very much relevant for them, large-scale CapEx decisions, 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 segments. That resulted in decisions getting delayed, number one.
Number two, and also April to March being a 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 moments in the macro factor as it's supposed to play out. There is no opportunity decline in the market, but it's more definition of decision-making which is slightly moving up the quarter as we go forward. Yeah. I think the sum and that has definitely resulted in a backlog which is lesser than the previous year. I'm sure that the orders what would in case if we are successful in the case decided in the future, this should also help us to do it.
The good part of it is that even though the orders are down, we are definitely on the revenues, we're not so bad off because we had a good service revenues which came up over there, which definitely helped the profitability as well. Next slide. Robotics and discrete automation, large order from an electronics sector, so helped upshore of the orders. This was also something which we expected in the last quarter, but firm and effectified in this quarter. I think all of them tending in the right direction, including the profitability for robotics. 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 and sorry, RMP and MO and EL still dominate the product offerings of us.
We are at 74%-75% of the business, which comes from these two segments. The balance is driven by process and robotic process automation, robotics. 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 are 73% and projects 13%-14% is what we see, definitely in line with what used to happen in the previous. In terms of channels as well, it's constant. In terms of exports, this quarter was slightly definitely higher in exports. That's what we could see. This is in revenues, but in orders, we were higher in exports is what we see. This is something which is pretty interesting.
As we see, another thing which I would definitely look at is that the orders from tier three and four have improved substantially compared to the previous quarter. This is a welcome fact, and it is also resonating with the efforts which are happening by reaching out to the hinterlands of the country to be more relevant in those particular markets as well. Overall, I think a good quarter according to us, other than revenues, which are slightly off the mark, and that is more driven by the macro factors, but all the other factors and all the other topics in place. That is what I would say. Yeah. This is the last slide, if I am not wrong. Yeah. I think we can open up the meeting for Q&A.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The question comes from the line of Renu Baid Pugalia from IIFL Capital Services . Please go ahead.
Thank you. Good morning, team. My first question is, Sanjeev, you did mention that macro is not looking so exciting, but you're concerned more you're focusing more bottom-up. What we saw in PA in the last quarter with respect to orders getting postponed from customers and execution, does that phenomena concern you in terms of the likely execution for this year that we may flip from double-digit growth to single-digit or flattish execution this year?
Or bottom-up, we have a fair amount of confidence that double-digit revenues growth trend should be intact. That's the first question.
Thank you, Renu. In our view, the process automation business represents largely the projects business, which is about 10% of our total portfolio. They do depend upon how the customers feel confident in the process industries as well as in the large government infrastructure projects in the, say, in the oil and gas and the other power generation area. There are 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. We do believe those projects are still in the pipeline, and those decisions will come. I think that's what it is. It's very difficult.
We have just finished the first quarter briefing, so it's difficult to say what happens end of the year. As far as our base business is concerned, that continues to be robust. It is to be acknowledged that as far as the large projects are concerned in the market, they are there, but they are sluggish in decision-making, at least in the first quarter. We will see how the second quarter for us and third quarter plays out. That is 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 a few inputs from the annual report. Within the product segment, others as a category in the last two years have grown very smartly from INR 1,400 crore to INR 2,400 crore + revenues, fastest CAGR. 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?
If you have been Renu, you've been hearing our commentary for at least, in my history, about 38 quarters. We have maintained that we play the market from three or four angles. 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. As the economy is growing, it continues to kind of become more sophisticated. More and more ABB sophisticated products keep coming, and we kind of localize and spread it in the market.
That's one effect which is playing out in this year as well. The other part is our geographical penetration because the India growth is moving into tier two, tier three cities. Sridhar mentioned that expansion is causing expansion of our portfolio intake from the market. Last but not the least, the economy continues to expand, and the market segments which were moderate in size earlier or small size, I think they have become substantial size now as we go forward. These are the few things which cater to it. You are absolutely right, especially in the electrification and motion. We have expanded our portfolio, and that portfolio is playing out in favor for us, yes. Definitely, 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, localize, and we expand on top of it, yeah. Any particular products to call out or something 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 drives product, there again, we have expanded our portfolio and also have localized. 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 piece.
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 two parts of it. One in terms of energy management solutions where we started expanding our portfolio there, which is very, very important for customers in terms of finding out in what way the buildings are efficient or the industries are efficient. 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 switch range which is for the commercial buildings and the residential buildings. This portfolio has really expanded a lot, and we are seeing a lot of traction in terms of orders and revenues coming in during quarter one. In the case of ELDS, our distribution solutions, Ganesh, would you like to mention? Ganesh? Ganesh, we're not able to hear you. All right. Maybe he's not. If you recall that we had inaugurated an expansion of our facilities in Nashik one and a half, two years back, and that production of GIS facility is on.
That really has created quite a large base for us to serve the market, wherein the market has become sophisticated because they require small footprint switchgear which can go into the basement of buildings, or it can be small urban areas because the land is something which is more premium in those areas. We are seeing quite a good expansion of our portfolio and the investment that we made in that area. We continue to expand in Nashik our localization effort. There are certain products which I cannot say directly the name of, but those are the products which are only produced in one country in Europe and another country here, which is India.
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. That also reflects in our profitability and growth, yeah.
Sure. Thanks much, team, and best wishes. Thank you.
Thank you. Thank you very much.
Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to respect two questions per participant and rejoin the question queue. The next question comes from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Hi sir, thank you so much for the opportunity. Sir, the process automation business is showing a weakness in terms of negative growth for the last three quarters. When do you think we'll be able to come back on the growth path in this segment?
Thank you, Mahesh. As far as when we talk about ABB present in this market with 18 divisions and 23 market segments, we are the true reflection of what the market is doing. I think what we do is when the market kind of and the customers that we are trying to serve, they're ready for decisions. They show up in our books. As I said, process automation is 10% of our large projects, process automation is 10% of our portfolio. Largely, we have fast-moving industrial goods. That base order continues to perform well because the country is expanding and is absorbing those products quite effectively.
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. I would say indirectly, if we watch these market segments and see the 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 two quarters, the order inflow has been soft overall. We had a single-digit growth this quarter, and previously, we had a negative growth. Going into next two to three quarters, will the momentum remain the same?
We are coming on back of last five years, wherein we grew CAGR 22% in the last five years, and our revenues grew 20.5% on back of economy growing 6%-6.5%. We have had a fairly strong run over a period of time. What happens is that once you have a strong run, just like in the markets, you have a time correction, and you also have a price correction. In this case, you can say that certain market segments take a breather, and then the next cycle of investment comes, and that is 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 in the US and also now the recent week events. 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 that will pick up. Whether it happens in running quarter or it happens in next quarter is difficult to say, but we are very optimistic going forward that we'll have reasonable rates of growth in this market for us.
Sure. Thank you so much, sir.
Thank you. The next question comes from the line of Subramaniam Yadav from SBI Life Insurance. Please go ahead.
Thank you, sir. 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 Q1Q changes in a couple of sectors moving to moderate, what is the view we take? Is it a quarterly view we take or a yearly view we take on this sector, and then we move that segment to moderate from below?
That's an interesting question. One is that this particular picture is 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 offers have to be very high, both on the sales side and also post-order side. That's one part. On the second side, we look at it from a 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.
Ideally, it is not quarter to quarter because this capital formation of the size we look for and we track does not change quarter to quarter. I would say calendar year basis is a reasonable way to look at it. 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. They say data centers started picking up in 2016 and 2017. They were next to nothing. Now, it is a substantial part of our portfolio, and the rate of growth is still quite high. That is where they stay. I think we have a bit of a metrics and more granularity to it which we track. Yes, to your question, to your answer, I think yearly adjustment is more relevant for it rather than quarterly adjustment.
Okay. When we look at the number of sectors moving from low to medium, in terms of our inflows, which are not matching to that thing, my question was related to that.
Yes. As far as you see the low segment, I think still they form quite a substantial percentage. I think it is almost 45%, Sridhar?
45%.
45% of volume comes from the low market segment. We see that as an opportunity because those segments are actually primed to spend more in CapEx because they have not done it for a very long period of time. If you look at it from that angle, it is 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.
You can just imagine that given the growth that we had of 22% CAGR in the last five 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. Yeah.
Thank you, sir. Sir, finally, if you can give some color on the service income because that buy has been increasing and leading to better margin for us. How do we look at that service mix going ahead? Thank you.
Service is almost every time between 12%-13%, but ideally, I think our aim is to get to 15%, but with more orders coming in. Service as a percentage looks pretty much the same. If you look only at the growth of service and exports, they are more very robust, I would say.
Okay. Thank you.
Thank you.
Thank you. The next question comes from the line of Mohit Kumar from ICICI Securities. Please go ahead.
Good afternoon, sir, and thanks for the opportunity. 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 CY2023? And what will your market share in IE3 and IE4 motors?
Yeah. So Mohit, actually, it's a very good question. I'm 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 do not go to that granularity of information because it's very kind of sensitive to the business.
Yeah. Sir, any color on the number for CY2023? Sorry? No, he was asking for CY2023 versus CY2024. That 54%, how does it compare?
As Sanjeev was mentioning, we don't give those numbers. Otherwise, I think we will have a different set of calls. Understood. Or if you can next time, you can bring as a base reference our competitors' numbers and say, "Hey, how they compare against them," then perhaps we can bring some granularity.
Yeah. Understood, sir. Sir, how does the acquisition of Siemens Gamesa Renewables Electronics portfolio help ABB India? What are the revenues for this business in India in calendar year 2024? And how does this expand their portfolio? Yeah.
What's the question? I'm not able to understand the question.
Sir, you acquired the Siemens Gamesa Electronics portfolio, right?
Okay. Okay. So I think Siemens Gamesa is the revenue for this business in India in calendar year 2024, and how does it expand our product portfolio? Okay. That is a global acquisition. What has happened i n India, we have not a great footprint about it, so we are buying only some inventories and capital equipment, as what we informed the stock exchange in the last quarter. They are very much players in wind, right? That is how we need to find out how wind and renewable will place. We need to find out how it works out going forward. Not much of relevance for India, at least, as what it is. 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.
Understood, sir. Thank you and all the best. Thank you.
Thank you.
Thank you. The next question comes from the line of Parikshit Karnapal from HDFC Securities. Please go ahead.
Yes, sir. Hi. Congratulations on a decent number. My first question is, given slight sluggishness in the market and the muted growth, how are the prices for the products holding on? Have you seen any price cut, or has the competitive intensity increased?
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 is an increased competitive intensity, you will see an effect on the prices, price realization. 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 for the price adjustment, there are minor product categories. There are definitely the pressures which we are seeing, mainly due to the competitive intensity out there.
Any commentary on the margin guidance? I mean, still maintain that 13%-15% band, or how it will move now on the net margin levels?
I think we have been saying that 12%-15% is where we are talking at the back margins at this point of time. So that's how it is. Now we are reaping the benefits of the earlier quarters of good price orders we are getting given at this point of time, and also the leverage on the capacities which is playing out. That is something which we will continue to watch out for.
Okay. This is the last question, sir, on exports. Any benefit you are getting on exports because this quarter growth has been strong, and any impact on the global trade friction which is currently going on with the U.S.? Will it likely benefit us in India because we do not have much of exposure to the U.S. 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 hotspots in the market. 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. Coming Monday, Ukraine and Russia is talking to each other. Maybe a resolution comes there. We also had, day before yesterday, the hot shooting war going on our western borders that came to a halt. These things have to play out. For a company like us or other 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. On export side, we have allocated certain export markets. We are doing quite well there. In India, as such, I think the way the trade system looks to be seems to be net positive for us, for our industries.
Whatever portfolio that we are exporting, we are not seeing any kind of dampening effect. In fact, we had quite a good expansion of our export orders compared to last quarter. I think it was about 40% increase. Our exports increased 40% year-on-year basis.
In orders.
In orders. Yeah.
Okay, sir. Sure. Thank you.
Thank you. The next question comes from the line of Umesh Raut from Nomura, India. Please go ahead.
Hi, sir. Good morning. My first question is pertaining to exports and services only. If I look at your trend as a percentage of contribution from exports and services, it is remaining rangebound at the range of about 10%-14% since last few quarters. How do you see a pickup happening here, whether your install base can lead more of an uptick in the services business for you in the medium to longer term? 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?
A growth of 40% on export side, I believe, is quite a healthy growth. 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? I think that is what, as long as the domestic side is stronger, it will continue to be percentages will continue to be playing out that way.
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. Given the facilities here are world-class, more and more global divisions are using our base for opening new export markets. It is a gradual but very steady process so that we are able to serve both domestic as well as global markets. Our teams are doing a good job there. We will see it will be a more steady path, but at the same time, there is a long path of continuing to gain on the export markets from India.
Okay. My second question is with respect to capital allocation for HDFC.
Umesh, I am sorry to interrupt you there. Your audio is not coming in clear right now. Could you please use your handset?
Hello. Is it better?
Yeah, better. Go ahead.
Please go ahead.
Yeah. Given that you have cash balance of INR 57 billion, and some time back you have also mentioned that you are looking forward to inorganic opportunities in the domestic market, but nothing has structured in the last two years. Any color here how you want to utilize this capital going forward?
We are expanding our capacities organically to meet the market demand. That is how some of the balances are. We have increased our dividends, so that is how our shareholders are benefiting out of our cash balances. As we speak, there are quite a few inorganic opportunities in our crosshairs, but then it takes two to tango. As and when we are able to kind of secure them, I think we will announce it to you.
Yes, definitely, there's a plan, both organic rewarding shareholders and plus inorganic opportunity. 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. Definitely, it is on the plan. Yeah.
Okay, sir. Thank you so much. I'll join back with you.
Thank you. The next question comes from the line of Jonas Bhutta from Birla Mutual Fund. Please go ahead.
Hi, gentlemen. Congratulations on a great set of results 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 two quarters order inflows for this segment have sort of moderated, and the base quarters are sitting with large project orders, that coupled with a higher or, let's say, no deterioration or the foreign exchange used or the import content remaining more or less the same as a percentage of sales, the margins for the segments seem to be really sticky and probably even trending upwards. Would appreciate if you can give us some strategic decisions that you've taken that have put electrification as a segment at these margin levels and what happens when growth resumes in order inflows.
Directionally, do margins for these segments sort of trend even higher from these levels? That's the only question. Thank you.
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. That is where a lot of investments go. Every year, our units are more productive than previous years, plus how we manage our supply chain, our suppliers. That is another factor. Also, how we are kind of localizing continuously our portfolio. It is a combination effect that comes. Sometimes it is largely aided by the margin realization, and at times, it is realized by the supply chain realization, and sometimes it is also guided by localization and a combination of those factors.
Going forward, we feel we are committed to this journey, and we do see that the volumes will continue to come. It means the utilization rate of our plants should remain good going forward. Also, the quality of customers and the market segments that we are dealing with, they reward the people with a good portfolio, right?
Amazing.
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?
Yeah. Thanks, Sanjeev. I think very similar to that. One point we noted is with respect to the order inflow. If you look at it with respect to even Q4 of 2024 and then Q1, we are at around 71% growth compared to that. The order inflows are always there. When I look at the order backlogs, the order backlogs have really increased by 36%. For sure, which is going to give us 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. If I can just squeeze in one quick one for Sridhar. If you can help us, when we see this line item called foreign exchange used, which amounts to roughly 50% of sales at INR 60 billion odd, 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 are subdivisions that are there, right? It is only a question of in which division is higher and which division is lower. I think. Yeah.
As the intensity is higher.
Exactly. Right? 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 to import, right? Definitely, I would say in terms of imports, it 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.
Power electronics.
The next one is the power electronics, which is the system drives and drive products which depend quite a bit on exports. Also, definitely in EL, where we have the electronics piece which is required. 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 the export. Imports will come only from these two segments, and the balanced 25%-30% would come from robotics. Understood. Thank you, and all the very best.
Thank you.
Thank you. Ladies and gentlemen, in the interest of time, we request you to restrict to one question per participant. The next question comes from the line of Amit Mahawar from UBS. Please go ahead.
Yeah. Hi, Sridhar and Sanjeev. Good morning, and congratulations on stable profitability. I just have one question, sir. The outlook for COI 25, particularly on base orders, can you throw some light on some high growth segments, particularly propulsion, semi-acid propulsions, and renewable low voltage and motion orders? Do you think there's a risk of this year being 10% or less growth in orders? That's my question. Thank you.
We are talking of base orders, right, if I'm not wrong?
Yes, Sridhar.
Yeah. 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. Actually, at this point of time, Amit, we're not able to say that whether it will go at 10% or less than 10% is what we see, right? 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 the macro factors which are beyond our control, right? That is how I see it, to be honest, Amit.
Sure. A quick one is on capacity creation. ABB has always been realistic and measured when they think of capacities, and we have seen that many times, which also helps at a time of low growth. This year and next year, anything particularly, one or two items where we are thinking of adding capacity or capability? If you can be specific without going into much detail, whatever is allowed and possible.
Since you asked, we will have a capacity expansion, especially in the units which are relatively small in the business. Now they are coming of age, so we have to put them into the larger units because their volumes have grown and they are demanding much more space. 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. Yeah.
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. It is a well-thought-through decision before we start to invest in organic or inorganic options.
Thank you, Sridhar and Sanjeev. Lovely to hear always. Good luck.
Thank you.
Last question, probably, I think. We are 6 minutes past 11:00. We take the last question from the line of Aditya Mongia from Kotak Securities. Please go ahead.
Thank you, everyone, for the opportunity. My question was linked. 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 kind of driving our margins up because on a relative basis, we are fairly strong? And B, from here on, have you seen the customers directionally? Which other segments can incrementally benefit as the customers further move in this direction?
If you go back to that 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 going faster because that's the place where technology plays a differentiating factor to a quite large extent, right, and where the speed of execution is also important. 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 reason is 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 can continue for some more time until the base expands and comes to a stabilization level.
In the second category, where it's called realistic growth of between 8%, 10%, 12%, I think there is a bit of a mixed bag where you have sectors which offer a margin for the value which we deliver, and some of the incremental sectors go by tendering model, which could be more competitive in nature. While we come to the last sector, which is the low-growth sector, but then high volume impact there, I think margin accretion comes more from the leveraging on the capacities and the delivery and the volumes what we build rather than just by ability to push prices over there. According to me, Aditya, all these three segments have characteristics that are quite different, right?
While the first one is very good to be in because it has the highest margin potential, it does not have the base through which we could really drive the margin. Naturally, we need to have a good balance between all the three market segments, which give us the growth we are in today at a backburn of 12-15% is what we see. That's all.
That's enough. Thank you so much for your response. That is the only question.
Thank you very much.
Yep. Thank you. 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 understand what's happened in Q1 2025. We look forward to interacting with you more and more. As we go into Q2 2025 and all the other macro factors as what we see today sort of ease out, it becomes a more level playing field for all of us. 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.
Thank you. On behalf of ABB India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.