Siemens India chasing large orders, says CEO Sunil Mathur
Engineering firm Siemens India hopes to place digitalisation and technology at the heart of the company’s strategy even as the Indian unit of the German conglomerate is chasing orders worth over $10 billion in transportation, energy and smart cities projects, according to market estimates.
Siemens India is looking at prospects of standard digitalisation solutions across the business verticals, including mobility, smart grid and power generation, said the company’s managing director and chief executive Sunil Mathur in an interview on Tuesday. Aiming at profit-led growth strategy, Mathur said Siemens India will bid only for select projects that will positively contribute to the bottomline.
Siemens’ chase for profitable growth and large orders comes at a time when the percentage share of stalled projects among total projects in India has risen to 12.3% for the quarter ending March 2016, according to data released by the Centre for Monitoring Indian Economy for the month of April. An increase in the number of stalled projects for three consecutive quarters has brought them to their highest level since Narendra Modi assumed office as prime minister in May 2014. The government is yet to place big orders to boost public capital expenditure.
“We are looking at participating in locomotive projects of Rail Coach Factory (RCF) at Kanchrapara in West Bengal and some of the first high-voltage, direct-current (HVDC) transmission line projects. We are also participating in the bids for upgrading train speed in India. Siemens India is also looking at opportunities to provide technological solutions to transmission lines to increase efficiency. We will be bidding for smart cities too,” Mathur said. He said the firm is looking at connecting all these projects and business with standard digitalisation possibilities.
All these orders have a combined worth over $10 billion, according to market estimates.
Siemens secured an order worth approximately Rs.570 crore to supply Static Synchronous Compensator solutions to state-run Power Grid Corp. of India Ltd on 27 June. This was in addition to a Rs.78 crore order from Power Grid on 13 June to design and commission Phase Autotransformers in Bhuj, Gujarat. On 22 June, Siemens secured an order worth Rs.83 crore from Indian Railways’ Diesel Locomotives Works at Varanasi.
Siemens India believes that the company has exposure to all the leading flagship projects announced by the Indian government, including Make In India, power for all, health for all and smart cities, and that winning some of the large projects could be critical for the firm, which focuses on the areas of electrification, automation and digitalisation.
Mathur said Siemens India is evaluating bringing factories in India with 99.99% accuracy through high automation and advanced technology helping cut down more people working on shop floors but supported with computer programmes. He said some of the German factories are extensively using data analytics and digitalisation to save cost and increase efficiency.
But what is stopping Mathur to set up such factories?
Madan Sabnavis, chief economist at rating firm CARE Ratings Ltd, said private sector firms are not injecting fresh capital as they are waiting for big orders from the government.
Sabnavis said the private sector is facing the problem of excess manufacturing capacity at present and they would want to step up their investments only when government orders start trickling down to actual business. He did not comment on Siemens India.
“On the manufacturing side, it will take at least two years for new factories to come up in India as there is excess capacity in the market currently. That does not mean the economy is not moving. There are things moving in infrastructure side. In last one year alone, India has awarded 5-6 metro rail projects and major locomotive projects,” Mathur said.
In a 13 June report, rating agency India Ratings and Research Pvt. Ltd said excess capacity in the manufacturing sector is constraining capex leading to a contraction in the Index of Industrial Production (IIP) growth. India’s factory output faltered in April, contracting once again after a gap of two months, signalling a persistent agrarian crisis and lack of private investment demand in Asia’s third largest economy.
“We have 22 factories in India. Siemens India is considering several internal proposals of setting up new factories but we are evaluating the business case for the same. Siemens would not hesitate to set up another 22 factories if there is a business case and demand,” Mathur said. In 2015, the German conglomerate committed to invest €1 billion in India as part of its growth strategy. Mathur said typically the India unit earmarks capital expenditure of around $200 million for a financial year.
Mathur said the government is giving the right messages to industries in a consistent manner with interests at reasonable level and that the economy is in much better shape compared to where it was.
What is stopping private enterprises in bringing fresh investments?
“The demand has not really picked up. The private enterprises will wait for domestic consumption to pick up. There is no fresh capital coming as export front is also in trouble because of political and economic reasons. However, large orders in defence, steel, transmission and distribution will start flowing in the next three to four months,” Mathur said.
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