ABB India Ltd
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Ladies and gentlemen, good day, and welcome to the ABB India Limited's Q2 CY 2022 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded and any unauthorized recording of this call is strictly prohibited. The recording will be made available on the company's and SEBI's website subsequently.
I now hand the conference over to Mr. T.K. Sridhar, Chief Financial Officer of ABB India Limited. Thank you, and over to you, sir.
Thank you, Kevin. Ladies and gentlemen, good morning to all of you. Welcome to the Q2 investors call. So we want to take you through the results of 2Q and give you a good insight of what is there coming in, how the divisions have all performed.
So on the call with me are Sanjeev Sharma, the Company Managing Director; and then I have all the business managers, Kiran Dutt, representing EL; Sanjeev Arora, representing Motion.
But unfortunately, we have Balaji traveling out, and so we don't have any PA, but we will manage that. And also we have Subrata Karmakar representing our Robotics, right? So without sort of making more time, over to you, Sanjeev.
Thank you, Sridhar. Good morning to all of you. Thanks for joining in this ABB India April to June quarter call. Next slide, please. So just as a refresher, most of you know ABB and you have been following us for a period of time. I think you have familiarity with our portfolio.
But just as a reminder, ABB has been present in this country for over a century, and we are manufacturing here for more than 70 years, with our core portfolio in electrification, which essentially deals with substation to socket products, enabling safe and smart and sustainable electrification, be it cities, buildings and infrastructure projects.
Motion, which represents the core of energy efficiency portfolio of ABB, with electrical motors, generators, drives and associated services, including the mechanical power translation products. These solutions, basically, if you see part of ABB portfolio, they are the major part of our revenue stream.
Process Automation, which is the process control system catering to the solution for process and hybrid industries, including the process control systems and the electrification and digital solutions. So this is a solution which really provides the integrated system approach to our customers.
And Robotics and Discrete Automation, which offers value-added solution in robotics, machine and factory automation in the country. We continue to operate with a widespread network, wherein we serve our customers across the country with 21 sales offices, 750-plus partners and we have 5 manufacturing locations and 25 plants.
Next slide, please. The highlight for last con quarter, April to June. You may have already observed in our results that our orders are up 64% year-on-year, revenues are up 44% year-on-year and profit after tax is up 115%.
We directly attribute this to operational efficiencies and customer connect our team and our partners have. And that's something which is contributing to this growth in a well-rounded way.
Our portfolio is spread in 20 distinct divisions, which have unique portfolio and unique business models for the market, and we operate and connect with about 20-plus market segment. So that gives us the base level robustness when we do business in Indian market and outside.
Last quarter, CII accredited us as a Responsible Export Organization, which we'll be happy to receive, which shows our credentials, which have been developing over a period of time in the export front.
CRISIL reviewed our ESG credentials, given a lot has been done by the organization in the last 2 years, and we have been rated as Strong ESG performer by CRISIL. And we are very happy to achieve that acknowledgment, but our journey continues in this particular area as we have more programs and initiatives running for us. And you may have noticed that our solid -- we have a cash position, which is solid.
Now if you see what is it that is leading to business growth. One is the characteristics of our business portfolio is that we have -- a major part of our portfolio is now a short cycle.
We are focused on very wide market segments, which are being served by direct and indirect channels. And this helps price realization in different market segments and different geographical categories where we are focused.
Exports revenue grew 45%, services revenue grew 14%, and of course, we have high growth segments, which are contributing higher than others. And of course, large projects in process industry and optimization keep trickling in, in different market segments.
So some of the examples, as you can see, which represents some of the deliveries and cloud installations we have across segments, be it in rolling mills, paint shop floors, traction converters for loco companies, local locomotives, compact substation for cities like, Ahmedabad and Surat, robotic lean palletization for fast-moving consumer goods product majors, and there's quite a good penetration of robotics in FMCG segment for us.
And of course, we continue to also help our cities to monitor the emissions that take place in the city, so that there is a good control of it.
Also on the industrial digitalization and decarbonization journey, we have city gas projects across the country, wherein our ThinkGas automation networks monitor the city gas distribution project, and it's quite a success story for us.
Just as one example for energy efficiency that we save 30% of energy in the luxury Amanbagh project or the facility Aravalis using ABB drives for HAVC systems.
And sustainability, the product and the core of our promise for smart building and smart power equipment continues to help our customers in solar, wind and solar cell projects.
On the right, you can see, which are the market segments we focus on and what is the current cyclicity of those segments. And given the widespread of these market segments, we are able to manage the cyclicity in our overall results as we pass through different market cycles.
Talking about ESG, we have some good achievements in the last quarter. As we said, all our factories they have been certified green factories, some platinum, some gold.
And also, as you can see, the ESG risk assessment, we achieved a strong category. We are establishing single-use plastic free premises beyond compliance, all units. Some of the units are already complied and the same practices are multiplied in our other campuses.
It is our resolve to become water positive in our location. We informed you last quarter that we are positive in Nelamangala, and same project is being implemented in our other factories and our premises.
We are committed to a zero waste to landfill goal at manufacturing units, and a very focused program is running. And we will -- we are very sure that as we move forward, as we learn more about India-specific and city-specific landfill practices, we will find solutions and try to reach towards zero waste to landfill.
We already have achieved renewable energy goal, that from 2022 onwards, we are 100% on renewable energy. And the waste recyclability in all of our locations has already touched 96%. We are happy about it. We do it because this is the right thing to do.
Now with respect to the social programs we are running. So we want to have a positive impact on the communities where we are present, and also far, far locations wherein our reach can be extended by the NGOs who operate.
So we are helping in the industrial setup. We are upgrading the infrastructure projects, wherein it is easy and safe for workers, women to participate in the industrial zones without fear of walking in the dark streets or streets which are not properly prepared.
So we are committed to provide good infrastructure to the capacity we have and the resources we have. We have already executed a project in 2 locations, and there are 2 more projects which are under execution.
So if you happen to come to Peenya, Nelamangala, very soon to Nashik, you will see what we really mean, and we will also share some graphical picture with you next time when we speak.
So there are a variety of projects, which are very close to our heart. We are sponsoring women engineering scholarships, especially these women come from poor backgrounds wherein you could have -- but they are very bright because the very reason they could rise up despite their resource constraint, they are able to come to an engineering college.
We provide 100% scholarship. But also we provide them the internship, mentorship. So that by the time 4 years, they compete in their colleges, they come out to be very good, participative women engineers to the industry and to ABB.
We -- this is a photograph where in you see, they are visiting one of our facilities. So we try to kindle their interest in technologies ABB has. So that as we go forward, we have them as meaningful participants, part of our workforce in the future or we release them into the open market, wherein they can find their passion.
So these are some of the examples. And now with this, I stop the highlights and hand it over to financial highlights, which T.K. Sridhar will take you through.
Thank you, Sanjeev. So go to the next slide. Yes, I think as you can see the slide, I think this is one of our, I would say, a strong quarter as we have performed. And we still travel on the direction that we want to remain credible. But we want to make sure that we are doing more consistent performance, and have a focus on the basics of how to run the organization with more sustained performance levels.
I think the -- our focus was what Sanjeev was saying on the 23 market segments, by the 20 divisions, what we have, right? They started to yield some good traction. And that's how you see a robust quarter based, among other, on revenues, as well as the margin expansions what you see, right?
And total orders received for the quarter was INR 2, 767 crores, right, which talks of 64 % growth quarter-on-quarter. But while I say this, I think we have 20 divisions, business units within each of these segments, what you see. And the information what I have shows a traction in each and every business division.
So that means it's just not in one division or one business area, which is propelling the growth, it is basically a growth by all the business divisions. It's the same for orders, it's the same for revenues, and the story of cash and profit also follow the same direction, right?
So I mean, in other words, I think the -- our strong customer connect and presence in the various parts of the geographies and also the focus on exports and services are now very well sustained on a very sustainable ground.
So with this, if I move to the order backlog, we have almost INR 6,000 crores of order backlog and this provides good visibility for revenues. None of these order backlogs are slow moving or not moving.
So they will get converted into revenues over a period of time. And naturally, this also has project businesses as well because if you look at the total traction orders happen, Process Automation is one of the major business divisions which has actually now gained more momentum, right?
Orders from ThinkGas is what we are talking of, and orders from other steel majors are something which have really improved and we are able to see that coming as an order backlog as well, right?
So -- and coming to the revenues, I think we are INR 2,053 crores, 44% increase quarter-on-quarter, right? And when we look at this -- I think we just now concluded the Board meeting. We also look at it sequentially as how we have what we performed.
Because the last quarter of 2021,was a quarter which was partially impacted by COVID as well. But even if I normalize it, right, so we see a growth pattern emerging between Q1 '22 and Q2 '22 as well, and it was across all the divisions as what I have mentioned earlier.
So the profitability, I mean, we stand at 9.5 % as of time. So I know that we promised 10 % to be minimum quarter-on-quarter, right, so but I think we will catch up in the next few quarters to come. right? So we still are in that particular band, where we will make sure that we remain credible at 10% base of PBT.
And this is in spite of the fact that we had an abnormal mark-to-market impact because of the copper which we have and the copper prices, which have fallen down, which were trending at almost INR 9,200, INR 9,300 levels. And finally, we had at the closing day [ INR 8,250 ] level. And so that having the impact on the mark-to-market and it was substantial, right?
And it was spread between MO and EL, and partially a minimum on the PA as well. So profit after tax, 147%, 115% growth over the previous quarter, right? And the sequential quarter which is Q1 '22, had a onetime impact of the sale of turbo business, which had INR 293 crores in that. So if you remove that, so then we are better off.
So what is probably very refreshing to see is the expansion in the operational EBITDA margin, which removes -- which is an impact of after removing all the embedded derivative impact, which is more transitory in nature and also the onetime...
We request all the participants to please be connected while we reconnect the management.
[Technical Difficulty]
So we are back. I think we had issues of network. Hopefully, with 5G, which is coming in, probably we have better response next time, right? So we expect that to happen. .
So from where I left, I think it is healthy to see a good expansion in operational EBITDA, which is -- which eliminates these onetime impacts and the mark-to-market impact, so I think that's something which we do and which we look at it consistently.
So cash, we are at INR 2,800 crores on the balance sheet and also investment of [ INR 315 ] crores. So totally, we will be around about [ INR 3,000 crores ].
We go to the next slide. So this dwells a bit more on how did we perform on the expenses and the income side of it. So good to see that material cost is 64%. So if anyone is wondering did we really manage -- how did we really manage this material cost. I think it's more -- it's an impact of 2, 3 really vital ingredients.
It's in -- one is definitely sourcing material from places where it is a bit more -- less costlier. And #2 is around how do we manage the mix to generate a profitable trend for the quarters to come. And of course, most importantly, is that how do we pass on the price to the market as well, right?
So because in this type where the inflation is high and where the commodity prices are increasing and ForEx is volatile, we have no other option but to make sure that the customer also pays for the increase.
And that's being something which is consistently being done by all the divisions across, right? So -- and that's how now showing up in the material cost.
So personnel expenses, we are at 7.1% compared to what we were at the previous year. Previous quarter of INR 139 crores, so in the same range. This is probably an impact of the difference, this is an impact of increments, what we give every year to the employees.
And other expenses from last year same time was an abnormal quarter, as what we said, because the COVID impacted quarter. But it is in line with the Q1 '22 numbers, what we are seeing INR 320 crores, INR 340 crores. That's basically the cost what we see.
And that's also from the fact that we have a bit of a higher freight cost and transportation cost because of the fuel price increases, and also the volumes have increased and higher exports, what we have done in this particular quarter compared to the previous quarter as well.
The next comes the exchange rate and commodities. So we have specifically made sure that this information is available. So we had a swing on account of material -- on the commodity impact to the extent of INR 53 crores, and it is spread between -- majorly between EL and MO.
So EL had -- in the results, if you look at the PBIT results, the EL results have been impacted by INR 18 crores and almost INR 35 crores by MO, right? So that's how the spread has been there.
So that means the intrinsic performance of the businesses, without considering the mark-to-market impact on account of the commodities, is something far better than what you see in the segment results, right?
So -- but the other normal topics are pretty standard, -- so we don't see -- we didn't have much of a deviation to what our estimates are.
So net-net, I think it's a strong backlog execution and a better revenue mix, which helped us get this margin expansions and better material cost impact what we see, but we definitely have to face the volatility in commodity and the [indiscernible].
Next slide. I think I will quickly finish it so that we have more time for Q&A. So electrification, I think they are, at this point of time, pretty well sustained in the market, right? So they did have a strong Q1. They also have the same momentum in Q2 as well.
And so I think we think that the trend is -- we will expect it to be continuing. So the backlogs are strong. So I think we will have a good order backlog position going forward as well.
So PBIT at INR 96 crores, which is 11.5%. Actually, if you add back the impact, what was there on account of ForEx, it is at least 2% more than what we see.
Motion, right? So Motion has -- EL and Motion as what we normally see are form 70% of our business portfolio of ABB in India. So both the divisions are -- have been -- are performing very strongly at this point of time.
So they see traction orders. Of course, there will be competition around who are picking up the market as well. So PBIT at INR 74 crores, which is 9%.
But if you add back the abnormal impact which impacted them, because motors and quite a few businesses import copper quite a lot, and that is probably what is impacting them. And they stand at a very strong 13% levels in case if you add them back.
Process Automation. So it is very heartening to see this business division coming back -- bouncing back with better performance. So they have a good service, ex-government revenues, to execute the extent of 28% that will -- that which resulted in an incremental expansion in their margins.
Robotics and Discrete Automation. So yes, I think this was a division which is -- which has very good prospects, the funnel, [indiscernible] et cetera. But today -- and this was the business division, which was probably impacted because of semiconductor topics they had to deal with, but we are confident with the backlog what they have, and the market funnel which they see, they should be bouncing back in the next quarters to come.
So -- and the next slide gives you about how we are probably looking at the channels to market, the geography and the offerings. So we do have the same range of services and exports. So the good to see, right?
So there was always a question as to how exports will grow, right? I think just to call out a number, in Q2 '21, our exports was INR 171 crores, but whereas we're talking of INR 246 crores, that means 43% is increased, right?
So that means even the export markets have increased because there are extra export market allocations which have been given to India, thereby we could see an expansion in the export volumes as such, right?
Overall, I think this was what was the performance. But I think I should also sort of close my call with saying that they would definitely -- I also see certain risks which we should sort of keep in mind, when we are looking at the future trends that could probably impact us going forward, right?
So of course, on that, right, I think I would bucket it into 3. One is commodity and inflation. This is something which we need to -- which we keep watching. So the commodity market is pretty volatile today. So while the technical analysis gives a different set of numbers. But when you go to the banks, they have a different set of numbers, which is [ forward ] plus premiums, right?
And also the inflation which is catching up on the repo rates going up. So this could have and probably an impact on the -- our material cost as well as cash -- availability of cash.
But we are keeping a very close watch on this, and accordingly, adjusting the levers of connect with our customers to get cash back home and also our supply chain management to manage the vendor base as well.
The other impact will be around ForEx, right? So ForEx is something which is under no one's control. So because there are various economic factors which impact the ForEx volatility.
So here, we keep the value of the business unimpacted because our policy says every -- all the ForEx exposures have to be hedged immediately as and when either you get a sales -- order from the sales or when you place a purchase order to the vendor.
So to that extent, so the tendered margins remain unimpacted, while we may be -- while the results may at times have to go through the market-to-market impact. But the point which I want to dwell is that with the U.S. dollar [indiscernible] strengthening against the U.S. [indiscernible] against the Indian rupee, we are conscious of the fact as to how do we close the gap between exports and imports.
Last but not the least is geopolitical and the COVID topics, right? I know there are a lot of geopolitical topics on the anvil and also the global trade balance and agreements getting resigned, so we have to look at it as to how it pans out.
And of course, I think the last but not the least, we definitely have -- the country has learned how to manage COVID as a topic, but we remain watchful of that, right? So this is probably my last comment on it. I turn over the call, Kevin, for the Q&A.
[Operator Instructions] The first question is from the line of Ravi Swaminathan from Spark Capital.
Sir, congrats on a very good set of numbers. So basically, especially the order inflow traction also has also been very strong at around INR 2,700 crores. And I think we had seen some large orders in the Motion business and the Process and Automation business.
If you could give your commentary on the sustainability or the visibility of such large orders over the next 12 to 24 months,from steel, cement and other large orders? So basically how they are panning out?
Is the ordering momentum still firm from these kind of sectors, which generally give the large ticket orders? So if you can give a commentary on these sectors, it would be really great.
Yes. Thank you, Ravi. So I think we have the benefit of Sanjeev Arora, our Motion President present here. So -- and also is Ganesh is participating as well?
Ganesh is also there and Kiran is also there.
Okay. So Sanjeev Arora, how do you see on the large project side, do you have certain good orders on the traction side, how do you see going forward?
Yes. I think -- first of all, thank you, thank you very much for giving me this opportunity to answer this question, and thanks for the question. So in my opinion, yes, we are -- actually, if you see from -- if you read the market, the market currently is a bit fluctuating or, I would say, looking into the metal prices and others.
But let me tell you that the pipeline is strong. And metals, cement, oil and gas, all the large projects are investing and they are very upbeat and bullish. And that is how I see from the large projects' point of view.
And just to add to that, even the mobility part, if we talk of traction, so I think both the Indian railways as well as the metro projects,are going quite strong. So I think we are in a good space. So that's from my side.
Kiran, over to you.
Thank you for the question, Mr. Ravi. Yes, let me look at the segments other than steel, cement and O&G, what Sanjeev Arora mentioned. If I look at the segments such as data centers and railway, I think the pipeline from data centers and railways are pretty good.
It's been -- in fact, if you look at the growth story as well in electrification, it's been, with respect to data centers, F&B railways and renewable as such. So large orders from these kind of sectors are further expected. Well, it also depends on how we move forward and how the market takes it in terms of the renewables as such.
Got it, sir. And my second question is with respect to the margin profile at the overall company level this quarter, if you adjust for the ForEx, our EBITDA margin would be, kind of, almost a all-time high of around 12%.
How much more can it expand? I mean we have started seeing some very good operating leverage also kicking in, so how much more expansion possibility there from here, if you can [ share ] your thought process a bit?
So Ravi. I think we are very steady when we say this, right? So we want to target a PBT corridor of 10% minimum, that we want to promise, right?
Given the sensitivities, what we have in the market, what we have in the other factors of commodities and ForEx, right, because we're still a net importing company. right?
So that being the case, we would try to stick around with the band of 10% PBT as such, right? So even though in 1 quarter, you have an exponential -- you have an exceedingly good result, right?
So -- but with the project revenues, which would come in the next future -- in the next 2 quarters, it could probably balance it out, right? So on a year-to-year basis, we want to remain steady with the 10% PBT.
The next question is from the line of Ankur Sharma from HDFC Life.
Sir, first on the order inflows again, a very, very strong number close to about INR 2,700 crores, INR 2,800-odd crores. If you could just help us, what was the value of the large order which you typically break out?
And what was the value of the base orders? Just trying to understand also what is driving this big growth in base orders, yes.
All right. So I think we did have a couple of large orders, but I think that's not how ABB India story is getting built. It's not around the large orders, it is around the momentum that we have in the base orders.
And that is coming, we have mentioned a few times that we are really laser-focused on multiple market segments of growth across the country. And that's how we are able to also -- one is to get higher growth because our penetration is increasing.
#2, when we -- our penetration is increasing, we are also making sure that our product portfolio expands and that also contributes to a better intake. And then the geographical presence that we have that also is going much, much deeper because the India story is not only in the metros or the Tier 2 cities, it is going into Tier 4, Tier 5.
So our expansion of our partner network, that is bringing more volumes back into our system apart from our direct support to customers. So this is something which is a story which is not built in last quarter.
This is a story being built by us for the last 2 to 3 years. So if you have been following our commentary, we have been always mentioning that. So it is a compounding effect that we are getting now.
Okay. Sir, secondly, while we understand that demand is good and clearly the outlook is also looking very strong. When I compare our sales on a 3-year CAGR basis versus Q2 '19, which probably was a more normalized kind of a quarter, our Process Automation sales are flattish.
Even our electrification product sales are maybe up by 3%, 4% on a 3-year CAGR basis, and our Robotics and Motion about 10%. So I'm just trying to understand, despite our order books the last few quarters being up anywhere in the region of 20% to 30%, that's not really kind of seen in the sales growth in that sense.
When I look at, as I said, on a 3-year CAGR basis. So is it -- and clearly, most of orders are anyway a short cycle, right? So it's not that it's spread over 2, 3 years. So is it also that we are seeing supply constraints which are kind of stopping us to ramp up sales more meaningfully?
Ankur, let me give you a big picture view of how we see, okay, right? So first of all, I think as we said, our business is just not one divisional division, we have 20 business divisions and we need to have a collective look about it as well, right?
But if I look at sort of the same story of what you look at it, we did this as well, right? We took 2018 as a base and removed the so-called businesses which we divested of, which is our PG, Solar, your -- some of them [indiscernible] are power traction businesses and also the turbo charges which we currently involved.
And if you look at it, 2018 to what we are, the adjusted numbers would be roughly around about INR 5,900 crores, right, from the revenue numbers, what we had declared.
And if we come to what we look at, right, and we compare with the GDP growth, right, so we are looking at almost -- the order inflow growth is almost coming to more than double-digit growth, nearing the double digit growth.
And if I look at the GDP as a -- on the CAGR basis, it's 3%. And even if it were adjusted to an inflation standpoint, right, so then it could be to 6%. What I mean to say is that on a 3-year CAGR, we see that orders and revenues traction is far higher than what the GDP traction is.
And GDP represents the overall business, which is conducted in India. So that's how we see this, right? So because while some of the businesses could be cyclical, but I think this is more of a big picture view of what we see.
Okay. And just one last one, sir, on the EBIT side, the unallocable expenses have come off quite a bit during this quarter when I look at the previous quarter. On a Q-on-Q basis, just about INR 18 crores, this was at INR 55 crores in the previous quarter. So why this sharp fall?
Yes. I think that's a good question, and I expected -- I want only did not give you the commentary in these things, right? So I think this is basically because the Q1, which was Q1 '22, had an actuarial impact calculation, which is impacted because that's how it is.
But whereas in Q2, we had a probably a reverse way where the discounting rate has gone up. Therefore, the liability is what we have as a provision on the balance sheet for actuarial topics is lesser needed to that extent. And this is not -- this is as per accounting standard, right?
And also we had some reversals of provisions because the asset spends on the tax for the GST and everything started to come off in a better way. So to give you a ballpark basis, what would be our unallocable income, so I would say between -- peg between INR 30 crores to INR 35 crores quarter-on-quarter on a normalized rate.
The next question is from the line of Amit Mahawar from Edelweiss.
Congrates on a goo set of numbers. I have 2 quick questions. First is, in the first half period, the order intake seem to be exceeding both last year and a 3-year CAGR number by quite a margin.
How much of contribution is from the new mandates that you've got from market, especially in the low voltage. That's my first question.
New mandates?
Yes. I mean in terms of largely new business that we would have gone in low voltage from parents, how much would that composition be in the first half?
So Amit, you may know something which I don't know. Which new business mandate you're talking about?
I'm talking about the new plants, the expansion that we've got and we've got -- yes.
Sorry, I misunderstood. So you're right in a way that we have been making investments in our -- I think for the last 2 to 3 years now, as I said. This story -- now I would say that we did something dramatically good in last quarter that our results were better.
I think we have been making investments in the product portfolio expansion, localization and productivity enhancement in our plants. So the amount of productivity increase we have in the low-voltage plant is tremendous. And I think it's almost a case study in making now, not only within India, but also I think we'll share it globally.
And maybe next time when you are in Bangalore, we'll try to give you a bit of a glimpse of it what we really mean. And that is something our capacity -- capability to address the market as market shows up in a very productive and a low cost-effective way, I think that is allowing us to gain market share and also to be able to address the market with the surety that the market looks for.
Because during the supply chain constraints, the markets are a little bit devoid of reliable suppliers. So we are standing out as reliable suppliers. So whatever we are committing, we are able to deliver.
And that also kind of moved the volumes towards us. So that's one part of the story which has played out. But yes, you're right. the new expanded capacity, productivity investment and the expansion of portfolio has played into this.
Sure. The second question is more on profitability vis-a-vis the utilization. Now we don't know the utilization across revisions, but considering the expansions and considering the new throughput of orders, it seems that CY '23 can be a very strong utilization ramp up the year for the company.
And in light of what you've delivered in first half and maybe especially in Q2 in gross margins, can you throw some light on which segments we'll see a significant ramp up in profitability? Without giving any guidance, I understand and appreciate, but given the ramp-up in utilization, which is possible.
Yes. So I think it has a direct connect with what's happening in the country. I think country has opened up investments in many areas, both led by the government and also certain market segments are expanding.
So if you have seen on my slide that the market segments, by the category, when we see growth in -- growth quality in those market segments, we start connecting with those market segments much more strongly, and we try to prepare ourselves to serve them. So you're right, that story will play out.
And in terms of the profitability part, I think you are right in reading it. You can see -- as a very clear signal you can see is in our backlog. So our backlog is much stronger than last year this time or the previous quarter.
So you can see that itself then goes through the execution. It plays through the capacity and most of the product portfolio, as we say, is a value-add portfolio.
So whenever you do more value-add portfolio, part of your mix, yes, it shows up in the profitability. And Sridhar has given you already an indication of what kind of profitability levels we see comfortable going forward.
So Amit, to answer to your question, right, on the orders, right? So we need to also understand H1 was a strong comeback by Process Automation. And that the reason was probably the pent-up investments, which were there by the steel majors, was something which was decided, they had to decide because they work on a financial year of April to March, right? .
So -- but now going forward, what -- because then there could be fresh budgets which should be there, and they will also reassess their capacity looking at the demand situation.
So that's something which could be a factor which we need to really look into as to how that pans out, right? So that's a factor which we should always have in mind.
The next question is from the line of Puneet from HSBC.
Congrats on good numbers. My first question is on the [ win ] that you gave on the extra import market that has been allocated to you now. How sustainable is that extra market? Do you think it will stay with you or is it very opportunistic given the supply constraints?
So I think it is the market which has been allocated -- is not allocated, it is something wherein the group has decided that they would like to use their well-developed India base for that particular -- certain divisions to be the permanent base for supplies into certain markets.
So certain products which have been -- certain markets which have been allocated, they run through, of course, India, of course. Then apart from India, it's Middle East, South America, North America, all locations are being served from here. So these investments and this shift is permanent in nature, unless we find ourselves incapable of delivering or we have some issues in other areas.
So that's exactly what we do. When we ramp up our export capabilities, we do it in a very measured manner so that we are always able to satisfy our domestic customers. And also, we are able to satisfy the expectations on the global side.
So I think it is going in the right direction for all the divisions which are participating. But we are always going in a measured way in this. The growth rate is good. It can be even faster, but what we do is we always do to deliver what we can commit.
So that's the ramp-up we have. So yes, to answer your question, at this point of time, it's an allocation which is not opportunistic, but it is a directive, yes.
Excellent. And would you need to add capacity to meet the existing demand given the strong backlog or you're sufficient, I mean well placed?
We need extra capacity, and that is already in works in our Maneja plant, in our Faridabad plant and also in our Nelamangala plant, and also Nashik plant. So those are ongoing investments. So maybe another 1 or 2 quarters, you will hear those as we inaugurate those expansions.
Excellent. That's helpful. My last question is, there was -- in your slide, globally, the order inflow growth was about 81% and while you guys indicated a 64% order inflow growth. What has related impact divergence?
What we report over here, the right numbers, that's what we see, right?
So it could be that the [indiscernible] we're looking also looking into the overall ABB India numbers, right?
They are looking at demand orders?
Yeah.
Okay. I think there is a concept of demand orders for ABB as such, right? That means whatever be the orders, which has been emanating out of India as a country, right, for the various business segments globally also as a demand, which is generated of India. So that could -- that is probably because of other units of ABB taking orders from India because they are directly serving some of the customers, some of the solutions. So that's how we see. But otherwise, the orders which we have reported is for the reporting unit of India.
It is the supply side of ABB India, not the demand side of India as seen by the group.
And can you give some more color on what the kind of orders could be? Yes, that's all from my side.
It could be oil and gas solutions. It could be some other markets, which -- I mean some of the solutions are only directly serviced by ABB Group companies.
[Operator Instructions] The next question is from the line of Aditya Mongia from Kotak Securities. It seems like we lost the connection for Mr. Mongia. We'll move to the next question from the line of Deepak Krishnan from Macquarie.
Just probably one question. Given that commodity prices are softening, do you see any impact on pricing or pull back on pricing? And how is the competitive environment with regards to that?
So this, Deepak, is a very good question, right? So this is basically an art of how we balance our capacities and our offerings to the customer and how we are sort of ring-fencing our risk in a competitive market, so that's basically what it is, right?
So as I said, for all the orders, what we have bid and what we are executing and in the backlog, the hedges are in place. So that means that's something which has already been offered, and we will have to execute that.
Now going forward, it's a play of how the market determines the price keeping in view, the commodity volatility. And that's how our business leads that in their market to understand these dynamics and accordingly price it out.
And here, I think what plays very important is how strong our customers can access and to make them understand the volatility of it and get the right price for the offerings what we do.
So, did we lose ourselves or did we lose the...
Sir seems like we lost the current speaker -- current participant. We'll move to the next question from the line of Harish from Jefferies.
Sir, only one question. Have you provided for the large order and base order breakup for the quarter?
Actually, if you look at ABB today, right? So large orders is something which we always have a larger number, right?
If you want to just understand what is the project orders, which are sizable in, say, above INR 100 crores or something like that, I think the large orders are to the extent of only INR 250 crores in total order backlog, order book what we had.
The next question is from the line of Harshit Patel from Equirus Securities.
Sir, my first question is on our railways and metro product portfolio, sir, what would be the contribution of this segment in our overall sales? Also, if you could bifurcate these railways and metro sales between Motion and Electrification segment, that will be very helpful.
Also, as per my understanding, with the divestment of turbocharger business, I think we now don't have any relevant offerings from the Process Automation segment for railways and metros. So if you could elaborate on all these points, it will be very helpful, sir.
So you're absolutely right. On the turbocharger side, yes, turbocharger was part of Process Automation division and that we have -- at a global level, we have separated and that was -- we separated that as a company. And same thing will happen in India as it has been announced.
So the Process Automation don't have direct offerings to railways anymore because of the turbochargers. Now our offerings from EL and MO are strong into railway and metro.
So I'll invite to comment from Sanjeev Arora in terms of what is the outlook and the portfolio for motion for railway and metro and what % of Motion business is metro and trade business. Sanjeev?
So thank you for the question. I think as I said earlier also, that this is a very growing segment for us, so Indian railways as well as metro. And we have our traction converters, battery chargers, our traction motors, and we are heavily investing into this as Motion.
To just give you a flare, I would not give you the numbers of contribution of Motion business, but then this is a separate division in itself and is a separate P&L, and it is very strongly growing.
So now you can imagine that since it is a separate division in itself with a strong P&L, but -- and good investments. This clearly states that these are very growing segments. And Motion is highly bullish on both metro as well as Indian railways. And we will continue to invest, yes. Thank you.
Thank you, Sanjeev. So Kiran, on the EL side, what does go from EL into railway and metro?
Yes. When you look at railways, there are 2 factors what you need to look at. One, in terms of rolling stock is, what we look at; and the second one is in terms of the infrastructure, what we develop.
So the products are divided into 2 pieces. Some of them go into the rolling stock and the other one, it goes in the infrastructure. So that's how the railway segment is. At this point of time, as you know, as the infrastructure of the country is developing pretty fast, and the railway is something as a great investment from the government of India.
So what we see at this point of time is that all the projects, most of them are on track and really giving us additional revenues for EL business as such.
So in other words, Harshit, that for the electrification portfolio, just to give some color. So if you have a metro project, so all the power that goes into the metro project, the medium voltage switch tiers that are required, that they become part of the infrastructure. And all metros, I think they prefer ABB solutions. So most of the metros are using our solutions.
Also, if you look into the railways, most of the OEMs who are certified to supply directly into railways, they receive our components and they integrate them into subsystems and they go into the railway system apart from what Sanjeev said, wherein we have the direct technology, which also get integrated part of the traction portfolio.
So that's how it is. And yes, over a period of time, this part of the business is growing much faster than the turbocharger, which was on decline, because railways have decided not to kind of pursue the diesel engines anymore.
So that -- there is an impact. But at the same time, since they're converting everything to electrical, and the metro is also electrical that has a positive impact on our mix of our portfolio.
Sure. Understood. Sir, my second question is on the Motion segment. So could you help us bifurcate the segment sales among our sales to direct customers, channel partners and exports?
And where have we seen the highest growth happening within these different channels in the recent times? And how does that affect our margins? So basically, why do we make better margins than the other channels, between these segments? That will be my last question.
All right. So Sanjeev, would you like to give -- not a very granular picture in numbers we cannot inform, but just give some color in terms of which market segment -- channels, which are growing faster for us in this area.
Yes, sure. See, here, if I see at the motion picture, we are very much balanced here. So I can even say that the channel partner business, OEM business, direct end user business, we are equally balanced, and we have a very equal share on -- in each and every aspect.
Of course, you can always play between 3% to 4% here and there in each of the segments, but all are equally balanced. When it comes to the export part, the base was less.
And hence, we see a very, I would say, daunting growth on this export piece, and we have really doubled our numbers what we were doing. And in this year -- half year itself, the revenue has grown dramatically high.
And of course, when we talk of the exports, we have good margins. And because India being a very optimally based, I would say, country to supply and manufacture the products, so -- and it has been utilized well by the global deals. So exports have good margins.
And also, when we talk of the base load businesses, so all our factories are run on the breakeven part. So once we hit that breakeven, the contribution margin grows.
So I can say that as we grow along the journey as India grows, you will see that the factory utilization is getting more. And all our segments will contribute very handsomely on the profitability piece as well, yes.
Sir, just a very small follow-up to that. So sir, within our motors and drive sales, what will be the contribution of the high-voltage motors? And what kind of market share do we command in that customized high value-added motors?
So Harshit, there is a very -- actually, we are getting into more of a segmentation of what is happening within the company, right? So that's something which we will -- is very sensitive, right?
So if you want me to deliver 10%, some of the things has to be held with the company and other things. So that being the case, we would not like to have answer this particular question, please.
Sure, sir. No problem at all.
And as a follow-up, sort of input for you, you could refer to Slide #18, which gives you the bifurcation by channels. And if you look at it, our distributor businesses have grown pretty faster than what it was in the previous quarter.
And more or less, it's the same for both EL and MO which has the -- which represents a major share of our business in India, right.
Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. T.K. Sridhar for closing comments. Over to you, sir.
Thank you. Thank you very much for both the -- for all the participants on the call, both from the investor side as well as the management side. And as I close this call, I wish you all a very Happy Independence Day.
Since this is Independence Day, that's very important. I think we celebrate it as we give these some strong set of numbers. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of ABB India, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.