ABB India Prepares For Future Without Power Grids Business
The Indian arm of ABB Ltd. discontinued its power grid unit—which contributed over half of its revenue—in the quarter ended December as the Swiss-Swedish engineering giant focuses on areas such as robotics and industrial automation.
ABB had announced the sale of its global power grid business to Hitachi on Dec. 17, 2018 for $6.4 billion. ABB India Ltd., at a board meeting on Feb. 13, granted in-principle approval for separating the domestic power-grid unit from its other businesses. ABB India—which follows the calendar year as reporting cycle—expects the demerger to be completed by June 2020.
The discontinued business’ contribution to revenue and operating profit was 58 percent and 53 percent, respectively, ABB India said in its fourth-quarter results.
The company’s management said in a conference call that its key verticals will now be electric mobility solutions, robotics and electrification products and industrial automation.
Bonanza For Shareholders
The stake sale can deliver good returns to shareholders, according to Aditya Mongia, analyst at Kotak Securities Ltd., who anticipates a dividend of Rs 195 per share in 2020. “The performance of continuing business appears muted on business growth, margin as well as returns versus the discontinued power grid business.”
The power equipment manufacturer has shifted focus to industries such as transport, infrastructure and utilities anticipating demand growth. Its digitalisation business—or software-driven and connected systems—has grown threefold year-on-year in 2018 in India. ABB said in the conference call that it runs around 300 digitalisation projects in India for domestic and export markets, although it didn’t specify them. The company’s management expects consumption and infrastructure-led government spending to spur growth for its existing verticals.