Capitalizing on India’s economic boom and future growth plans

In recent years, Indian businesses have increased their focus on sustainability, driven by a push for energy efficiency, demand for exports to other parts of the world, customer demands and legislation for greener products in consumer-facing businesses. To keep pace, Siemens has invested more than $1 billion in India over the past six to seven years to acquire companies, create new products and update existing plants.

Siemens expects India’s economic boom, as well as rapid progress toward digitalization and sustainability, to drive the company’s growth in the coming years. The demand for clean technology and clean transportation has led to significant investments from governments and the private sector (in these areas). This is also a time when companies have the opportunity to change and expand.

In recent years, Siemens has undergone significant portfolio changes globally, including losing several non-core businesses to transform itself into a technology-focused company.

It sold several businesses, including electric commercial vehicle powertrain units, a postal and parcel company, and high-voltage grid components company Trench. The company also spun off its gas and power businesses into a new public company called Siemens Energy.

The company’s stock price has risen more than 66% over the past year. Looking at the stock’s performance over five years, it has delivered multibagger returns of nearly 445%. Now let’s take a closer look at the article and find out about their business and the future of the company.

Siemens Corporate Overview

siemens It is a technology business focused on industry, infrastructure, digital transformation, transportation, transmission and power generation. It is the representative listed company of Siemens AG in India. The company’s business structure is well suited to meet industry demands for increased efficiency, quality, flexibility and speed.

With its diverse portfolio, market-oriented organizational structure, global technology leadership and strong local capabilities, the company is well-positioned to partner with the country for sustainable growth.

Siemens business divisions

digital industry

The company’s Digital Industries (DI) business provides technologies for the automation and digitalization of discrete, hybrid and process industries to support their digital transformation, helping them become more sustainable.

The portfolio includes industrial software, automation and drive technologies for optimizing the manufacturing value chain, including product design, production planning, engineering, execution and after-sales service.

In fiscal 2023, the company expanded its relationships with customers across verticals to deliver cutting-edge solutions to strengthen its digital transformation and sustainability goals.

Notable examples include additive manufacturing, industrial edge, IT-OT integration, cybersecurity, digital twin, and green hydrogen. The company also announced the launch of industrial 5G devices.

In fiscal 2023, new orders grew 3.7 per cent to ₹4752.9 crore, while revenue (excluding other operating income) grew 24.1 per cent to ₹4336.6 crore. During FY23, this category accounted for 23% of total revenue.

energy

As an energy technology leader, the company’s Energy division provides products, solutions and services across the entire energy value chain, guiding customers to use innovative technologies to transition to a more sustainable world.

The energy business’s growing demand for power generation and transmission solutions is primarily driven by industrial power plants, clean energy investments, capacity expansion and grid stabilization as a result of renewable energy integration.

In fiscal 2023, new orders grew 8.7% to ₹67,72.2 crore, while revenue (excluding other operating income) grew 13.0% to ₹59,86.9 crore. In fiscal year 2023, the sector generated 31% of total revenue.

smart infrastructure

The company’s Smart Infrastructure (SI) business connects the physical and digital worlds of grid infrastructure, industrial infrastructure and urban infrastructure to improve people’s living and working conditions while significantly increasing efficiency and sustainability.

SI provides customers with comprehensive end-to-end automation and digitalization A single-source portfolio covering products, systems, solutions and services from power generation to consumption.

The SI business performed well in fiscal 2023 as demand for solutions in industrial sectors such as grid infrastructure, industrial infrastructure, and urban infrastructure increased.

New orders for fiscal 2023 grew 24.8% to ₹65,62.9 crore, while revenue (excluding other operating income) grew 20.0% to ₹53,96.3 crore. In fiscal year 2023, the sector generated 31% of total revenue.

liquidity

The company’s mobility business offers intelligent transport solutions and is constantly innovating its range. Key areas of focus include rolling stock, rail automation and electrification, a complete software portfolio, turnkey systems and related services.

During fiscal 2023, the Mobility division received an order for 1,200 9,000 horsepower (HP) locomotives from Indian Railways, the largest single purchase in the company’s history.

In fiscal 2023, new orders grew by 745.9% to ₹282.95 billion and revenue (excluding other operating income) grew by 53.3% to ₹1969.7 crore. In fiscal year 2023, the segment contributed 11% to total revenue.

Siemens finances

In fiscal 2023, Siemens saw significant growth in its revenue, surging 21% to reach ₹19,553 crore compared to ₹16,137 crore in fiscal 2022. Analyzed over a four-year period from 2020 to 2023, the company recorded its revenue at a compound annual growth rate (CAGR) of 25%.

At the same time, net profit showed a notable increase, with a 55% increase from ₹1,261.9 crore in fiscal 2022 to ₹1,961.9 crore in fiscal 2023. Cumulative net profit recorded a CAGR of 37% over the four years from fiscal 2020 to fiscal 2023.

In FY23, Siemens maintained favorable financial metrics with a return on equity (ROE) of 15.89% and a return on equity (ROCE) of 20.44%.

Siemens’ future plans

Portfolio restructuring: considering split

Siemens AG has entered into a share purchase agreement with Siemens Energy to acquire an 18% stake in Siemens India for €2.1 billion, a 15% discount to the current market price. The transaction is expected to be completed by December 2023.

Additionally, Siemens AG has granted Siemens Energy the right to utilize 5% of Siemens India shares as collateral. Notably, Siemens India is considering spinning off its Grid & Power segment from its existing operations, with both companies expected to operate independently within the next two years.

Additionally, Siemens Energy and Siemens AG will exchange their respective shares while retaining ownership of the current business within the parent company.

Capex Announcement: Positive Growth Outlook

Siemens has announced plans to strengthen its power transformer production capacity, doubling it from 15,000 MVA to 30,000 MVA by December 2025 and spending INR 3.6 billion. At the same time, the company plans to strengthen its business. vacuum breaker Production capacity is expected to increase from 40,000 to 70,000 units by the second half of fiscal 2026.

Management is optimistic about the continued surge in electrification globally, predicting continued growth in demand for transformers and switchgear.

conclusion

Siemens Limited has demonstrated remarkable growth and restructuring efforts, positioning itself as a future-focused technology company. With ambitious spin-off plans, expanded production capacity, and an optimistic outlook, the company is poised for continued success.

In conclusion, we would like our readers to share their views on the future trajectory of Siemens Limited and its potential impact on the industry and India’s economic environment.

Written by Narin Surya

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