ABB shines bright as government lines up huge investment for the power sector
01-Mar-2007 •Value Research
ABB (Idirect Code: ABB) is among the major players in power equipment and industrial automation technologies in India. The order book of the company, having a significant presence in transmission and distribution space, is likely to gain on the back of the huge government outlay marked for the power sector.
The government's target to add 65,000 MW capacity in the 11th Five-Year Plan period will boost demand for electrical equipment and will also involve huge spending to cut the T&D (transmission and distribution) losses.
To meet the demand of the burgeoning sector, ABB has proposed to set up two new plants in the country entailing an investment of Rs 100 crore.
The company has started inking deals with a price variation clause for the new orders which will de-risk it from the price volatility of raw material. Apart from the government spending in the power sector there has been a robust capacity expansion in leading companies in sectors like cement, sugar, steel, aluminium, oil & gas and hydrocarbon. Moreover, demand for electrical equipment like motors, switchgears, transformers is also increasing for new office & residential complexes and malls. This will go well for ABB, which has the ability to offer turnkey solutions to the real estate sector.
The company, however, is facing pressure on account of rising prices of inputs like non-ferrous metals. Moreover, Chinese power equipment players are beginning to make greater inroads in the ultra mega power projects with their aggressive pricing.
Despite all this, the company is expected to grow at 30-40 per cent per annum.