Even as companies in sectors such as IT have highlighted considerable uncertainty next year, the investment cycle in the economy seems to be on a strong track this year, going by comments from heavy equipment maker ABB India.
The company, which makes heavy industrial and electrical equipment, reported a sharp increase in its order inflows during 2023, with the last three months seeing a 35% jump in new orders.
Strong order inflows for capital goods companies is taken as an indicator of optimism in the country’s industrial sector. When these companies, which make machinery and electrical equipment, report strong order growth, it indicates that big companies are continuing to expand their businesses.
The company won new orders worth Rs 3,147 crore in the last three months of 2023, which was 35% higher than the same period of 2022.
The strong jump in order inflows towards the end of the year took ABB India’s total order backlog – orders waiting to be fulfilled – to 30% higher than a year ago.
“The order backlog of Rs.8,400 crores..it is an all-time high because we had good order intake in this particular year…which gives a better visibility of revenue for the future,” said TK Sridhar, the company’s head of finance.
The company said the strong order inflow was contributed by sectors such as automotive, renewables, processing industries such as metals, mining, chemicals and textiles; data centers and electronics; and railways and metro.
“Cautiously Optimistic”
As for the company’s outlook for 2024, ABB India's management remains cautiously optimistic on growth, and more certain on profits.
On growth, Sridhar said the company expects to “have a positive momentum..at this point of time...we think definitely investment in the private sector along with the public sector will drive growth,” he added.
On the other hand, the company also flagged some risk factors. "Inflation and higher interest rates will be an item to monitor because that impacts the so-called original equipment manufacturers and the small vendors," he noted.
Sridhar was more certain on the profitability front, said it expects to sustain double-digit profitability margins backed by a “better business mix, services expansion, operating rigor and value-based pricing”.
"So, given that we are at the double-digit margin at this point of time, I think our ambition is to make sure that we remain credible over here,” Sridhar said.