ABB India Ltd (NSE: ABB) Q1 2026 Earnings Call dated Aug. 04, 2025
Corporate Participants:
Unidentified Speaker
T. K. Sridhar — Chief Financial Officer
Sanjeev Sharma — CEO & Managing Director
G. Balaji — President of Energy Industries Division
Sanjeev Arora — President of Motion
Subrata Karmakar — President of Robotics & Discrete Automation
Ganesh Kothawade — Senior Vice President Distribution Solution, Electrification Business
Analysts:
Unidentified Participant
Renu Baid — Analyst
Mohit — Analyst
Bhavin Vithlani — Analyst
Amit Mahawar — Analyst
Atul Tiwari — Analyst
Sameer Thakur — Analyst
Parikshit Kandpal — Analyst
Aditya Mongia — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to ABB India Limited’s Q2 April to June quarter CY 2025 earnings conference call. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing Star then zero on your Touchstone phone. 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.
T. K. Sridhar — Chief Financial Officer
Thank you. Rayo. Very good morning. Warm welcome to all of you ladies and gentlemen for the Q2 analyst call. What we have today. So it is proud to say that we are in the NSE boardroom today taking on this call along with us. Along with me I have Nil Sanjeev Sharma, the country Managing Director of ABB India Limited. And I have all businesses other than Kirandut who is traveling at this point of time. So we have Balaji, head of representing Process Automation. We have Sanjeev Arora, Head of Motion. And we have Ganesh Kutavade representing EL and also from Robotics.
Right So. And also we have the other management people in the room. So it’s a great privilege for us to address this particular call from this iconic place where we have been associated for the last 30 years. Since we are there. So without wasting the time, go to you Sanjeev to take us through the Q2 results and also get to hear from the leaders.
Sanjeev Sharma — CEO & Managing Director
Thank you Sirdhar. Good morning to all of you. Welcome to this call for the our second quarter of 2025. We are happy to join. You know, addressing you from the National Stock Exchange. We are using their boardroom. They have invited us here to celebrate 30 years of ABB India’s listing on National Stake Stock Exchange. And whole management team and other team members are present here. I will kind of give you, given the occasion, a bit of a snapshot of how ABB has delivered shareholders value in last 30 years. Kind of journey that we have performed together with nse.
As you know we are manufacturing in this country for 75 years. But this snapshot that you see for last 30 years, total shareholder return is 8,500% during this period. And consistent dividend has been paid out every year since the listing of ABB on NSE our share price has risen 6745% and market capitalization increased 68 times. A lot of 100 shares is worth more than 6 lakhs and net worth is 33 lakhs. Now key financial performance indicator between 24 versus 94 is our revenue from our core operations is in 20 times in crores. Our PAT is 37x EPS is 27x DPS is 6209% and dividend payout is 2850 bps.
So that’s the kind of shareholder value that we have created from our India operations for our shareholders and also that’s a belief that we participate in this market and you can see in last 30 years how many ups and downs have come in the markets and how many ups and downs have come into the global economy, local economy. And our belief system is that these are all temporary passing matters. We stay consistent in focusing on our customers, bringing more products for the country which are good for nation building, continue to localize it, continue to expand into the geographical reach and also continue to connect with new market segments which show up as the country is growing in its sophistication across the length and breadth of it.
And that continues to reward us and also continues to reward our shareholders. Now next slide. If I look at many last quarters, I think practically after we came out of COVID we saw continuous growth in orders, revenues and profitability. And I think all of you have been joining this call have been part of that journey and we are very pleased with how that journey and the growth has come out of our portfolio and we enjoyed it and we have created a very strong balance sheet at this point of time and also good momentum for our portfolio within the company.
So much so that for the first time our backlog is about 10,000 crores. And like everything, I think when the market has been strong for a very long period of time, a point comes when the market takes a breather and I believe we are passing through that point and maybe last quarter and at current point we see that the market has been readjusting its growth trajectory and we believe it’s going to be momentary and then it will come back to its own forward trajectory again. So that gets kind of reflected in our orders and which is also kind of correlated with the large orders we had last year which are missing in the last quarter.
But our backlog continues to expand, revenues continue to expand and we have certain exceptional items in the PBT which I would be able to explain as we, you know, kind of discuss it further. Next slide please. So you can see that the financial performance the base orders we continue to see base effect is strong. It’s only the large orders are a bit cyclic. So we continue to enjoy the growth on the base orders. Revenues expansion is 12% which means the execution capability of the business is at a solid level. Our cash balances stand at 5,500 crores.
And board of directors have declared an interim dividend of 9 rupees 77 per equity share of face value of. So this is again is in consistency with the last two years that we have started declaring the interim dividends for the shareholders. Now the portfolio, we have introduced some new products which are prime for this market. And we will continue to gain more market share of the existing market share, existing market as well as we are introducing new products and opening up new market segments. On the sustainability front, if you take 2019 as our base, we have reduced our GHG emission by 87.5%.
We are rated strong in ESG performance by CRISIL and comprehensive sustainability training is delivered to over 50 suppliers. Now we continue to see stronger momentum in core segments in quarter two complemented by few emerging segments like for example we particularly like transport, building an infrastructure, discrete and process industries. But at the same time there are certain classic segments within these segments which are kind of subdued and sluggish. But we have a mixed market picture and as you said our order backlog stands at highest level above 10,000. Some of the key highlights and I think you can go through them like this shows the diversity of the applications and the markets we supply, be it SCADA for remote terminal unit for pipeline projects we have the power distribution for energy measure we have machine and factory automation for large paint and polymer company supplying solutions for tires, rewarding solution for a two wheeler manufacturer and automation for a smelter project.
And power electronic building block for control system for Indian railway. So you can see how diverse our product portfolio gets applied in the industry as well as in the port projects across the country. Same way we continue to deepen our connect with our customers. So not only in tier one, we go to tier two, tier three and new emerging markets within the country. And we continue to enjoy engagement and growth in these aspirational countries that we have at this point of time. Well, our focus remains on the market segments which are relevant for us, which are considered a high growth which is about 15%, moderate is between 8 to 15% and low is less than 8% growth at the moment in the market.
So that gives you a snapshot of how we are seeing the market at. The moment at this point of time. Theme of the quarter is pharma and healthcare. And just to give you a little bit of in depth view, how we see India is ranked third for pharmaceutical production by volume and pharma industry shall reach $130 billion by 2030, a CAGR of 12%. And we see that the pharmaceutical market continues to grow in future and we continue to engage with our solutions. I think this is one sector which always stays part of our solution engineering. Whether it is the automation systems, our drives and clean room solutions, or it is the powering such large plants, all those solutions go.
And also in robotic side there are pharma majors who apply into certain applications as well. Now when it comes to sustainability in practice, our goals for this year we are on track. As I said, 87.5% GSG emission based on 2019. Our target is that four of our campuses will become zero waste to landfill. Already three are achieved. That means no waste goes to the landfill from our plants. Out of four three, we have already achieved the water positive unit. That means we put more water in the ground than we take it out. And water recyclability target is 50%.
We have already achieved 41%. So we continue to have CSR focus and not only at the central level, but all the locations that we are present. And our leadership team really is very conscious in terms of engaging the communities which we can affect in a meaningful way. And this is something which gives us a lot of pleasure and lot of fulfillment apart from delivering good results for the market as well as our stakeholders. Now as far as the outlook is concerned, we see megatrends are in electrification, energy transition, digitalization and automation and sustainability because these are elements which are really kind of appreciated by our customer, which is part of our portfolio.
And on the macro factors, of course, continued government expenditure, private investments, private consumption, and as inflation is easing, I think these are good positive tailwinds for us going forward and that we hope to exploit as we go forward. Now, before I hand it over to TK Sirda to give you financial highlights, let me take the benefit of all our business presidents present in the room to give you a very quick snapshot of what’s happening in process automation, motion robotics and electrification. So let me invite Balaji for a very quick comment. How does he see process automation so that you can take a benefit of more granular view of each of the business areas we have.
Balaji.
G. Balaji — President of Energy Industries Division
Thank you Sanjeev. As all of us know, in process automation we cater to solutions to various segments, specifically oil and gas, power, water. Specialty chemicals, pharmaceuticals, and the heavy industries of metals, minerals, mining, etc. From a process automation context, I think we are continuing the journey in what ABB does, which is to make the industries leaner and cleaner. Our solutions are bringing both scale and sustainability to various industries that we cater to. In terms of our performance of H1, I would say what’s standing out, as you might see in the subsequent slides, is our profitability. We are holding course. This is a reflection of a good order backlog, strong execution, notwithstanding the forex variations. I think these two positives have resulted in a good result.
We do see demands coming in from core industries of various energy, mining and paper industries. But overall we have seen the markets have been sluggish in the H1 of 2025. We have seen some late positive movements that we hope will continue for the balance of the year as well. Overall, we remain positive. We are watchful about market. We stay prudent and cautious. Thanks Sanjeev.
Sanjeev Sharma — CEO & Managing Director
Thank you, Balaji. I invite Sanjeev Arora, who is the president for Motion division, Motion business area. Sanjeev.
Sanjeev Arora — President of Motion
Thank you, Sanjeev and good morning to all. So from Motion perspective, as you are aware that we are into motors, both low voltage, medium voltage drives, same low voltage, medium voltage and traction business. And this I would say I would start with a positive note that although, you know, we talk about the sluggishness and other aspects a bit later, but then the baseload orders for us are intact. And if I see the progress from last quarter to this quarter, the baseload orders have shown some improvement. However, having said this, what we are missing is the large orders.
And on top of it, of course we are facing some headwinds when it comes to the price realization. But then our theme still remains that how we can give the best of the technologies globally available to our local customers. That is our motto. And we are promoting energy efficiency with all the, I would say, product ranges, what we have across our motion. And the customer is also appreciating and really going in that direction as well. So overall, I would say, you know, and the good part is the motion portfolio is so large that we are serving, be it the light industries, the heavy industries, infrastructure, railways.
So we have a large bandwidth of operating in many segments and we can really counter the cyclicity of that segment. As we go forward. But having said this, we are quite hopeful that in maybe H2, probably once we see some momentum in the large projects, the things would Be back on track.
Sanjeev Sharma — CEO & Managing Director
Thank you, Sanjeev. So I invite subrata for the give a bit of an overview of the robotics side.
Subrata Karmakar — President of Robotics & Discrete Automation
Thank you, Sindheev and good morning. As you know that in India manufacturing is getting smarter and smarter. Correct. And in that way robotics use of manufacturing industries in India is rapidly growing industry segments. If I talk about automotive and other than automotive electronics, warehousing technologies, everybody is today adaptation of robots are pretty high. Small customer, medium and large customers are also proportionately we see the demand from all segments. Software wise. Digital twin, one of the highest level of software today. And AI and digitalization on top of it. Actually getting robotics technology smarter. And demand for the robotics in the industries are growing.
We are very hopeful in India and the growth for robotics automation in the future.
Sanjeev Sharma — CEO & Managing Director
Thank you. Thank you, Sabrada. And last but not the least, I think our largest division head for the ELDF distribution solution. But speak on behalf of the electrification Ganesh.
Ganesh Kothawade — Senior Vice President Distribution Solution, Electrification Business
Thank you, Sanju. So when it comes to the electrification, basically we are supplying the technologies which is the switching and protection of the our distribution network. So typically we supply the medium voltage and low voltage components and the switch gear and majorly into the power generation and distribution building segments, rail and road infrastructure, data centers, renewables, heavy industries like cement, steel, oil and gas. So if we see post pandemic, the momentum was really good, which is little bit softening when it comes to the large inquiries typically which is coming from the heavy industries and the data center.
But base inquiries are still strong. As you can see from the results. Our base orders have actually shown a growth. And we also see a very good pipeline when it comes to the data centers, renewables and building and infrastructure.
Sanjeev Sharma — CEO & Managing Director
Thank you Ganesh. And over to you Sirita to give financial eye.
T. K. Sridhar — Chief Financial Officer
Thank you, Sanjeev. I think with the business leaders participating, the time taken place then results should be shorter. So let me try my best at this point of time, that’s okay. So base orders for the quarter we grew at 5 percentage. Last year, the same quarter we had some orders from data centers and mobility sector segments in motion, which is not there at this point of time. So I think this definitely shows that our focus on Tire 2 and Tire 3 has been pretty consistent and they have been paving the results. So just to sort of give good insight about, we did improve our Tier 3 and Tire 4 market shares during the first six months.
And that is also reflected in this result order backlog 10,064 crores all solid order backlog with clearly managed schedule deliveries over the next 18 to 24 months both large and the small orders which will happen and every business segment will have its own cycle to do it. So while automation will have a longer gestation time and part of motion business also will have a longer gestation time, the balance all will be executed in the next six to nine months to come. So revenues grew, I mean the all time high for the second quarter in the last five years.
303,175 crores. EBITDA is at 13% lesser than compared to the previous quarter. So we will definitely come back to the story of what impacted the profitability in this particular quarter. So cash balance at 5,054 crores. This is after also declaring and disputing the dividend of 700 crores which we did last after in the month of May after the agm. So we still also have the board as approved in prim dividend which will also happen in the next few weeks to come. So going to the next slide. So now coming to the profitability story. If you look at it, we have a profitability of 21 percentage which we started for the same quarter last year.
So what happened in this particular quarter? We had. A few things which was basically very specific for this particular quarter. The first and foremost is because they were QCO guidelines which we had to comply and we had the customer orders on other side which we have to deliver. So therefore we had a hard choice to make in terms of importing material to supply to the customers to meet the delivery requirements as well. And that definitely impacted both motion as well as electrification business segment motion to spawn extent but definitely to a quite large extent to the electrification segment. That’s number one. And because of which your report content was higher.
And the second thing was also the mix of the revenues. There was definitely larger impact from the trading revenues. So this was basically depending on the project schedules and the deliveries. What we had to be made to the customers. And the other couple of things was we didn’t take one off cost in the case of electrification segment. And as you know ABP follows a conservative accounting and then risk mitigation risk appraisal process. And therefore wherever we saw risk and to the extent what is evaluated is right is what we took in. And we also declared it to the market in BCB results that we have taken a one off cost of 29.5 crores.
Apart from that I think the one one which was basically beyond our control was the exchange rate. So exchange rate we follow a fair value hedging in which the results of this Particular hedging impacts go directly into the P and L. So that’s something was unexpected, especially when it comes to Euro and CHF. The currencies in the last quarter appreciated more than 10%. So all the revaluation of the forward which we had taken and the cost which we had, very important. So definitely had an impact on the material cost per sale combined which we had in 4.6 percentage swing and other expenses.
What you see it’s all volume related so we did not have any one offs over here. And the personal and other expenses pretty steady and stable. So I think a long story short, I think this was a very specific quarter where we had these particular impacts and this is something what everyone is working around to understand how we should mitigate this going forward. So electrification is working on the one off claims as to how we could mitigate and so on on the imported content and the mix as to how we could make it better so that we could deliver it and deliver better results going forward.
So having said that, I think as what Ganesh was alluding to, I think the market is definitely a bit of a mixed bag at this point of time with bit softening in some sectors and some other sectors. So it’s basically a cautiously optimistic approach which what the businesses will take the next slide. Yeah, I think this has been the pattern what has been there for the last eight quarters where we see we have seen consistently each and every quarter we had some large orders which give a favorable impetus to the order. And now in this quarter we did not have large order but the base order definitely grew right by 5 percentage.
That itself is strong and is a bit of a motivation factor for all of us. So order backlog is 10,064 crores. They are a mix of large orders and also the product orders which will get delivered in this. Right. So I think almost 50, 50 percentage of it is coming from large orders and they will get delivered over the next 18 to 24 months depending on the project schedule. What we have the next slide. So this is a slide which I think is more only from the investor standpoint. When people, when ABB group looks at India so they look at a 9% degrowth whereas we look at on a standalone basis at 12 percentage D group. So this is how the demand order and the supply side of it is interpreted the next slide. So here I think here is basically a bit of segregation which we’d already explained to.
I think this is pretty much very evident that in this particular quarter we did have 56.5 crores of 56 crores of impact on account of forex and 39.5 crores is a great cost which we had taken off of in electrification segment. So other expenses stay steady. So there was no much impact our ETR at 25 points which is also steady next slide. So we dwell a bit more into the division wise segment wise numbers. So identification 1400 crores roughly in orders and this is basically and if I look at it from the previous quarter, this is then the previous year, the same quarter we had a large order there to the extent of 148 crores.
So that is something because whereas we see here 1,432 crores and if you take only the base orders of the RAO electrification quarter on quarter we have delivered 9 percentage growth on that. So it’s an. I would say the focus of electrification, the building segment, the data centers are strong and therefore we have got this growth momentum still continuing revenues 1379 crores it could have been but I think we had the issues to deal with in terms of QSO, Q0 and import content. So I mean that’s important. That’s something which probably had to be scheduled according to the clearances.
What we get, that’s all at 3500 crores. I think most of it will get exhausted in the next 12 to 15 months. But it’s essentially what we see and profitability as what we mentioned. It has an ironput content revenue mix of higher trading revenue therefore and we had forex volatility in the one offs of impacting them. Next slide motion I think Motion also had 396 crores of large orders in the 1000 seats 29 crores of the last year. And therefore on a standalone basis I think for the base orders they still delivered solid growth as what I would see and therefore orders definitely grew for control railways and good system drive products on a sale which happened.
And also in terms of the base order yes there was a bit of a competition impact when it comes to some of the business divisions in motion. But I think the overall basket of large orders base orders is still growing backlog at 4,000 crores. I think here is where because we have good mix of system orders of the project orders and also the base and the base orders to do so. I think it will get spread between 18 to 24 months for the total execution and profitability was impacted again as what we had in the case of electrification they also had a forex impact.
They also part of the businesses had to deal with QCO challenges and also there was an impact of price realization for some of the business divisions in Special Motors. So I think that’s more of a competitive scenario which is emerging out over there. So next slide. Product automation. I think this is a division which actually is reflection of the large orders getting decided in the market. So if you look at it, it’s pretty much stable between what we had last year to this year, the slight decline. And that’s more for the fact that a couple of orders got decisions have been postponed for the last two quarters.
I mean that’s reflective of the investment scenario which is more cautious at this point of time. And revenues slightly subdued to the extent of 500 crores. We expect that this would actually become the next two quarters to come as the delivery schedules are getting cleaned up for the supplies. Order backlog declined by 12 percentage. That’s more reflective from the subdued order intake. What has happened in the last two quarters and revenue execution maintain the same trend. But good part is profitability. Despite they had a bit of an unforex impact, they were able to recover that or offset it in a way through a good revenue mix.
They had high service content within the orders and also they had a good amount of projects which they could close out and actualize the margin in the quarter. So I think this was some of the positives which could help offset the impact on the foreign exchange. Next thing, Robotics last quarter had a large order from the electronics segment which is actually not present in this particular quarter. So they are 120 crores roughly in this quarter. And the future as what you heard from Supratha pretty much is promising. And we stay committed on this particular division as such.
And revenues grew to all time high of 236 crores. But it was more evident from the fact that it had a large content of trading revenues. So that’s something which because Robotics has a longer Runway to do more in terms of localization. So we still depend on quite a few imported components and therefore the trading revenues are higher. And they also had a forex loss. But I think the basic fundamentals of the business segment remains strong. Next slide. Yeah, this is something to prove as to how we are in the different offerings to the customers.
The business areas motion and electrification still hold 75 to 76 percentage of the businesses coming from. And that’s also represented in the product portfolio of offerings which we have 75 percentage, 12 percentage from the services and 13 percentage from the projects and so on channels to market partners and OEMs partners and end users are important for US, so they constitute 80 percentage of OEMs and EPCs are less. And this is also a reflection of the fact that the large orders in terms of decision making are slightly getting delayed by geography. We are predominantly still a domestically focused organization.
So 88% of it comes from the local market and 12 percentage from the exports. Earlier you will see 90 percentage coming from a domestic market and 10% is an export. There’s a bit of a change at this point of time because there was a reflection of the domestic market softening at this point of time. So overall, I think as Sanjeev was mentioning, we had quite a bit of strong run in the several quarters after Covid. And this is a quarter where we had specific issues to deal with and we are more than happy to deal with in a very transparent way and just use it to the stock exchange and the result of our results.
So that’s what we have done. So thank you very much for patient listening so we can open up for the question answers.
Questions and Answers:
operator
Sure. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press STAR and one on the Touchstone telephone. If you wish to remove yourself from the question key, you may press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Renu Bed from IIFL Capital. Please go ahead.
Renu Baid
Yeah, hi, good morning team. Thanks for the opportunity. My first question is now, it’s been almost six to nine months that you’ve called out that business is a bit soft with respect to large orders and QY25 likely to be year of moderation. So how are you seeing second half of the current year panning out? Is the momentum being sustained, slowing further or improving? And in your view, what will drive back the positive investment sentiments from the private sector, especially large projects?
Sanjeev Sharma
Our take is that, especially as Balaji explained that we do have a pipeline of orders which are yet to be converted. I think we do see something in process automation, but it’s not a big mountain of kind of, you know, forward log, but it’s a reasonable log for us to convert. Likewise, in the motion electrification, I think on a regular, on a, on a, on a regular scale, I think it’s a good market setup going forward, but not super strong as we have experienced in the last quarter. So I would say on a normalized basis, it’s a good market, but not as strong as we have witnessed in past Couple of years or three years now going forward.
What we can see going forward is that there’s a bit of an uncertainty in terms of what’s going around the world. So especially on the private capex during these times people become more cautious in terms of how much capital they want to commit till the clarity comes in terms of domestic market as well as for the export participation for our customers. We do believe that the government capex has started picking up but not it is yet to gather pace and I think that will be one defining factor as we go forward and also we will see that the new market segment and new trends which are emerging in the marketplace, energy transition and cities expanding and creating more robust power supply data center and recent events wherein something happened in terms of somebody was not able to kind of participate in the cloud services.
I think that may lead to more digitalization services and the localization of cloud and the data centers locally. Those trends may start emerging as well and that go positively for our business. So I say second half. Yes, it will take time for it to come back but I think if I put the midterm which is the next year onwards, hoping that everything falls in place, I think we should start getting the momentum back in the marketplace. That’s the expectation we have.
Renu Baid
Sure. Secondly, on the profitability of margin front a demand, moderation and plus inflationary impact has been probably visible in some of the segments like Motion and EM and Shehar. In your view the QCO impact, how elongated could that be in terms of readjusting for the domestic standards and getting the qualification done and probably the lingering impact of that on our margin profile.
T. K. Sridhar
Okay, good question. Thank you. I think this time being six months, what we have performing we also definitely would have given you the. We also looked at the balance sheets which have been attributed branch has been published. So we do have inventories which are high at this point of time which was roughly 1800 crores to 2,300 crores, 500 crores. So we have imported quite a bit of material to meet these compliance requirements and they got probably relaxed as late as last month. And therefore we expect that we will have to use these imported components to supply in order to gain time and also create these inventories.
And so the tissue impact as what we see we have an in some of the products one year Runway up to September 26th is what we need to be ready for that and in some of the products we’ll come to know in the years, in the months to come. So as we have as we’re Preparing for this, we will have to be making sure that we are committed to the deliveries what we have given us to the customers. And therefore we are okay to invest by importing material and using it in the consumption. So I think in the next six months we will have a mix which could be which we have to do judiciously in order to ensure that we have a balanced consumption between imported and localized.
And also the revenue mix in terms of how we do more of manufacturing revenues and service revenues to shore up the margins.
Renu Baid
Sure. And the pricing impact in terms of inflation as well as these demand, any price hikes that we are taking or the market itself adjusting.
T. K. Sridhar
So I have the motion and el leaders over here. So the question is, are you going to pass it on to the market with the price adjustments? Yeah, of course. Whatever inflation is there market definitely should be able to absorb it. So I think what could be a bit of a challenge is that the volatility of the Forex is something what the market may be not evenly accepting it. Okay. So the reason is because we are above the short cycle order. The long cycle project orders definitely have a possibility of correcting it because they go by indices, by adjustments, so that is protected.
But whereas if you look at products which we are 70 percentage and they are more short cycle, I think this challenge of balancing the volatility risk vis the margins, what we have committed on is going to be definitely a work to be done.
Renu Baid
Sure. Thank you and best wishes. Thank you.
operator
Thank you. The next question is from Mohit from ICICI securities. Please go ahead.
Mohit
Good afternoon and thanks for the opportunity. My question is, are you anyway impacted by the tariffs announced by the US or India either on the revenue side or the cost side?
Sanjeev Sharma
Well, I think as you can see that the 90% of our business is domestic. Right. So that is where we get it. And most of our products we have quite high localized content. And that’s the strategy of ABB globally, to be local for local. So that means we are increasingly post Covid deepening our supply chains locally and that’s something which is helping us. So as such, on the kind of a tariff side, we are not exporting very high volumes into us at the moment. There are a couple of products which we do, so we will see how that pans out.
But that is not a very high mix of our overall orders and revenues at this point of time.
Mohit
Understood. My second question is on the can you please explain the nature of heat you have taken on the electrification side and why and are there any risk of further Search risk and how are you mitigating it?
Sanjeev Sharma
So it’s a, you know, kind of a typical project topic wherein we have been executing a project wherein certain corrections had to be done into the installed equipment. So that’s where it comes. And as far as we are concerned, we are an engineering company. We deliver engineered solutions and all these engineer solutions need to comply with the local standards. So at times if there is a deviation on it, we never step back. We always correct it first and then make sure that the customer enjoys the product how it is meant to be. So that’s the nature of it.
And we have already corrected those what you call anomalies that we detected and in collaboration with the customer, we have that back online for our customers.
operator
Thank you. Thank you. Before we take the next question, a request to participants to please limit your questions to two per participant. Should you have follow up questions, we request you to rejoin the queue. The next question is from Bhavan Vitlani from SBI Funds Management. Please go ahead.
Bhavin Vithlani
Good morning. Two questions. One is what could be the impact on the exports given the tariffs that we have seen and many products that ABB is the feeder factory for the global side. The second is on the motors business. We have seen significant increase in the competition where MNCs like WEG and NIDEC have set up greenfield facilities and the larger existing ones like CG has doubled capacities.
You also spoke about price realization being under pressure. More color on this would be more helpful. These are my two questions.
Sanjeev Sharma
So as far as tariff is concerned, I think I answered that question in my previous response. As I said, as far as 90% of the market is domestic and out of the 10% of the exports only a very minor part goes into the US specifically. But there is some export. But that’s something we don’t see as a major impact and we hope this situation like in other countries will resolve itself given the tactics of negotiation in play. So we don’t see significant impact on us at this point of time. And now when it comes to competition, I think competition is way off.
Right. ABB is a global company. This competition in one form or the other exists in many markets globally for us and we deal with it and we know how to play this out. And especially in domestic market we have had a very strong run of our motion businesses in the market which is visible in our results post Covid. And there’s always when there’s an extraordinary performance by a company which was us, there are always competitors who get more interested in those market segments. And there is much more activity. So I think it’s a fairly normalized behavior that we see part of our portfolio.
Unless Sanjeev, you have something to add the newer order.
Sanjeev Arora
Definitely Sanjeev, I think you have given the right perspective and as far as the price realization, if I pick up that point, definitely we will have that push of increasing the price level to the market and we have been collecting that in last quarter as well. So coming back to the competition that Sanjeev has explained very well and we are expanding our base in India and we are going into segment specific energy efficiency, the best of the technologies of the, you know, present at this point of time in the globe with the, I would say the local footprint so that we keep that forte and the customers are also appreciating and they are actually, you know, giving that kind of credit to abb.
As far as motors, you are asking specifically and we are seeing and that is also getting well explained in the improvement in the base load orders. So yes, you know, the competition is welcome but then on other part we are doing our stuff to stay order, stay ahead. Thank you.
Bhavin Vithlani
Thank you so much for taking my questions.
T. K. Sridhar
Thank you Bhavan, it’s nice to hear. You after a long time.
Bhavin Vithlani
Likewise. Thank you so much.
operator
Thank you. The next question is from Amit Mahavar from ubs. Please go ahead.
Amit Mahawar
Hi Sanjeev, I have two questions. First is so you know, last year you had a very strong base of large orders also in second half. Can you recoup? I don’t see too many large proportion orders for you. I don’t see a lot of segments which otherwise would have been large orders in second half. So is it safe to say this. Is going to be a 5% or. Maybe 5, 7% growth year for orders? I know we don’t give guidance but some color here. That’s question number one.
Sanjeev Sharma
So on the traction side, I think we still have some play out in the market which we are hoping to secure going forward. So it’s not dried out but it was not in last quarter and we do see some good play there because the expansion by Railways Metro, I think that is still quite a strong market segment. So I think that’s something we should keep back of mind. And our portfolio is pretty strong as well as pipeline is reasonable there. Now when it comes to the other market segment, as we said, yes, if you net out the large contract which are cyclic in nature from the previous year, our base order remains pretty strong and I think that’s what counts.
And also our small cycle Orders there also remains quite strong. And I think that’s the nature of large contracts that you get them, they show up in your backlog and you execute over a period of time. And that’s why you can see our backlog numbers are expanding. But yes, we will take the market as it comes and typically we don’t second guess the market. We really, really deal with the market as it shows up. And I would say for the conversion point of view, for the large project or reasonably good, you know, medium sized project, the pipeline is reasonable at this point of time and we are hoping to convert them in the third and fourth quarter of this year for us.
operator
Thank you. Next question is from Akul Tiwari from JP Morgan. Please go ahead.
Atul Tiwari
Yes, thanks a lot. So my question is whether you are seeing increased competition from Chinese imports in any of the product segments that you are presenting.
Sanjeev Sharma
So we did have a lull for a period of time given what happened between India and China. I think though it is not out there in open, but we do see participation from the Chinese manufacturers in the marketplace and some of the corporates when they are deciding they are bringing them into the mix of buying as a possibility from Chinese players. So yes, I think your question is in the right direction. So Chinese players participation with the products which are manufactured in China and imported directly by the corporate that has come. Into the mix. Mostly it is coming in the heavy industry or heavy equipment.
Atul Tiwari
So I mean which of your product segments this competition is coming in? Electrification or.
Sanjeev Sharma
We have seen some of it in our process automation segment.
Atul Tiwari
And obviously, I mean all of us know about heavy industrial overcapacity in China and the prices which are obviously totally unrealistic. So is the same situation here that the prices are way off the mark?
Sanjeev Sharma
They are, they are, they are income. You know, I think the buyer is taking benefit of that sentiment, but I think that’s not the price level. We’ll participate just to keep the order and the revenue books going. So we typically, as I said, we have a long experience in this area. It always comes for a period of time and then it dials itself out. So we participate where there’s a reasonable kind of quality in terms in the eyes of the customer and the appreciation for the local value added carried out by us. And whenever we see the participation, that appreciation, we participate.
But if the decision is purely based on price and which is way out of fundamental expectation, I think we don’t participate. They let the customer know what the value proposition we have. But sometimes customers get enamored with the price level they get.
Atul Tiwari
But. But you have not seen any competition in electrification and motion?
Sanjeev Sharma
No, we haven’t seen that in the, in the electrification motion at the moment and not in robotics. Little bit, but not much.
Atul Tiwari
Okay, thank you. Thank you.
operator
Thank you. Before we take the next question, a request to participants. So please limit your questions to one per participant so that the management is able to address questions from all participants in the conference. The next question is from Sameer Thakur from Ambit Capital. Please go ahead.
Sameer Thakur
Hi. Thanks. So on the higher import content, I understand that the increasing imports volume could impact remaining quarters as well. And it is safe to assume that this is the bottom quarter and will we get back into that 12 to 15% PAT margin from Q3?
T. K. Sridhar
So Sameer, we don’t give any guidance but I think to answer to your question, to color to that as I was mentioning earlier as well, so we have a topic to handle. Right. So the QCO is not a simple topic. So it has its processes to go through. So on the other side we have deliveries which are committed to the customers. So we stay committed to the customers with momentary impact in terms of using more of imported components to deliver to the customers. So therefore we will continue to have a judicious mix between using the imported material which we have definitely stopped, assuming that we don’t face any headwinds in future, and also increasing the manufactured content.
So I think at this point of time, to answer your question, it will be a mixed bag. So the earlier sort of band which we had given with 12 to 15 percentage is something which we need to work out to be there.
Sameer Thakur
Okay, thanks.
operator
Thank you. Next question is from Parikshit Kanbal from HDFC Securities. Please go ahead.
Parikshit Kandpal
My question is on the prospects pipeline, so I know you spoke earlier, but has it reduced or is it just timing delays? So just want to understand the discretionary and non discretionary part of that and whether it’s there or that it’s getting delayed and when do you think the recovery will happen? Which quarter?
Sanjeev Sharma
So let’s give you a very quick snapshot. Balaji, do you see it is reduced or it is delayed in the process automation?
G. Balaji
I would say that it’s just picking up. That’s been a general sort of a delay in decision making and we wait for the customers to make the decision at the appropriate time and then we proceed ahead. Okay.
Sanjeev Sharma
And Sanjeev Arora, do you see in motion it is reduced or it is.
Sanjeev Arora
Delayed as I said earlier, so we have good prospects and I don’t see it Reducing and it’s matter of just time that when we get into our books.
Sanjeev Sharma
What do you think Ganesh on the electrification side?
Ganesh Kothawade
Yeah, as I said, the basic inquiry is still strong. So it has not reduced some of the large inquiries, particularly in chemical oils, oil and gas segment is getting delayed. Some of the decision, some reduction which we have seen in every industries like a cement.
Sanjeev Sharma
How do you see in robotics?
Subrata Karmakar
It’s a little bit of a time gap, but first level is very good.
Sanjeev Sharma
And there you have it.
Parikshit Kandpal
So this continues even in this quarter. So it looks like what the commentary has been spoken by the business leader. So maybe towards the end of the year we see some pickup happening.
Sanjeev Sharma
Let’s hope so. So I think we will meet again.
Parikshit Kandpal
Just one question. On the margins earlier you’ve been adding about 12, 15%. So now. So how do we pivot now given that H1 is over? So do you think now we’ll be able to maintain the lower end of the margin?
T. K. Sridhar
So I also will digest the lower end of the margins. Right. So I had the business leaders here as well. So we had a market commentary and we had an operational topic to deal with. So are we out of the qco? Answer to that is no. We still have to deal with it in the next couple of quarters to come as well and be ready for the 2026. Right. So as we navigate next quarter, we will make a judicious mix of how we use this. But also short of the manufacturing revenues to be at this format to give you a bit of a qualitative direction, quantitative direction is not possible and we don’t do it.
Parikshit Kandpal
Okay, sure. Thank you.
operator
Thank you. The next question is from Aditya Mongya from Kotak Securities. Please go ahead.
Aditya Mongia
Yeah, thank you for the opportunity. I just wanted to clarify when we talk about base orders and last large orders, are there are these separate topics? Like certain sectors only go for large orders and those are not coming in. Thus we should be seeing base orders separately or just want to get a better sense as to whether large order is just a summation of bigger parts of orders which can also be given up as base orders. And thus the trend should be seen in combination or should one just focus on base orders separately? Thank you.
Sanjeev Sharma
So if you really see our portfolio construct, I think we have explained it earlier also they have three distinct areas. One is the MTO and MTS business which is the made to order and made to stores, which are the. Stores. And then these are the ones which are high flying equipment. We make it as a regular production and it gets channelized into the market convention. So that’s what is a classical base order. And there is a pretty robust and stressed good strength out in the marketplace and also is a function of the demand and also the competition participation and the price realization and whether we want to participate in that price. But there I think we have a very good traction and that’s a very good expanding area. Now second part which comes is called ETO engineer.
To order that we use the same product that we produce, we do value added engineering and make more subsystems for the customers like say in the energy kind of a business wherein we give a complete power distribution solution for industries, cities, etc. There again I think it’s a small to mid cycle order. The MTO MTF is a small cycle order. And this ETO business again is quite robust and it is going into the new emerging market segment. And there again we will call it as a base plus order. You know, they are not the large order because they can be a single unit or it can be a very large maybe data center order where some multiple same units are required.
So that again is a volume that happens on our shop floor. Now the last but not the least is our systems order wherein what we do is we use our core automation technologies and electrification technology and plus third party materials to integrate a system order for a customer wherein a value added performance based solution is given. And typically that’s where these large orders come and they are quite cyclic in nature and they’re very dependent on large capex happening either directly by the government through EPCs or end users securing them. And the other large order that can come is in the ETO space which is in the data center or in the MotR, you know, the traction business wherein suddenly a particular partner has a very large trance contract or a Metro contract and they will offload a lot of volume of the technology.
Those goes into those. So I would say as far as the base order is concerned, it’s pretty robust. Volumes are not affected. A particular market segment may get affected because of the increased competition intensity. But then we choose how much we want to participate in terms of price correction. We continue to play the premium side of the market there. And ETO is quite robust and system business is quite cyclic. And if you compare previous years, I think we had a fair mix of the systems orders as well as large orders coming from railway and traction.
And related to that, if you see the numbers, that’s where I think they are kind of showing a different picture. But the base orders remain Fairly, fairly robust for us.
Aditya Mongia
Just a related question. Do we have meaningfully different hit rates in base orders and let’s say large systems orders? That will be in the final question. Thank you.
Sanjeev Sharma
Good point. So base orders are a pure function of flow in the market. Like how well we channelize ourselves in the market. So more expansion of channel partners, more expansion of our integrated partners with a function of that and plus reaching out to tier 2, tier 3 markets and also participating in more market segment where the machinery manufacturers are catering to those market segments. So it’s a function of channelization. It’s less of a hit rate but more of channelization. And I think a major port of the part of the business comes from the channel management.
And I think that way we continue to get better and better and other way how we get better there is by localizing and introducing more products in the basket so that the channel partners can do more meaningful value add for their customers in the marketplace. So that’s how the pace order functionality works. And when it comes to large orders, yes, that’s a pure hit rate. Like for example I mentioned that we had couple of opportunities we let go because of the Chinese competition wherein the price which was put on table of customer was way out of normal trend and the customers took a bite on it and we let it go.
So yes, that’s where the hatred goes down. But in favor of not mixing our books with a toxic order which typically will not give much of value to our shareholders.
operator
Thank you. Thank you very much. Due to time constraints we have to take that as the last question. I would now like to hand the conference over to Mr. T.K. silar for closing comments.
T. K. Sridhar
Thank you. Thank you Leo. And it was very nice to talk to all of you once again in this quarter which was definitely a different quarter than the previous quarter since the COVID where we had always been declaring absolutely strong results. And I would also say that this result, what we declared given the market situation, what we are in according to us is decent enough apart from the impacts what we had on the profitability which were one off. So having said that, I think we would like to look forward to talk to you again the next quarter.
And thank you once again for all participating and supporting us in this particular journey. So and all to the management team who is there and from here we go for the next which is the. Bell ringing ceremony and I think we’ll do it on behalf of everybody on the call.
T. K. Sridhar
There has been a strong support for us in this journey of 30 years. I think from where we were to where we are today. It would not have been possible without the support of all people like you and the investors who have improved their confidence in abb. Thank you very much and looking forward to talk to you next time. Thank you.
operator
Thank you very much on behalf of ABB India Limited. That concludes the conference. Thank you for joining us. Ladies and gentlemen. You may now disconnect your lines.