ABB India Ltd (NYSE: ABB) Q4 FY22 earnings Concall dated May. 05, 2022
Corporate Participants:
T. K. Sridhar — Chief Financial Officer and Chief Investor Relations Officer
Sanjeev Sharma — Managing Director and Director
Sanjeev Arora — President of Motion
Analysts:
Renu Baid — IIFL — Analyst
Ankur Sharma — HDFC Standard Life Insurance — Analyst
Aditya Mongia — Kotak Securities — Analyst
Charanjit Singh — DSP Mutual Fund — Analyst
Sandeep Tulsiyan — JM Financial — Analyst
Ravi Swaminathan — Spark Capital — Analyst
Amit Mahawar — Edelweiss — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to ABB India Limited Q1 CY 2022 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. Please note that 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 and Chief Investor Relations Officer
Thank you. Thank you, Faisal. Very good afternoon to all of you. So the Q1 2022 analyst call, where we’ll definitely discuss about performance and the overall initiatives that the company is taking. So I have with me on the call, Mr. Sanjeev Sharma, Managing Director of ABB India Limited. Alongside with me, I also have Sanjeev Arora, who is the [Indecipherable] for Motion business in India. And then on the call, I have G. Balaji, the Process Automation originally.
So — and Subrata Karmakar, who’s robotics; and [Indecipherable], who leads the EL business, right, were not able to join this call because of their customer engagement. So that we will be able to handle the inquiries interested to their business within ourselves, right? So thank you very much. Now I’ll now hand over the call to Sanjeev to take us through what happened in Q1 and later on with the financial results is what I would explain a bit more.
Over to you, Sanjeev.
Sanjeev Sharma — Managing Director and Director
Thank you, Sridhar. Good afternoon, everyone. Thanks for joining in this quarter one — the first quarter of this year call. I’m quite pleased to report the numbers as well as the developments that took place around ABB. We also had AGM this morning. We concluded about one p.m. today, very good interest from the shareholders with respect to the development they saw in 2021, and we see that continue in this year as well. So just to give you some highlights. So we had a strongest base order growth in the — our first quarter of calendar year.
Orders were up 26%. Revenues were up 21%. We improved value offerings, and our operational efficiencies led to double-digit PBT percentage before exceptional items. And also, we went ahead and voluntarily published our business responsibility and sustainability report, BRSR 2021, as early adopters. And you will — if you had a chance to look at it, if not, please have a look at it. It will show you detailed insights into what ABB and its team have done in the last 1.5 years.
We have been taking a lot of initiatives in this area, and now we have the recognition and conclusion of those initiatives. And we really are pleased in terms of how our campuses and our locations have developed and also how we are helping our customers to be more environmental-friendly with their establishments because our product portfolio is in the sweet spot of energy efficiency and it’s in the sweet spot as an enabler for customers to also realize benefits around their ESG agenda.
We continue to maintain a solid cash position, and it continues to strengthen. When we look into the overall business construct, we have strong short cycle orders, which means also good for cash flow because the conversion of orders to revenues, to cash is quick, and that’s something we continue to enjoy in our balance sheet. The market segment focus, and you may have heard me say this before, we have 20 distinct business divisions. Each one of them have their own business model, but all of them are exposed to about 23 market segments in the market.
And these 23 market segments represent the strength of Indian economy and the activity. Some of the market segments are cyclical, some of them are long-term trends, and we are continuing to participate there with focused channels, focused OEMs, focused integrators and also our direct efforts in the marketplace. And we continue to see penetration across geographies as well as in the market segments. We had a fine time addressing our export obligations, wherein we help our group to cater to certain markets wherein group thinks that the Indian operations can support them to support customers outside India, and that saw a good traction of plus 33%.
Services order, which again is a backbone of our installed base, we have created over last 70-plus years of manufacturing in the country. That continues to draw the strong support from our customers in terms of maintaining reliability, availability, maintainability and serviceability of the assets, which customers have deployed. And so — and we also are not dependent anymore on core sector unlike five, six years back, wherein either the core sector was up or — and we were up with them. Our core sector is down, and we were down with them.
But now, we have a much more broad-based offerings across the market segments, which are not only large industries, but also medium-sized industry. And also, upcoming industries like data centers, F&B and others and also the expansion of automotive and ancillaries in EV and other spaces. So our offerings are really broad-based. And not only we carry them ourselves, but also, our partners are helping us to penetrate on the deeper side of the market.
Process Industries and optimization remains a theme, and we see an uptick in this area wherein steel industry, cement industry, chemical oil and gas industry and many other associated process industries, we see that apart from the opex-led investment in last years, we are seeing some solid projects coming in front of us in coming quarters. Let me put the next slide up. Yes. So just to give you a flavor of some of the orders that we are kind of secured and supporting different — I think the takeaway of this slide is how diverse our applications and the locations are. So rectifiers for natural resources is one of the major company in this area.
We typically will not name the customer, just — unless we have pre-agreed with the customer that we can expose their name. We don’t typically mention it. If any one of you have a very high interest, then we have to somehow take the approval from the customer before we can talk about it. And also, tire industry expansion, we are helping our auto operations, robotics for electronics major. And again, this is another testimony that, as the electronic manufacturing expands, our robotics offering or going beyond the automotive sector is going into food and beverage.
It is going into logistics, warehousing. And also electrification in the high-class IT campuses in Hyderabad, complete electrification around the IT campuses, we find our reliable solutions. And of course, we recently announced in the month of April new expanded digital substation product and system factory in Baroda. It’s a state-of-the-art, very well organized and very well very productive facility compared with any facility you can come across globally.
I think that investment is paying us well, and we have some new product lines also which are being added there. And of course, we continue to expand our LV motors market position. And also, one of the key ingredients for our expansion of market in the LV motor trade continue to expand our offerings and our portfolio. So our customers and the channel partners have benefits of taking a much wider range of products from us, and that’s something which goes with part of the core of Indian growth story. So these are kind of some numbers that give you a flavor of our exports and services expansion in absolute numbers.
And on the ESG framework, especially the environmental, social and governance framework, as you see, we have adapted our gross 2030 target based on SDGs. And then we combine it with the Indian flavor of BRSR and national ESG requirements, and we have created ABB India ESG focus area. We have 10-point agenda, which you can see on the screen, right from green infrastructure to renewable energy, water conservation, material conservation, safe water engagement, innovation by diversity, diversity and inclusive board.
And this is something you can also find very solid evidence how we do it in details in BRSR report. So I will really encourage you to look at it, and we’d be very happy to get your feedback because this is one area we continue to engage and continue to grow. And we call it as a — program as sustainability in practice. We don’t talk about sustainability as an intellectual pursuit. What we talk about is that in the last 1.5 years, we were focused in working in certain area. Once we have achieved it, then only we talk about it.
And the evidence here, you can see we have six locations: Nelamangala in Bangalore; Ahmedabad; [Indecipherable]; Peenya; Bengaluru; Nashik in Maharashtra; Disha building, which is our corporate office; and our business office in Bangalore and [Indecipherable]. So you see, in the month of December and January, we got all these certifications, which are essentially the green certification. So Nelamangala and [Indecipherable] has platinum certification. Peenya and Nashik got gold. And Disha building, which is our corporate office is a lead gold certification.
Just — And I think most of you are aware of it, but what it really means, platinum certification by IGBC means it’s a world-class excellence facility at the campus level. Gold means it’s a national excellence facility and lead gold means it’s, again, a national excellence facility. And underlying elements apart from a very strict criteria of reaching this certification, we can very probably tell to our customers as part of our — their supply chain, you have a green campus which supplies new product.
And it also adds to our customers’ credentials who are very increasingly is ESG conscious as we go forward. And this also gives us a lot of credibility when we want to supply to new markets outside India, especially in Europe. You can talk a lot, you can make a lot of power points in terms of how good you are, but European customers are very sensitive on the green agenda.
And if you have the products and solutions being developed in a green campus and facilities and the consciousness of the management and the factory is to be very conscious about ESG agenda, you always get look good credibility with the European and other customers who are — we are increasingly serving to our locations in the country. We have reached already in 2022, 100% renewable energy in all our campuses. And this is something — if you recall my last year’s presentation, it was not the case.
But since we have a very focused effort, we can declare we have 100% RP100 achieved. We are working towards 100% energy productivity, and these are the targets for each location. Recyclability is about 90% most locations, and we have committed to be a zero waste to landfill target, which we will achieve over a period of time. And also, we have a target for water net zero reduction target. We have been already declared as a water positive, net positive unit for Nelamangala, which is certified by [Indecipherable]. Index of 1.24, that means we pump in more water in the ground as a contribution to the mother Earth relative to what we consume in it.
So there are a number of techniques and technologies, which we have invested, which captures water and also conserves water when we use it. And also, it recycles the water around the campus. Other locations, we’ll also reach water positivity. Already, the projects are being implemented. So every time we have a discussion, you will see this thing changing. Our Peenya campus where I’m calling you today, we have already achieved the single-use plastic usage-free campus, and that’s something we will also implement in all the locations.
So that’s what our sustainability in practice means. We will not talk about something which we want to do way out, but we will tell you that’s the direction. But I think we will continue to share with you how we achieve it and how we continue to do it. And we would like to stay really ahead of the curve not only at the India level, even at a global level among the network of locations we have around the company. Our focus on social impact area, we have — the locations where we are present, we like to make sure that there’s a positive impact we create around the communities.
Like for example, in Peenya, we are in an industrial area and the infrastructure roads, pavements, safety for women, lighting, we found that, that was less than desired around the campuses. And we collaborated with police — traffic police with BBMP, which is the municipal committee, and fire department. And we have improved the road infrastructure. And I think it is world-class road infrastructure, segregated pathways for young women and young men to walk freely, not walking and crisscrossing in the traffic.
And it’s very kind of a structured way for people to navigate themselves through the industrial area. We have created this as a kind of catalytical project as an example for authorities as well as for the other industries in the area, and we are finding that people are getting inspired to take up similar projects. And likewise, we continue to support health benefits for the communities in Peenya, Nelamangala, Vadodara, Nashik and [Indecipherable], wherein our health bands go to the rural areas wherein people are wanting more support, and we continue to provide them a health medical facility.
We wish we continue to expand this faster because the feedback we have is people really benefit because there are a lot of people who are not able to access the health services otherwise. We are working with Lila Poonawalla Foundation. We are running a scholarship program for 200 young women. They will be sponsored for four years of engineering. They come from backgrounds, either the single parents having very low income in the family or — but they have meritorious students. We selected with a very strict criteria.
And we also put a lot of effort making sure that they are mentored through their four years of engineering. We also provide them internship with their certain selectivity and also later on jobs and also release them in the marketplace as very well-developed engineers so that their income, which will really boost their family income, whether the mother or father who have raised M&A [Indecipherable]. So we feel very good about such programs because we feel, in a small way, we make a difference. And as our volumes as well as profits expand, we will continue to expand these programs further.
Again, we do the National Science Day. We contribute — try to walk them knowledge among the women as well as young boys, so that the more and more engineers are available to us. And likewise, in Nelamangala, we are also upgrading a hospital where, to us, a not so desirable position, but then I think we are doing it to a very high standard so that communities around our locations are able to get that benefit. Same way, just to give you a business flavor, 85% of our business comes from these market segments.
The green — dark green and light green are the ones, which are growing at plus 15%, plus 10% and the yellow or the orange one is sub-10%. But if you really look into the budgetary provisions, you will see that then the budgetary provisions, the orange areas are getting boost and there will be a cycle of investments in those areas. So I believe we are well covered with our portfolio as well as our exposure to different market segments, and we continue to deepen our engagement with the customers’ underlying segment. Now, it is time for financial highlights, and I hand it over to our CFO, Mr. T. Sridhar.
Over to you, Sridhar.
T. K. Sridhar — Chief Financial Officer and Chief Investor Relations Officer
[Indecipherable], will you have your slides?
Sanjeev Sharma — Managing Director and Director
Yes.
T. K. Sridhar — Chief Financial Officer and Chief Investor Relations Officer
So thank you very much for giving an overview of what’s happening on topics, which are non-financed. So now we come to really a hardcore of how we have performed in Q1. First of all, I think this year — this quarter, I think, was a very credible and solid performance on ground, right? So if I want to talk about orders, which is INR2,300 crores, roughly the orders. This is a sort of a larger — I mean, a quarter, which has probably given the highest of the orders, right? And why I say so? Because it’s the — it’s all coming from base orders, right?
Even when we compare with Q4 ’21, we have a base order of 19 36, and this is fully made up of base orders. So that means our — this is a clear indication of the customer connect and our penetration [Indecipherable] are really working, and the underlying demand situation is reviving. And this is just to take a view from what Sanjeev was saying, saying about the [Indecipherable], which are a bit sluggish, that have started to look at investments in their area of expansions as well. So all the divisions across ABB, right?
So we have 20 divisions working in the present in India. So all of them have posted the growth, right? So this is something, which is, for the first time, I have seen in the first quarter coming up with this particular number. And the revenues. Revenue has also grown up by 21 percentage. That’s what you see compared to the previous year, right? And — but whereas compared to the previous quarter because, sequentially, we have slightly low by four percentage negative but six percentage negative. And I think that’s more from the point of view of how the scheduling is done for execution.
And when it comes to profit before tax, I think, we look at what is profit before exceptional items. That is pretty much very key because that is what is going to be consistent, and that’s where our focus needs to be while the exceptional items will take care of one-off topics, which has to be dealt in a more strategic elements. So I think this is something which is reflected — the profitability is reflecting the fact that capacity utilization is on — is the media. It’s showing up the positive number.
And also, we did have some challenges in the market in terms of commodity price increases and plus sometimes in terms of ForEx as well. So I think what the business has done is about to pass on this particular impact to the market. So because, as you know, we don’t — we have very less of orders, which are probably have a variation clause because we don’t have projects. We are more in the short-cycle businesses, and that is something what we have necessarily pass on this commodity impact and the impact of the business.
And that’s what we have — or the business has done to remain profitable. So the next is about order backlog. Order backlog, we have a solid order backlog of INR5,230 crores, and that’s something which we see — will be executable in the coming quarters. And we have sort of arranged offers to deliver them on time without any disruptions in care — which is beyond — which is within our control. So cash collections remained steady. So DSOs have reduced compared to Q4 2021. So that’s something what we have also continued to focus.
What we have increased is around the inventories. So inventories have increased in the company because that’s more with respect to sourcing what has been done to stop the material to meet the supply disruption challenges as well as to meet the execution timeline for the backlog, which has already gone up. So this is — in other words, this is a very conscious buying, which has been done by the unit to avoid any future surprises. So what could be the focus area, I think, going forward?
So I think — definitely, I think we expect that there could be a headwind of supply chain disruptions, and we have to gear up for that, and then some parts of geopolitical impact, which we could — should also expect to continue. So while we do this, our focus on working capital because cash is very important when the growth is — when we are seeing the growth, we need to see cash to fuel the growth. So that’s something that we will conserve and we will build upon it and — which we also expect there could be certain — definitely increases in expenses like trade, like traveling, etc, because the market is opening up.
And also the freight is something, which is also — the players in the market with respect to availability of logistics constraints and the fuel prices. So the exceptional items, I think as we had mentioned, we executed the sale of the table charger business, the fully owned subsidiary. So that’s something what we did. That INR293 crores is the exceptional item that has been reported. And we also approved the tax on it on the capital gains at the 23% rate. So that’s reflected in the PAT percentage. Next slide. Yes. So this is where we stand with respect to how our P&L analysis looks like for the various elements in that.
So material costs remaining at 65.8 [Indecipherable]. As I told you, this is, I would say, contributed by three major factors. One, of course, the mix, right, which is definitely a key pack because both exports and services have better than the previous quarter. So that is something, which is important for us to know. And also, as we said, we did a price increase for the price in the market. And so that’s also an important element.
And also, after we had certain issues in process automation earlier with [Indecipherable] projects, with the improvement in the processes, right, I think the profitability is absolutely pretty much very strong without initial prices and urban top-class execution of projects is what we see. And that’s held the material cost at steady levels. Coming to personal expenses, there is definitely a slight increase compared to the previous quarter same time, and that’s more because there is an impact of annual increments, which comes in. And also, a good news.
Because we performed extraordinarily well in 2021, but then the employees had got their bonuses, which were — which was absolutely full bonuses and in some businesses, slightly more, because they had outperformed the target and they have done well. So it’s good. And that’s important for us to retain the employees and engage with them so that we have continued support from them in the delivery of numbers. All right. And other expenses that you see, I think it definitely increased.
Increase for the right reasons. One, as I told you, it’s about the volume-neutral expenses, which is on the freight and topics like — which is related to revenue royalty and all these [Indecipherable] more driven by revenue. So we have — we are keeping a tight control on the fixed expenses, which is very important. It does not blow out because we’re increasing in revenue. So that’s something, which is as an internal control topic if we hold the business responsible. So I think this is large and good to see compared to the previous quarter, same time and the same.
So we have a lesser positive impact of commodity variation — so of the exchange variation as what we say. But instead of it, we did a 10.1% in PBT. So our — as I said, as we said in the last call and the previous calls as well, our — we would like to maintain a credible first level of profitability at PBT level, right, of having doubled quarter-on-quarter and year-on-year. And then that should sort of translate — with the volumes what we tend to believe that will improve, that should translate into better profitability going forward, right?
So all the elements of cost is something under probably everywhere. Yes, this is about — yes. So now we do a bit of a quick dive into how does the segment-wise numbers look like, right? So electrification, again, I think I would say, to be on a very lighter side, we actually promote healthy internal competition. So we have motion and electrification as two businesses, which comprise almost 75 percentage of ABB India’s turnover as well positioned to compete with themselves to be leaders, market leaders. So we could see today, electrification is sort of now growing robustly at this point of time.
So we see a good order growth, which is absolutely across all channels and segments which you have seen. Revenues, I think because it’s a short cycle business. So [Indecipherable] to be converted to revenues, and so that they are reflected in the revenue growth. And profitability, better, because I think when the revenue kicks in their debt — people to get because it’s been a product business. They get the full advantage to the bottom line and also raise a reasonable price increase. So when we come to the next slide, this is Motion.
So again, a very strong performance. I think Motion has been — as I said, there’s well in account of ABB in India. So they have been — there are consistent performers when it comes to performing in the market as well as in the profitability. So they have a solid backlog, so that should be converted to revenue in the coming quarters. And I think they also have a good contribution of — in the channel. And probably they are leading on the export side of it, so they have got various allocations to various market compared to the previous year.
So that’s something which is growing with especially the large motors business, right? So — and revenues, of course, I think it ends on the fallout of the orders that we had. And profitability better than previous years, more fueled by mix and improved price valuation. Process Automation. I think process automation, as you all should know, right, so the business and project businesses, projects and — that is dependent on the decision what the customer would do on the timing. So they did — but the base volumes were pretty strong, INR460 crores — INR160 crores is definitely higher.
If I look at INR770 crores, that had an element of INR350 crores of a large order. And if you remove that, so they are actually maintained the base orders and a good, healthy [Indecipherable] and order mix, which we have tackled. So on revenues, I think they would definitely scale up the revenues going forward because they have backlog to execute,and that’s more in line with the project schedule, which would fall in place. Robotics, again, they did a pickup in this particular quarter again.
So they went to — later, they did get some good orders in the market. And we believe that this is a small and sweet business, which will keep growing fast, right? And that’s something, which we are watching out how this would pan out going forward. So — but in terms of capacities, I would say that we are now working in quite a few plants at double shifts right? So as and when we move into higher trajectory of growth from those percentages, so we have headroom to move into the third shift as well. Yes, this is something on channels.
I think this is — we already discussed, so we could go ahead on this. Yes. So outlook and priority with the last slide. I think very important, we have an absolute flawless execution of our order backlog. That is pretty much the very important stuff so that we have the conversions to the bottom line and the top line happening correctly. And we will definitely look — we look at headwinds on demand supply chain [Indecipherable], so that will — especially when it comes to electronics and semiconductor-related confidence what we get in.
So that’s something which we are aware of underground, and we are preparing ourselves to handle it more to the customers other than [Indecipherable] production line. And we will also see elevated cost commodity prices and volatility. So this is something what we will look at it. And what I did not add into this is the impact of interest costs and the corresponding inflation with the RBI coming up with it. So that’s something, which we have not added to this that we will see. But I think that’s — we will also keep on watch.
So having these sensitivities, we will definitely make sure that we leverage the positive momentum, which has been created in the market and internally also in the production facilities. We will consolidate our cash position, right? And of course, last but not the least, I think without this, we cannot survive [Indecipherable] customers, only person who gives us the income. So we’ll add some engagement with them. So this is the — our last side. And I think we probably now open it up for Q&A, yes? So who is moderating?
Faisal, so would you open it up for Q&A.
Questions and Answers:
Operator
[Operator Instructions] First question is from the line of Renu Baid from IIFL. Please go ahead.
Renu Baid — IIFL — Analyst
Yeah, hi, good evening. Good afternoon. Team and Congratulations for the strong performance. My first question is on the sharp commodity inflation that we have seen over the past two months, those started to taper off. But do you foresee any impact of this deep inflation, both on near-term margins on the short cycle orders that we have in the backlog? As well as do you foresee any risks to demand either in terms of delays or postponement of orders in the later time? That’s the first question.
Sanjeev Sharma — Managing Director and Director
Thank you, Renu. Thanks for the question. Well, I think it is true that the inflationary pressures are being felt across the globe and also the supply chain disruptions. We are equally aware, and also our customers are equally aware. And both sides are equally sensitive to it. So whenever you have such a situation, and you are not uniquely partly spending in inflation of input costs as a company, then what happens is that distribution of that cost is much easier to the customer base.
We got customers understand where we are coming from and the [Indecipherable]. And since there are supply chains which are squeezed in the marketplace, customers are also very receptive to receive that pass on cost from us. So — but at the same time, we keep our integrity of our contracts with the customers. If we have committed somewhere wherein the customer has certain price lock in with us, we honor that commitment, we deliver to them. But at the same time, when we see that there’s an input cost increase from us, we also adjust our prices towards our customers.
Luckily for us, the way our portfolio construct is today, we have very fast-moving products. So the cyclicity of our — the order to delivery is quite low, and that allows us to adjust the price base for us whenever we see input cost variation. So at this point of time, yes, it’s a stressful area. Sometimes, this is about — demand is very strong. So sometimes it is about securing the supplies. I think that’s where our attention goes.
But whenever there’s attainable that we could not keep that cost inside our books, we have customers who are very supportive at this point of time. In medium, short term on the elasticity of the interest rates, on demand and elasticity of the cost input on the demand, I think time will tell. Right now, in fact, we can’t explain the strength of the demand. In fact, that is the other way around. The markets are very, very strong at this point of time in the multiple market segments, and that we also see in the inquiry buildup.
We have not seen immediate impact on demand reduction, but we never know what happens six months down the line. If the Fed in U.S. continues to increase interest rate and RBI follows, obviously, when the credit supply gets squeezed in the market, there is always certain partners of the market who are very interest rate-sensitive. Or the investments, which are interest rate-sensitive, they get a little bit more impacted. So we will wait and watch. Until that time, we continue to serve the customers who are demanding and connected with us.
Renu Baid — IIFL — Analyst
Sure. So hopefully, the double-digit PBT margin should not have any headwinds in the near term.
Sanjeev Sharma — Managing Director and Director
Well, [Indecipherable] with you.
Renu Baid — IIFL — Analyst
The second question that I have is actually where has been emphasizing the cash is the focus, and that is where everything is driving. So again, particularly like every quarter, what do you plan to — how do you plan to use this INR2,700 crores cash on book? Any updated updates on new products or factories? We read about the new smart meter factory being set up at Nashik. So if you can give some more info for insight, that would be excellent.
Sanjeev Sharma — Managing Director and Director
We are continuously investing. We are continuously expanding. And post-COVID, we know that we are already — Silvermentioned, and also, Sanjeev Arora sitting there, we are expanding our ships. So that means we are already hitting the top ceiling of our capacity. So it means there will be an organic growth in our capacity expansion, which is already in play in different locations for different product lines. And also, we have inorganic opportunities, exposure globally, wherein our global teams are evaluating some global opportunities.
And if they get materialized, so that means they will have a local footprint, which we will have to integrate, and that’s where we fund it with our own accruals. So both for organic and inorganic, there are things in play, and we hope that’s where we will be able to use our cash meaningfully in the volatile markets we have. But at the same time, we continue to consolidate our portfolio and market position. But at the same time, Renu it doesn’t hurt. It really feels good to have some cash in hand.
Renu Baid — IIFL — Analyst
But anything to quantify in terms of capex that you plan in the next two years?
Sanjeev Sharma — Managing Director and Director
I do have it. I do have it. I do have it, and there are some announcements we will make some time in October. And whether you see our BRSR report or sustainability and practice report, we talk about it when we are ready and we are completed. Because otherwise, we are kind of putting a speculation matter in market. And what we have is you will see some announcements from us, but I don’t want to hint it at that time because it’s a bit sensitive for the marketing.
Operator
[Operator Instructions] The next question is from the line of Ankur Sharma from HDFC Standard Life Insurance. Please go ahead.
Ankur Sharma — HDFC Standard Life Insurance — Analyst
Yeah, hi, sir. Good afternoon. Congrats on the great numbers. Firstly, I look at your order inflows, up 26% Y-o-Y. I’m just trying to understand how much of that is driven by the price hike or price increases that you may have taken and how much is actually the volume increase. So if you could help us understand what has been the kind of price hike you may have taken last couple of quarters? And if you exclude that — I mean, what kind of order inflow growth, that would be good.
Sanjeev Sharma — Managing Director and Director
I think it’s a good question. So what we will do is we will have to do a bit of analysis there. Definitely, as the inflation expands and the price expands, there is a outward definite effect of it. But I would say it’s a mix of solid demand plus the price expansion. But let me give you a bit of a flavor with Sanjeev Arora, who runs our motion business. So maybe, one of the businesses he can pick up so that he gives a bit of a kind of a micro snapshot of the business, so that it gives you a flavor.
Sanjeev Arora — President of Motion
Thank you, Sanjiv, and thank you, Ankur, for the question. So as — in the earlier question, you must have heard that how the raw material prices are hurting. But then, when the demand is there, you can always see it’s a bit easy to pass on to the customers. Of course, it hurts, but then we have to do that. So I would say that giving a ballpark number, 18% to 20% of the price increases, if we compare last Q1 to this Q1, it would be on the price increases, roughly. And then balance, of course, the natural growth of, say, in motion business see around 8% to 10%.
Ankur Sharma — HDFC Standard Life Insurance — Analyst
Perfect. Okay. Okay. And any more hikes plan, sir? Are you largely done?
Operator
This is the operator.
Ankur Sharma — HDFC Standard Life Insurance — Analyst
Yes, I can hear you.
Operator
One moment. Ladies and gentlemen, the line for the management has got disconnected. [Technical Issues] Ladies and gentlemen, thank you for patiently waiting. The lines of the management is reconnected. Thank you, and over to you.
Sanjeev Sharma — Managing Director and Director
Sanjeev Arora continues to explain, he was at a point wherein he said 18% is about the price increase. Balance comes from demand. Would like to elaborate?
Sanjeev Arora — President of Motion
Yes. So first of all, sorry for the disconnect of the line. But then, while I continue my last sentence. So roughly, about 18% to 20% is on the price increases. And balance the natural growth and the way we are penetrating into the various geographical segments, exports is growing. We are in Tier 2, Tier three — even, I would say, in the nascent stages, of entering into new businesses also like having new products, like what Sanjeev showed about LV motors. So I think these, all put together, has given us both the growth momentum from the market standpoint, as well as the price increases. So the combined effect has been quite good for us. So I hope I was able to answer your question, Ankur.
Ankur Sharma — HDFC Standard Life Insurance — Analyst
And if I may just follow up on the export side. I think on one of the slides, it was specifically mentioned that export is doing pretty well on the Motors business. If you could help us, how much is exposed today of the total motor business? Any new markets, products? What’s really happening there? What’s driving this growth for that? That’s all from my side.
Sanjeev Arora — President of Motion
So I think it is good to know that what is driving this. And the way we are operating in our factories, the on-time deliveries, the quality and the technology, what we have in India is driving this growth. And the story has just begun and it will continue. As far as the numbers, I would say that we have a very good growth. That is the statement that I can make, because I cannot say much beyond this, but I can assure you that this is just a beginning.
Sanjeev Sharma — Managing Director and Director
So just to complement what Sanjeev Arora said. So we have export growth. So we did mention plus 33% expansion. And also, we have given our operations are world-class. So we have more and more markets being allocated to us as far as North America, South America and other locations. So our products are flowing in all the directions. So that’s what the effect comes when the global allocation comes to a factory, expansion comes beyond the domestic market. So it has really an exponential effect. So that exponential effect is built into our export performance.
So that’s what happens with other product lines, also, we are exporting more than motors. As the geopolitical things, as well as other things play out, as and when our global team members become comfortable that India can serve certain key markets, then we always see an exponential effect on those product plan. And luckily, we have created a lot of local supply chains, and we are very competitive in the domestic market. And when we are competitive in a domestic market, which is so price sensitive than competing outside is the leverage.
Ankur Sharma — HDFC Standard Life Insurance — Analyst
Sure. Great, thanks. That’s all from my side.
Sanjeev Sharma — Managing Director and Director
Thank you.
Operator
Thank you.The next question is from the line of Aditya Mongia from Kotak Securities. Please go ahead.
Aditya Mongia — Kotak Securities — Analyst
Good afternoon, everyone, and thanks for the opportunity and congratulations on entire team for a fantastic event. The first question that I had was more on margins. At this point of time, you are at double-digit PBT margins. Could you give us some color on the journey towards double-digit PAT margins that you may want to kind of play through?
T. K. Sridhar — Chief Financial Officer and Chief Investor Relations Officer
Just so I would again repeat what I said last time, right? So this question is, of course, comes every quarter. So I think the first step, which we had to reach, is to post a credible double-digit margin as the PBDs list year-on-year, right? So we first started to reach that in Q4 of ’21, right? And this — what I mean is that without exceptional items, because actual items is something which we don’t consider it as an — it’s a onetime topic. So that’s something which we would like to stabilize. So when we embark on this particular journey.
So there are definitely a lot of headwinds in respect to various topics which come. So we need to manage it as well and continue to grow post the 10 percentage of double-digit margin on the PBT level. Yes, our vision is to make sure that in the medium term, we are there at the bottom — at the path of double digits. So that’s important for us as a target to achieve, right?
So what we nursed close to — to this 10% at PBT level year-on-year. So I think we need to wait for the first year of 10% as PBT on a holistic level, that we do with our exceptional items. And then we immediately shift our gear, how do we improve from there to translate it into the PAT level, right? Hopefully, I think we also expect some relaxations from the government as well in terms of corporate tax reduction that will offset that.
Aditya Mongia — Kotak Securities — Analyst
Okay. The second question that I had was on newer areas from where you’re getting orders, specifically, let’s say, energy efficiency. I wanted to get a sense from you whether numbers are becoming like full — fully ordered, what kind of response you’re getting from customers? And if you could give some more sense on whether the opportunity size is higher on the industrial side or on the commercial building side.
Sanjeev Sharma — Managing Director and Director
So I think my colleagues will also help me here. So what happened is that — one thing you should know, and I can say my experience and my colleagues also experience it. Fundamentally, the market and the market participants’ mindset in ESG. Earlier, everybody was looking for a cheap and substandard product, but now, everybody is looking public best-in-quality product. I think there is quite a marked shift on the quality and the technology side of acquisition by our customers. And our exposure of our portfolio is more on the industrial customers than on the government customers.
But in the government again, we have railways and metros and they are buying best-in-quality and best-in-class components because of their fast trains as well as metro trains, because there’s no compromise on those qualities and they’re looking for more and more public infrastructure opportunities. So that’s largely industry. And industry, again, digitalization, energy efficiency, they are becoming a very thoughtful and very conscious aspiration with every acquisition customers we are making.
And that’s where our portfolio falls in a very sweet spot, be it in buildings — whether it’s a residential building, people are doing automation of their phones. Be it in the offices, people are doing automation of their own. Like the building we are sitting here and talking to you, we — it’s our own building. We are using 5,000 ABV products, out of which, 500 are connected product, digital product, and it reduces the energy footprint of our building by 35%. It is being documented by our building management system. And as we say, in 2030, the 70% of the buildings that will exist, they don’t exist right now.
They have yet to be constructed. And this movement is going in that direction, whether it is hotels. And smarter thing is that it is not the multinational or the global company, it is the domestic customers, domestic corporates who are consciously buying the energy efficiency portfolio. Number one, with that consciousness, they save money. Like say, you saw my slide about RE 100. Of course, it’s a good credential that we are buying green energy, but it saves me 30% energy cost. And that consciousness and awareness is coming into the customers. It’s making smart decisions about energy efficiency, it’s more productivity for their people. So that’s the kind of a trend we are seeing in the marketplace, and we are seeing a marked shift in the attitude and the acquisition behavior of all.
Aditya Mongia — Kotak Securities — Analyst
Thank you. Sanjay. Those are my questions. And all the very best. Thank you. Thank you very much.
Operator
Thank you. The next question is from the line of Charanjit Singh from DSP Mutual Fund. Please go ahead.
Charanjit Singh — DSP Mutual Fund — Analyst
Yeah. Hello, sir. Thanks for the opportunity. Sir, my first question is regarding the inquiry pipeline. You’ve talked about that inquiry pipeline remains strong. So if you can touch upon any key segments where you are seeing this in the pipeline to be strong? Or quantification in terms of how large is this pipeline or how it would have grown over the last couple of quarters? That’s my first question, sir.
Sanjeev Sharma — Managing Director and Director
Thank you, Charanjit. So you saw the segment picture I told you. When you saw a high green and slightly less green and yellow, that represents our so-called view of market formation. So that’s what we say, the dark green means plus 15% growth in the inquiry base. Then, when we talk about light green, is a plus 10% market growth. And then we look into the yellow one, it is, say, 8%, 9%, 7%. So correspondingly, we get to see the inquiries build up there. And what we are saying is that the yellow one, which is basically, the core sector, they are the so-called — the next ideal of capex has to start.
And we have started seeing the kind of the preparation by the large corporates in the steel, cement and many other core sectors, and that will play out as we go forward. But in terms of quantifying, I believe we know it. We use some digital tools where every salesperson who is operating in the market, he knows his inquiry base. And all what we do is we also monitor how much conversion we are doing it out of that base. And that’s where most of our efforts go. And so far, given plus 26% growth, you know that our conversion rate is good. But in my view, it can be better.
Charanjit Singh — DSP Mutual Fund — Analyst
My other question is, if I look at this channel mix, so distributors have become 34% in our overall channel mix. And our nature of the products are also more short cycle. We talked about expanding into Tier 2, Tier three markets. So you can touch upon this entire channel expansion and an industrial products company, looking at more of channel-driven sales? Also, looking at Tier 2, Tier three markets. So how is this entire business prospect changing? And how does the distribution channel mix look like, maybe going forward for ABB India?
Sanjeev Sharma — Managing Director and Director
So I’ll answer it partly and then I would like Sanjiv to comment because he’s the master in this area. So as far as we are concerned, we are producing products in the company. So here when — we call it products, so you understand there are three types of products. One is called — you have the manufacturer to stores, MPS products, wherein you produce it, put it into a box and you get an order and it gets shipped out. Then there’s an empty apart product, which is called made to order where it’s the same product, which is MTS, you put a relay or some kind of add-on accessories, and then it gets shipped out.
And then you have ETO product, which is engineered to order, we use our product, but you put them into a subsystem and then you ship out because that’s the next level of value add. Now, these kind of products — so then you have, what happens is there is already a defined use by the channels, panel builders, integrators who are serving their customers in their proximity.
And that’s the muscle of ABB, that’s not only our salespeople, our engineers, but we have a huge battery of people who are earning their bread and butter every day and every morning and expanding the wealth of their families using our products and our portfolio, and they are very loyal to us, and we continue to train them and continue to empower them to do more business in Tier 1.
And since the GDP growth is going into Tier 2, Tier 3, it’s a very natural flow to expand there. And then, what happens is one, since our production lines are same, more you sell in the marketplace, more pull it creates for the products from our shelves and then the magic happens because you hit the breakeven point. And after the breakeven point, EBITDA is a natural effect in terms of traction of it.
And this is a very fantastic business relative to a very project-heavy business, which is top line interesting, but then, it takes a lot of time to convert profits and convert cash out of it. So again, this kind of business, again, converts orders into cash very quickly. And also, it’s very elastic. If your ability to serve and technology is good and perception is good, then you get a multiplier effect very quickly. Sanjeev, do you want to add on top of it?
Sanjeev Arora — President of Motion
I think, Sanjeev, you have said it all. But as the word says, so partner is very important in that. So they are our partners. And it becomes our model responsibility also to groom them to that level. That’s how we do impart our technical training, how we impart them all sorts of factory know-how, how we produce motors, what are the USPs or drives or switchgear.
So all the products what we talk about today are quite — and then on top of it, how we are actually managing our Tier 2, Tier three cities, which are our white spots where we require — and we continuously add the channel partners and also, engage in monitoring their performance and supporting them to add new product portfolios of ABB. And I can say — humbly speaking, ABB is one company where if a channel partner is there, he can sell anything in ABB’s portfolio and then, he grows as a natural growth also. So I think it’s a win-win situation, and you will see more. I would report into this in coming time.
Sanjeev Sharma — Managing Director and Director
So just to give you a breakdown, we are about 70% in MTO MPS and EPS space, 20% in automation and about 10% in project business. But this project business will expand when the capex in the large heavy industry comps. But that’s — I really like this portfolio because of the elasticity of it, is to the market demand is very good.
Charanjit Singh — DSP Mutual Fund — Analyst
Thanks, Angie, for taking my questions. That was very helpful, thank you.
Operator
Thank you. The next question is from the line of Sandeep Tulsiyan from JM Financial. Please go ahead.
Sandeep Tulsiyan — JM Financial — Analyst
Yeah, very good evening. Thank you for taking the question. First, I would like to harp on the point of margins. When you compare the numbers on a year-on-year basis, we see that the exports and services have grown much slower at 3% versus the overall sales growth of 20%. As well as we see the direct sales to customers is lower versus 34% of sales is down to 32%.
But despite that, we have improved our overall margins as well as gross margins. So if you could highlight a few points, what is driving this margin expansion in the current quarter? And going forward, as our mix improves given the strong inflows on exports and services, how should we look at the margins panning out, say, over the next four to eight quarters?
T. K. Sridhar — Chief Financial Officer and Chief Investor Relations Officer
Yes. So let me take this question, Sanjeev, right? I think — First of all, I think margin is in a sort of a product of various elements into that, right? So first is the volume impact, then the mix impact of the business is now what we deliver, right? And also, we have the impact of what is the sort of the SEM, the supply chain efficiencies in which we operate. So I think, do we have this particular come now tram track within the company? Answer to that is, yes, right?
Can we sort of share it with you? The answer to that is no, because that’s something which is sensitive for the market and it affects the competitiveness of any organization for the matter. So we — now, how do we drive this, is very important. If every business definitely has a KPI that they have to be strong enough in the top line and the bottom line as well. So the business leaders drive this particular agenda in terms of how they maintain the market leadership with the right mix and leveraging on their capacities, built up capacities, at minimum cost, right?
As what Sanjeev was mentioning, while we are definitely looking at ESG as a topic, which is supposed to be not only a compliance topic, but also, a business enabler. For the reason because it, a, helps us to showcase these particular topics to the customers to get more businesses from the quality of customers, improve it get better pricing. And b, it also helps us reduce the cost of other side, right? So our energy cost comes down, our water consumption comes down our — probably, our waste management control comes down.
So those particular expenses, which normally are not seen with the common eyes comes down and it also impacts our competitiveness in a positive way. So now, coming to the trajectory as to how do you want to see it, as I mentioned. So our first goal, right, is to make sure that we remain credible on delivering that double-digit profitability at PBT level without any exceptional items. That is something which is foremost and most critical for us this year.
And we do not want to get disturbed about look at how it translates to PAT in the immediate future because that’s something — because we are, in the next two years, we do foresee certain headwinds and risk as what you see. For example, when the geopolitical stuff was not visible one quarter before, right? So what we sort of came in badly got impacted as well, is that because our exports which are there or the global output could be impacted like that. So that was as an example. So that being the case, our first listing is to do double digit in the medium term. Definitely, work with the other levers to make sure that we are going to go there to 10 percentage back.
Charanjit Singh — DSP Mutual Fund — Analyst
Second question is on the employee strength. What we see from the annual report has increased significantly in the last one year. Broadly, our employee expenses were in that INR five crores, INR75 crores ballpark number for the past couple of years. And we have also paid out some variable bonuses in the current quarter. So going forward, how should we look at the overall employee strength? Since you mentioned we’ll be utilizing cash to expand capacities, should it increase at a much faster pace than what is the trajectory that we have seen in the past three, four years?
Or this is more like a onetime buildup and we shouldn’t see a similar proportionate increase in future? And since this is last question, I just want to squeeze in one more over there. Given the parent company has mentioned the listing of the Mobility division will be completed in the current quarter, what will be its likely impact on the Indian business?
T. K. Sridhar — Chief Financial Officer and Chief Investor Relations Officer
Okay. The first one is about the employee spend, right? So first of all, I think in today’s market, right? So employee is one of the very key factors with the backlog which we have or any company has it. We need to make sure that the employees are retained. So that’s something which we want to do. So while attrition is good, but attrition, beyond an extent is something which will hamper our deliverables to the customer. So that’s something which we do not want to.
And typically, when it comes to digital and automation skills, right, that’s something which is a very sought after skill in the market, and that’s something which we want to retain. So the annual increases will continue year-on-year, but we are only trying to make sure that our personnel expenses is within the range of eight to nine percentage of our sales, which is what has been our trend, is what we would like to maintain, right?
And while we do this, I think there are certain great initiatives by the business leaders in terms of automating and robotizing some of their operations on the shop floor, so that they’re able to be flexible with their capacities in terms of how they could manage with less people and more automation. So that’s also something which all the business leaders are working on.
So that’s important for us to be agile. So a long one for short is, we will have employee costs between eight to nine percentage. Digital and the automation skill capacity, skill sets are pretty important for us to fuel the next set of growth which will happen, right? And the capacities will be managed with balancing between automation and headcount.
Charanjit Singh — DSP Mutual Fund — Analyst
Understood. On the e-mobility part, please?
T. K. Sridhar — Chief Financial Officer and Chief Investor Relations Officer
And the e-mobility part of it is a global initiative, so we have nothing to do with it in India at this point of time.
Sanjeev Sharma — Managing Director and Director
So probably, one more question.
Charanjit Singh — DSP Mutual Fund — Analyst
Sure. All right, thank you so much.
Sanjeev Sharma — Managing Director and Director
Thank you. So I’ll probably one more question.
Operator
We’ll take the next question from the line of Ravi Swaminathan from Spark Capital. Please go ahead.
Ravi Swaminathan — Spark Capital — Analyst
Yeah, I think, Good afternoon. Congrats on a set of numbers. My question is with respect to the good growth that we have seen with respect to the electrification products. If you can bring that growth up into what kind of price increase was and how much of it was led by distribution rate increase and growth across different lower data [Indecipherable] products, we can do that process?
Sanjeev Sharma — Managing Director and Director
Could you repeat your question?
Ravi Swaminathan — Spark Capital — Analyst
[Indecipherable], how did the growth come? There was — how much was it basically like motion — also on pricing, right? And how much was it really because of the customer connect on the core?
Sanjeev Sharma — Managing Director and Director
So I would say it’s safe to assume, I think it’s a similar pattern than [Indecipherable]. So I would — I don’t have [Indecipherable] right now. He was engaged somewhere else. He would have given you more precise numbers. But I think it’s safe to assume what Sanjeev replied earlier for the Motion business.
Ravi Swaminathan — Spark Capital — Analyst
Got it, sir. And the growth in the Process Automation business has been on the softer side. The run rate is still in terms of orders, it’s more like INR400 crores, INR450 crores. The last quarter was kind of more like an exception. While the other two lakh segment has grown consistently in this segment as being on the softer side, any particular reason behind that?
T. K. Sridhar — Chief Financial Officer and Chief Investor Relations Officer
So Ravi, it’s like this, right, Process Automation has got two major businesses, which is an energy management division and other one is the process industries, which caters to cement, mining and the steel sector and this thing. So as Sanjeev was saying, those customers lie in the seven to eight percentage growth sector, which is a core sector, right?
So naturally, their growth will not be as exciting as what MP is posting at this point of time. And they are also project business, which is more cyclical, and becoming more of the capex thing. So that will — definitely, you need to look at MP if you want to look at it, we need to look at the three year rolling average on four quarter rolling average, and that gives you more sort of a color rather than looking at quarter-to-quarter.
Ravi Swaminathan — Spark Capital — Analyst
And my last question is with respect to the slide 13 that you had mentioned: high, moderate, moderate-low. Each of these categories, if you can give a breakup of contribution to your overall revenue. So basically, how much would be the revenue portion from the high-growth segment, from the moderate and the medium growth segment.
Sanjeev Sharma — Managing Director and Director
So Ravi, that’s a very good question. I’m also very interested to know that. But we had 20 divisions operating in 23 market segments. We do that analysis, but I think we are not in a position to immediately share it with you.
Ravi Swaminathan — Spark Capital — Analyst
Got it. Sir. Thanks.
Operator
Thank you. The next question is from the line of Amit Mahawar from Edelweiss. Please go ahead.
Amit Mahawar — Edelweiss — Analyst
Thank you, Sir. I just had two quick questions. First is, if you see the EP division, electrification productization, the growth has been pretty strong, more than 30% vis-a-vis last two to three year average. Is it right to say that this segment is where we’ve seen the maximum addition in mandates, both globally and logistic market, the addressable market expansion? And can we see the profitability scale up in this segment in line with that in terms of potential?
Sanjeev Sharma — Managing Director and Director
So I would say we have four engines, and I think since you are the market person and you also, I’m sure, analyze these securities for all the companies. So I like our portfolio because it has different aspects of it, but Motion and EL, I would say they are part of our growth portfolio. PA is more cyclic because the capex needs to come in. And again, as far as the Robotics is concerned, it’s really a high-growth segment for us, right? So that’s how it is.
So I would say, in terms of global mandate, EL and MO has a very strong kind of a global mandate because they already have a very good footprint in the country. Localized — low and high localization and also, very good market shares in the right market segments for us. So that, anyway, has a very good flow, not only for domestic, but also, increasingly for the export market. When it comes to Robotics, I think you may have heard me before, globally, similar market use 120 robots for 10,000 workers. We use six robots per 10,000 workers.
So you can see it’s no-brainer that market continues to grow at a faster rate and that we enjoy. Process Automation, actually, it’s a system business, but it integrates a lot of MO and EL products, part of their portfolio, part from control system. So whenever the capex gets picked up, that cyclicity again gives us the benefit as we pull forward. Other than — they have very strong service business on our installed base, and that, again, we continue to grow as the more opening takes place and more demand of service on the opex side comes from the PA side. But that’s the kind of one. So I would say we have a fairly strong mandate from globally for all the divisions at this point of time. But yes, it is true. Robotics is smallest, but at the same time, we have put it into a long play for us, yes.
Amit Mahawar — Edelweiss — Analyst
Okay. So maybe, one question for Sridhar, if I can get in Q1, what was the ForEx gain in Q1 vis-a-vis last year Q1?
T. K. Sridhar — Chief Financial Officer and Chief Investor Relations Officer
So should I do like this, Amit, so it’s a bit of a more minute detail. I would send you a note. Is that okay?
Sanjeev Sharma — Managing Director and Director
Yes. I think we are at 15 minutes quarter to — I mean, after 4:00 before it’s time to close the call. And so thank you, everyone, for attending this particular call, and also, the afore long preparation for this. And also, the management team, which took out their time to attend to this call. Pretty interesting. We really enjoyed the call. And we are also directed with our journey on the ESG stuff, which is not just ESG, but will enable us to building sustainability in practice.
So it is [Indecipherable], so we look forward to soon, right, in this year at least, have — and try to have a face-to-face meeting with all unless some time in the right time, right? So any you could probably decide that the analysts are also taken care of. Thank you very much for attending and looking forward to talking to you in the next quarter. Thank you very much.
Operator
[Operator Closing Remarks]