ABB India Ltd (NSE:ABB) Q4 FY22 Earnings Concall dated Feb. 13, 2023.
Corporate Participants:
T. K. Sridhar — Chief Financial Officer
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
Sanjeev Arora — President & Lead Business Manager, Motion Business
Kiran Dutt — President, Electrification Business
G. Balaji — Vice President & Local Division Manager, Energy Industries
Analysts:
Ravi Swaminathan — Spark Capital — Analyst
Renu Baid — IIFL Securities — Analyst
Bhavin Vithlani — SBI Mutual Fund — Analyst
Parikshit Kandpal — HDFC Securities — Analyst
Mahesh Bendre — LIC Mutual Fund — Analyst
Amit Mahawar — UBS — Analyst
Deepak Krishnan — Macquarie Group — Analyst
Aditya Mongia — Kotak Securities — Analyst
Viresh Mehta — Nomura Asset Management — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to ABB India Limited’s Q4 CY 2022 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. [Operator Instructions]. 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. Thank you, Aman. A very good morning, ladies and gentlemen. Welcome to the Q4 2022 analyst call. So, we have with me in the call, Sanjeev Sharma, the Country Managing Director; and we have Kiran Dutt, who represents EL Division; Sanjeev Arora from Motion; and G. Balaji from Process Automation; also, we have Vinod, who also runs in — a division of Process Industries in Process Automation. So unfortunately, Subrata could not join this call because they are busy with the customers, right, and so they know that they have a task cut out in front of them.
So with this, I hand over to Sanjeev to take us through the next set of slides and then afterwards, I’ll come in for the finance performance. Thank you. Over to you, Sanjeev.
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
Thank you, Sridhar. Good morning to all of you. Thank you very much for joining in today. So, we had our Board meeting on Friday, and we concluded the last year’s results. So, I’m very happy to share the outcome of those and the — share the results that are duly approved by the Board. Next, please.
So, if you look at the quarter four 2022 highlights and also pay attention to the year-on-year performance of FY ’22, so we have a good growth, overall growth in orders, order backlog, revenues, profitability and profit after tax. So you can see that the expansion is quite good, and we are getting a lot of operative advantages.
We have a number of business models and a number of business divisions in the Company. All of them have been evenly growing in all the parameters. So, that gives us lot of pleasure. It’s not that there are only a few businesses. And also we are exposed to a number of market segments, and we are gaining good traction in our traditional market segment as well as new market segments that we are focusing on.
So, with the results, you can see that we have a solid foundation, and not only that, we have a very robust cash position now in our balance sheet. And alongside, we have been consciously developing our Green Agenda in the Company so that we are a conscientious ESG Company. We were rated Strong ESG company in 2022. And all our campuses have been rated by IGBC, the platinum or gold, and majority of them are platinum standard. And we have also completed RE100 goal in 2022, that means, we are using 100% renewable energy for our operations.
Next slide, please. If you see the key business drivers, you can see with the graphs that orders that is accelerating over a period of time, and also the revenue’s acceleration is in place. So, as we explained to you in last calls whenever you have joined with us that our majority of our volumes are not short cycle orders, wherein the conversion from orders to cash is quick. And also, since they are short cycle, and in the inflationary environment, whenever there are adjustment of input cost, we have good support from our customers, and they have been participating in those rising input cost, where it was required.
We have improved our channels and segments and not only improved channels and segments that also has helped us go into new geographies, penetrate deep into Tier 2, Tier 3, Tier 4 markets and there we are pleasantly surprised how robust the demand for high-quality industrial product is. So, that’s something which is very encouraging for us.
And with the result, we have seen the order backlog is up 32% and that gives us a good runway for 2022 — 2023 performance with the efficient capacities, which are already placed in the Company. And we are also incrementally expanding our capacities to foreseen volumes and foreseen expectations on the domestic and export markets. Our exports grew by 10%, and also we have significant orders from the large projects order from the process industry on the control system and the optimization systems. Next.
Some of the significant wins, just to highlight to you. So, we have a distributed control system being supplied to a major paint supplier or a paint company, which is a best-in-class in the country. We also have the low voltage and medium voltage power distribution unit for one of the largest data center being set up in the country and these are the best-in-class customers that are available to us globally, and now they are active in India. And also we have the solutions wherein ABB Robotics for passenger e-vehicle tool design and simulation was part of our portfolio delivery.
So, if you see wins in CY 2022, we have commissioned Arc Proof Smart Compact Substation and RMUs in the Shri Mata Vaishno Devi route, which we are very proud. So it always helps Company to do stuff, wherein we get some blessings back. And we have traction order for Vande Bharat trains. We have instrumentation and analytics package for Jal Jeevan Mission in Uttar Pradesh. And of course, first-of-its-kind fully automated robotics paints line application for Indian auto major. When I say Indian auto major means Indian large auto company, and you can see marked improvement in quality of those cars in the market and on the road. And the reason is because they have been fully automated paint lines, welding lines and also the finishing lines fully finished by ABB. Why we give this example is just to give you an idea how diverse our portfolio is, and how diverse industry and the customers we work with. Next, please.
This will give you a bit of an idea of what’s happening in the marketplace. The dark green, high, these are the market segments which are seeing plus 15% growth at the moment. And these are the newly positioned segments in last few years, and we are seeing good traction for us in terms of gaining new spent — or the new money spent in the new market segment. So, it means, the market base for us has expanded because we have been focused on these new and high-growth segments.
Same way on the moderate growth segments, which is 10% to 15%, again good leverage, we have with our portfolio and moderate to low, this happens to be the traditional segment. And we believe all the budgetary proposals are encouraging these market segments to spend more capex, and some of them are already doing it and we are taking benefit of it as well.
So, the themes is about partnering for a greener economy, transforming the transportation systems, automation and digitalization of Indian industry. All these are the themes which are playing through our books. Like for example, in the transportation system now, our IE3 motors which are the special motors, we are supplying to e-vehicle, steering pump application. This is a new application that we have started. So thus, you can see that our traditional product portfolio or our capacities now are going into the new markets.
And at the same time, our intelligent automation system for gas network, which is getting set up across the cities to provide pipe gas to the consumers that’s coming about. And then also robotic solution away from automotive application, wherein we have a major play, but they are getting used in the solutions for electronics and 5G equipment manufacturing. Next, please.
One of the examples in the Water and Wastewater, a deep dive, you can see that this is a segment, which is expected to grow at 10% in 2023, reason for that is that we are — when you go to the major rivers today, you see that the rivers are relatively cleaner, reason is because a lot of sewage treatment plants are being set up across the cities, and those — that water which comes out of it is being used in the city, rather than dumped with sewage in the plant, and that’s why you have the treatment plants, you have the pumping station and distribution to create better infrastructure, you have desalination plant, and of course, a lift irrigation, wherein the water is lifted from rivers to higher reaches wherein water is not available, and there are some very good examples in the country where we participated, and a lot of year-round crops are being enjoyed by the farmers in those areas. Otherwise, those farmers were turning to become laborers in the cities, but then this had a big impact. So, it has a very, very large impact in terms of how water and wastewater is being used in the country. And we see that this will continue to grow as we go forward.
Indian Union Budget ’23, I think you are well aware of this and these are the few elements we have highlighted in the area of infrastructure investment, financial sector, green growth, unleashing the potential in the — by setting up cutting-edge know-how and technology, and generate — developing the talents in the engineering — in the institutions. And of course, PM Awas Yojana, which also gives a kick up to the real estate sector. So, we feel that all these elements, not only this budget, but last two or three budgets have been pushing our portfolio into the sweet spot in serving the markets in the energy efficiency, electrification, robotics automation for manufacturing, and of course, process automation for expanding the process industries.
In our ESG journey, as I already mentioned that we have been 100% of all our major factories are now certified green factories, and some of the factories are 45-year-old, 50-year-old. So you can imagine, there was an effort and investment required. But all our teams across locations in Nashik, Maneja, that is in Vadodara, Faridabad, Peenya, which is in Bangalore, Nelamangala, all are committed to make sure that we really run the green campuses to the truest form, not only the green campuses, green factories and also as we move forward, we will also have our products, which will be qualifying to the green standards. And not only that, we are doing that influence within our own parameters, we’re also involving our suppliers and training them how they can become green, so that our supply chain becomes green as well.
And you should know that most of the products, which are used by our customers, they lead to more carbon dioxide reduction. They are the products which help our customers reduce their GHG emissions. So — so we are quite proud of our portfolio as well as our own attitude, how we have gone about doing it. And with this, we have reduced 82% of our GHG emissions in 2022. I’m not sure if there is any other company, you will go — you will know it in the — out in the market, if there are some other companies who have done it, but we are very proud. And it’s not only a good benchmark in India, but it’s also a benchmark within the Group — ABB Group globally how quickly and how clinically we have implemented our plants.
Our factories have become 100% certified for single-use plastic free in 2022. As I mentioned, we are using only renewable energy and we have 100% of factories are now zero-liquid discharge. We are not wasting any water, and we are moving towards water positivity. That means we are using less water than what we are putting it into the ground. There are investments required, but we do that, and we have good return on investment there as well.
Our waste recyclability is at 95%, and we are aiming to have zero waste to landfill goal as we move forward and it is well-crafted as well. Suppliers, I talked about, and we have been awarded by IGBC as the pioneer in large-scale adoption of Green Factory Buildings and we have been rated strong ESG performers, but we are going for even stronger performance in future.
CSR, I think in terms of our outreach program for education, diversity and inclusion and healthcare, they’re very well targeted and for last seven, eight years, we have been spending 100% of our CSR funds. We know that we are making an impact for a country wherein such interventions are required and we continue to do that as we go forward, which is within our impact zone and impact capabilities.
So, with this, I hand it over to Sridhar to take you through the financial highlights.
T. K. Sridhar — Chief Financial Officer
Thank you. Thank you, Sanjeev. So I think, yeah, we’ll go to the next slide. First of all, I think it gives me a lot of pleasure, and this is something which we have been saying that we want to also aspire to become an INR10,000 crore organization as what we were when Power Grids were there with us, right?
To just paint a journey, right, so how — I mean this is the first — this is the year where we have crossed INR10,000 crores. I thought we should sort of go back and understand how we were before with Power Grids and other divested businesses. Right in 2018, we were INR10,115 crores in orders, and I think we divested Power Grids, we [Indecipherable] there was a turbocharger and solar as well and that brought us down to roughly around about INR6,000 crores, right? That was the base volumes at which we think we were supposed to be measuring ourselves end of 2018.
So from there, I think the journey towards INR10,000 crores has been pretty interesting and not to forget the fact that in between we had two years of COVID which had impacted quite severely the business performance of all of us. So, when I look at it, I think the growth on a compounded annual basis has been on about 14% from — over the last 18 — I mean, from starting from 2000 — end of 2018.
So, — and when we compare it with what’s the sort of the nominal GDP CAGR, so we’re — that was at 8.7%. I think we have done exceptionally well in the last four years in the journey towards this INR10,000 crores. So now, while I go to how did we perform on orders quarter-on-quarter. I think we — you could see a dip from our nominal percentage of 4% against Q4 ’21, but actually, Q4 ’21 had INR307 crores of large orders. And if I probably look on a base order basis, we grew at 21% for the quarter. So that’s something which is a good start for the next financial year, so that because these orders get converted into revenues going in ’23 onwards.
So, I think — so, for the total orders intake, we grew at 35% on the base order basis, but 31% on the full — on the — including the large orders. We are at an order backlog of 6,468 and you’ve definitely seen subsequent slides where this order backlog is there by division. So, I think majority of it is process automation. So that’s the nature of the business. Therefore, it has an larger order backlog, which will get executed over the next few quarters to come. And — but whereas the other divisions also have equal amount of surge in the backlog, so therefore, our revenue visibility is quite strong going forward.
So, and the profit before tax has been exceptionally well in this particular quarter, right. Without any exceptional items, we stand at 16.5% for the quarter, and this is more driven by a mix of quite a few factors, which I will elaborate going forward as well. So, I think to broadly say, it’s a good amount of revenue, capacity utilization, good mix of orders between service, exports and domestic, and also the value chain improvements, which gave us that bottom line — positive bottom line impact.
Profit after tax, definitely, we did not have any exceptional item in this particular quarter. So it’s a direct correlation to the — the profit before tax, which we have derived. But whereas in the last few quarters, we did have the impact of an exceptional items coming up from the turbocharger sale. So, if I go to the next slide, please.
So we do have a cash balance of INR3,600 crores. You would have definitely noticed in the media that we have mentioned that out of this INR3,600 crores what we have, INR2,000 crores is something what we’ve marked for inorganic option. So this is the visibility what we would like to give to all that we are — I mean every business is definitely required to grow and the M&A opportunities would be bolt-on and Sanjeev would definitely speak more about it as we go.
So if you go to the income slide, I think this is more about how the P&L stacks up for the quarter. So, I mean we did definitely explain about order — revenues and orders and all the stuff, so, I think the good part is here we have the expenses also tracking well, not much of increase in personal expenses compared to the previous quarter same year. So, this is just nothing but a price-driven salary revision, which has happened. So, material cost is definitely better than what it was in the previous quarter, and this is because of factors what I told you in terms of mix, the volumes, and of course, the prices, which we have increased for M — and EL and MO products, which we are still holding on at this point of time. So that’s important to understand that these price impacts definitely depend upon the market demand-supply situation. So, but overall, I think this particular quarter was very favorable for us towards the material cost.
We did have an exchange gain of INR30.6 crores compared to the previous year same quarter was INR16 crores. So we had a favorable swing of INR14 crores. And depreciation, of course, it’s pretty less. Interest cost is slightly higher because the income towards it is classified as other income is nothing but a reclassification. So overall, the net interest cost to the Company is very negligible. So, profit after — and the ETR stands at 24% — less than 25%. So, overall, I would say, I mean, we — our analysis says, this is a better year, better quarter for all of us in the sales, right? So, yeah, we can go to the next slide.
Just a bit of how every business areas performed. I think EL on a basis of CAGR that’s 13% on a five-year — on a four-quarter basis, which is sequentially, what we are seeing for the quarter. But I think if you look at on a year-to-year basis on the — for the same five-year period, I think it would have been a very good growth on the EL side of it, as well as in MO. So revenues, we have — EL follows more of a book-to-bill scenario. So, therefore, the revenues are pretty fast forward depending on the orders what they get. So, therefore, I think there’s a good uptick in the revenues as well. We stand at a good order backlog of 20% higher than what it was in Q4 ’21 and from a PBT tracking in the right direction with better product mix, volumes and improved price realizations.
Motion, I think they did have good order intake in Q3 and Q2 where — from the some of the large orders of railways, which actually is delayed to the next quarter. So that’s why, therefore, there in other words, they definitely have an order bank, which would materialize in the next quarters to come. And, good revenue tracking. I would say it a fantastic revenue tracking of more than [Phonetic] 23% growth and an order backlog growth of also 18% and profit — yeah, profit before tax is solid at 16%, yeah. And we did have a bit of a positive forex income also getting impacted on the MO portion as such. Next slide.
So for process automation, this is a real turnaround year, right? So I think solid growth in orders on a year-to-year basis and also on the revenues as such, they have a solid backlog at 5,000 — INR2,600 crores, a 52% increase and a good traction in terms of profitability, and it’s more because efficient project execution and what they had provided earlier, they could come back — bring back those money, and also and a very good share of services is driving the profitability of PA.
So Robotics, again, so we have a consistent uptick in the orders, better profitability as what you see, and also the order backlog tracking pretty well. So, they also have a good order backlog to execute for the next few quarters to come. So, I mean this is about how we track on different sectors, different dimensions as such. So I think the most important piece is exports. Exports, we are at 12% at this point of time. We were used to 15% some point of time, and we need to understand that the domestic demand is growing faster than the exports. Therefore, the exports per se could be 12%, but actually the growth on exports is almost 14% to 15% whereas, the domestic demand is growing faster. That’s why the percentage looks a bit muted, but actually, growth on exports per se is stronger.
So overall, I think this is how we are there at this point of time. Services and Projects well distributed, it’s well-balanced portfolio as what we see. And just to — just a point of good information what you would like to see. We have been saying about how we are approaching the market by penetrating Tier 3 and Tier 2 cities. Just to give information about the 85% order book, which is there leaving aside 15% for exports, which is from the local demand, we were pleasantly surprised while Tier 1 and Tier 2 contributed 52% of our order book, right, in the current year, vis-a-vis, 57% previous year and Tier 3 and below that contributed almost 48% of our order intake, compared to 43%. So that 5% uptick has come from the so-called efforts what has been put in penetrating the markets below Tier 2 cities. So that’s happened [Phonetic], I think overall, and this has primarily happened in EL and MO as well as PA. So overall, I think this is a good development what we see, in getting to these particular performance levels.
So, yeah, so this is basically what we see. We have definitely a robust cash position at this point of time. Balance sheet is pretty much, well — is very strong. So we have all the items pretty clear for their execution collection going forward. So we don’t try and remove it from the balance sheet.
Of course, as we look forward for 2023, so we’d largely depend upon the government capex, which is being told about in the budgets. So we expect that this should hit the ground and we should see some action. And of course, our focus engagement with the different parts of the market will definitely help us with opportunities what we have. And when it comes to risk, I think the commodity prices and forex will still continue to be a moving element which we need to manage, and also there could be definitely certain competitive and price later actions, which will happen in the market, that’s also something what we need to see. And of course, the — any disruption in the supply chain constraints, which we have managed pretty well till this point of time, we need to look at it — keep looking at it going forward as well.
So — yeah, so that’s it from my side. I think, thank you. Thank you very much for your patient listening. So I think we could now — Aman, open up the floor for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Ravi Swaminathan from Spark Capital. Please go ahead.
Ravi Swaminathan — Spark Capital — Analyst
Congrats on a very good set of numbers. My first question is with respect to the profitability. Gross margins have seen a significant improvement year-on-year, so what is the reason behind that? And secondly, so basically, order inflow momentum has been on the slower side, 4% growth. You had mentioned there was a one-off large order last quarter. So, are you seeing the traction from large orders slowing down a bit? So, you can answer these two questions. Thanks.
T. K. Sridhar — Chief Financial Officer
Okay. So Ravi, let me take the large orders, this thing. I think our — having reached INR10,000 crores, our ambition is to make sure that we are steady and credible to remain at INR10,000 crore level. Of course, this definitely depends on the large orders, which get mostly applicable for process automation, which is PA, PI and — Process Industries and Energy. So we have Balaji and Vinod as well on the call. So our market intelligence says, yes, there is a funnel of opportunities, but only question is how the timing will pay out, right?
So having said that, we are probably confident that we would be able to maintain the trend, right? It could probably vary from quarter-to-quarter but on a year-to-year basis, we still would like to aspire to be as 10,000 — more than INR10,000 crores, that’s what we have performed in this particular year, right?
And coming back to your margins, Ravi, I think, as I mentioned, this particular quarter was definitely an extraordinary quarter in terms of how we leverage our volumes, mix between various elements of revenues, what we have, and also the supply chain actions what we had taken — what the business has been taking has actually fructified into good efforts into the bottom line.
So — but having said that, will this be the benchmark of a material cost percentage, what we want to do? Yeah, having said this, we will keep it as a benchmark. But, I mean, if you look at it, normally, we trend — we tend between — tend to move between a range of 63% to 65% quarter-on-quarter. So that’s where we would be.
Ravi Swaminathan — Spark Capital — Analyst
Got it, sir. Yeah. Thanks.
T. K. Sridhar — Chief Financial Officer
Thank you.
Operator
Thank you. [Operator Instructions]. Thank you. The next question is from the line of Renu Baid from IIFL Securities. Please go ahead.
Renu Baid — IIFL Securities — Analyst
Yeah. Thank you and many congratulations for the strong performance. My first question is you did highlight and give some interesting inputs that nearly more than 50% of your revenues have come from Tier 3, Tier 4 and lower distribution markets. So can you share some inputs in terms of what is the kind of reach in distribution does ABB has for its industrial products? What initiatives have gone by, and how do we look at further enhancing and leveraging this reach to grow revenue? And what type of products are actually getting pulled from the smaller markets? Are these conventional products, new technology or more mature technology platforms?
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
Okay. So, I’ll make a quick mention and then I’ll hand it over to Sanjeev Arora, The MO Head, as well as to Kiran, but — there the product push into these tier 3, tier 4 market matters the most, in the Motion business and the Electrification business. So, yes, there is a significant impact with the number of initiatives we are taking for last four years, and I think — they are delivering good results for us. So first, over to you, Sanjeev.
Sanjeev Arora — President & Lead Business Manager, Motion Business
Yeah. Thank you, Sanjeev, and thank you, Renu, for that question. So, as you see, the industry is expanding and India is in the highlights. So we have seen a good momentum in Tier 3 and Tier 4 cities. So, how we are capturing is that we are expanding our channel network. And the name of the game is, as you are closer to the customer, you serve them better. So, that has been our winning piece.
The second part is that, when it comes to the end-user segments or OEMs in Tier 3, Tier 4 cities, we have done very segment-specific seminars and also made sure that they know our products and technologies well. That has really given the pace of the — even to the end users as well as the EPCs and OEMs present in that Tier 2, Tier 3 cities. So one part is, that how we are catering the end users and promoting them because anyhow if the growth has to happen and the industry has to expand, Tier 3 and Tier 4 customers will raise their bars to Tier 2 customers.
So, that’s kind of a growth there we’ll see in coming time. So overall, the channel network and how we make sure that the end users’ OEMs and EPCs present in those territories are well addressed.
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
So in terms of technology, we are talking about products, which go to the OEMs, end users and the — our channel partners and that gets then integrated into a machine or a larger plant. So that’s a kind of a technology for Motion. And same thing from Kiran, your perspective?
Kiran Dutt — President, Electrification Business
Yeah. Thank you, Renu. I think it’s a very, very important question for us as well. When it comes to EL perspectives, I would classify into three different directions. The first one is on the service part of it. End-users are located in Tier 2 and Tier 3 and Tier 4 cities and it’s very important for us to give them the service. It’s also important to have that particular reach to ensure that the service is on time. And here the time matters. So it’s very, very important to be closer to the customer as Sanjeev also mentioned it.
The second part I would like to mention is, we also looked at what could be done in terms of a retail network. So that’s something which we are now expanding very quickly, and it’s very important to understand where is the retail, is it in metro cities or it’s in Tier 3 and Tier 4? I think it’s in both, it’s a mixed kind of an approach. We approached Tier 3 and Tier 4 cities as well.
And when it comes to the other side of the story, in terms of distribution part of it, where more of industrial products, not in terms of the residential applications but industry producs, the distribution network, we were — as Sanjeev Arora was also mentioning, it was important for us to be very, very near to the customer in terms of ensuring the availability of spares, it could be — it could be even a full product or it could be a part which could be retrofit later on. So, that is what we approached, and I think service, retail and distribution have been the factors for success in Tier 3 and Tier 4 cities.
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
But at the same time, thank you, Kiran, thank you, Sanjeev. And also Balaji you know, who handles our Process Automation, Energy portfolio. So Balaji, from your perspective, you see some actions taking place in across the country in the cities, what is your take for expansion to Tier 3, Tier 2, Tier 4 cities and any action you see on your side?
G. Balaji — Vice President & Local Division Manager, Energy Industries
Yeah. As a part of the energy transition journey of India, there is a lot of focus that’s been provided on the natural gas usage, especially for the domestic and the automotive and there is lot of activity as you have been following on the city gas distribution. And we have also seen a lot of requirement of automation coming up for these city gas distribution and we have been successful in quite a few. So, there is a lot of penetration in the automation side into the Tier 2 and Tier 3 districts and cities as well, Sanjeev.
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
Thank you, Balaji. So I hope Renu that answered your question.
Renu Baid — IIFL Securities — Analyst
Sure. Any way we can quantify the distribution that we have through retail and distributor network, or it would be difficult?
T. K. Sridhar — Chief Financial Officer
It is not difficult within the organization, but definitely difficult external for the organization.
Renu Baid — IIFL Securities — Analyst
Got it. And secondly, as in, now that we are sitting on a strong cash kitty and you’ve highlighted a separate amount which has been earmarked for inorganic expansion, Sanjeev, can you share some colors of — or contours of this kind of inorganic, what type of businesses, technology you would want to expand in? And would these be as an India-centric acquisitions or would be outside some more color that you are looking at? And any timeline that you have in mind that acquisitions within the given timeframe, which are planned?
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
Yeah. Sure, Renu. So this is in alignment with our global CEO’s strategy, but he has announced that we — ABB will go for multiple bolt-on small and medium size investments and acquisitions. And this basically follows in our core portfolio. So all our division managers globally as well as locally have been empowered to look for targets which makes sense from the global perspective as well as from the specific local or regional perspective.
So we have drawn up a good pipeline, and it can be in the areas of digitalization wherein we could be looking at certain partners who have come up with some solutions, when they are layered on top of our core portfolio, it adds more productivity and value-added services for our customer, so that’s one area that we are looking into. And we recently also acquired a company there in the EV charging space from the global team’s perspective.
Other areas we are looking at is on the — there are certain expansion areas, which are taking place, especially in the energy sector as well as energy efficiency area. So there are certain add-on technologies, which can complement our customers’ experience with us, and they are also part of our pipeline, both global, as well as with the local targets available with us. So, I would say, a mix of both.
So, if the global team comes up with a kind of an acquisition, which has a local footprint, so our cash will get utilized there. And also the local targets if the — you require both buyer and seller to shake hands, so both sides should be ready, so we are not in a hurry. We just want to make sure that we select it right and we get the right deals for both buyer and seller so that a stable platform can be created for us.
So, the money will get spent on both sides, global as well as local, Renu.
Renu Baid — IIFL Securities — Analyst
Sure. One last question if I can. On IE3 range of motors, which you mentioned are finding higher application in EVs for pumps segment. So can you elaborate a bit more in terms of the opportunity that you see from EVs and what type of vehicles are we looking at? And, are we looking at expanding the portfolio within this motor portfolio that we are looking through?
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
So as this segment opens up and expands, and also more and more OEMs are now getting interested and they are localizing the overall supply chain. So naturally, we find ourselves with part of our portfolio fitting in their requirement and request. So I hand it over to Sanjeev if you like to add something on top of it.
Sanjeev Arora — President & Lead Business Manager, Motion Business
No, thank you. I think, Sanjeev, you have really summarized it well. So, there will be a momentum and we are sweetly placed. So as of now, it’s not advisable to really open up more. But then, we are in that space, and where you will soon see that as the segment grows, we are part and parcel of that.
Renu Baid — IIFL Securities — Analyst
So automotive will increasingly become a growing opportunity within the motors portfolio for us?
Sanjeev Arora — President & Lead Business Manager, Motion Business
So going forward, we have to see that whether that business is — becomes more crowded, or whether it makes sense, but definitely, it is not only the cars what we are talking, but then automotive means many other trucks and buses and — which are especially the dump trucks in the mining sector than others. So there is a large portfolio of automotive, which needs to be considered while we take a decision.
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
I think what Sanjeev Arora mentioned was the right word. We don’t — we are not going to be in the crowded space, but we will be in the space wherein we add extraordinary value for the customer with a technology which is quite differentiated.
Operator
Thank you. Ms. Baid, I request you to join the queue for any follow-up as we have several participants waiting for their turn. [Operator Instructions]. The next question is from the line of Bhavin Vithlani from SBI Mutual Fund. Please go ahead.
Bhavin Vithlani — SBI Mutual Fund — Analyst
Congratulations to the team for excellent performance. The question is on the order flows and when we look at sequentially, second quarter INR2,760 crores-plus [Phonetic] and we’ve been seeing sequentially it’s been slowing. If you could give us a color on that. So is it that we are — the preference is more on the profitability versus the growth? Is that the case where we’re letting go of some business in view of profitability? That’s one.
The second is on the EV charging globally, there is an announcement of separation and IPO. What the implications will be on the Indian entity for that? And the last bit is, we have seen a significant expansion in the margins and especially, it comes to the Robotics division. So if you could help us understand, and — the sustainability of these elements. That’s it from my side.
T. K. Sridhar — Chief Financial Officer
Okay. So Bhavin, I’ll take the first and the last, while Sanjeev can — you may have to repeat probably in case if we lose track of the second question again. So, the first track is basically, how do you see the momentum of the orders, how have been tracking? Just to quote some numbers, I think in Q4 ’21, which is the last quarter of the same year, I think — the last year same quarter, I think we did INR2,200 crores. Q1, we did INR2,291 crores or INR2,300 crores to be — just to round it off, right? In Q2, we did INR2,800 crores and in Q3 ’22, we did INR2,600 crores. While you see there is an uptick definitely between Q2 and Q3, and to mention that, they had large orders, so project orders which were there in which PA definitely grew on them both from Process Industries as — and energy segment, right?
So, and when it comes to Q4 ’22, we didn’t have large orders, it’s all base orders. In other words, the base orders has to be consistently be growing at INR2,300 crores, INR2,400 crores, quarter-on-quarter. Every quarter, we need to do that. And, added to that will be the large order as and when they get dispersed. So, in nutshell, do we see an — what you call, a decline, in it? I could only say we see a strong funnel, so therefore, it’s only a time for that to mature, right? So — and we have been consistently booking more than or almost INR2,300 crores of orders — of base orders every year.
So, on the last question of how does Robotics track in terms of margins? How have they done? I think there has also been a rejig of the portfolio of RA. So good amount of services, which has started to play out. And also the offerings into electronics and logistics sectors is something, which is, of course, giving better margins. So in other words, and these segments are going to remain. So that’s something as what we have told in Sanjeev slide as well with respect to the high-growth segments, which has been maintained.
So I think we look forward that we will be able to maintain those margins as what it is, but I think definitely in this quarter, the margin was pretty much higher because we had a capacity utilization also playing it.
If you could repeat the second question, probably, I…[Speech Overlap]
Bhavin Vithlani — SBI Mutual Fund — Analyst
EV charging.
T. K. Sridhar — Chief Financial Officer
EV charging, yeah.
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
Okay. Your question was EV charging. Our Group’s announcement in terms of establishing, of course, they did involve certain investors to take some stake in that unit. And that’s very, very fast-growing unit for us in ABB, based out of — with a good base in Europe as well as volumes in Americas. We also announced expansion of our factories in Europe as well as in Americas. Our view on India is that as this company frames its global strategy and what they will wish to do it in India, I think that will be determined by that company.
So it’s not directly impacted by us and nor focused by us. I think it is — this global EV charging company in certain market, it manufactures, certain market, it does only trading. India is a market, which is at the nascent stage, nascent stage of development on the EV vehicles, EV passenger vehicles, and also the vehicles, which really require fast-charging where we specialize, because those EV vehicles need to be high-voltage.
So I think it will take some time, wherein that sophistication in the market will come and the market will grow. So I’m sure our global team, which is responsible for EV charging will deploy India-specific strategy.
Bhavin Vithlani — SBI Mutual Fund — Analyst
Sir, just a follow-up on the last one. So in case, there is an IPO of this business, will it remain as a part of the listed entity or will it be disposed off as a separate entity?
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
So what we know at the moment is that it will be a company which is IPO-ed at the global level, and I think it will be absolutely based on their strategy what they want to do about Indian market. So we don’t have a play there.
Bhavin Vithlani — SBI Mutual Fund — Analyst
Thank you so much for taking my questions.
Operator
Thank you. The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Parikshit Kandpal — HDFC Securities — Analyst
Hi, sir. Sir, my first question is on margins. So we have a trajectory of going towards 15% margin. And in the past, we have guided for 10%. So again, we have achieved that. So, how far are we from achieving the 15% margin?
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
So, Parikshit, you are very fast, actually, I couldn’t probably… [Speech Overlap] No. But I think he is absolutely right. I think the first thing is we should look into our — listen to our elders. So our Group CEO had said that we will deliver a 15% operational EBITDA globally, which he has delivered, it is 15.2% or 15.3% — [Speech Overlap] 15.4%. So it means that target was achieved by ABB Group one year ahead of time. And as a Company in India, I think we are on the right track to make those positive contributions to the global goal, and I think that has been acknowledged by the Group. And you should also know that the way we operate in the country, I think the value-added by us by localizing and value-added by us by importing key technology is part of the value chain that also contributes to our global network. Now, as far as we are concerned, on the profitability side, it’s a journey, and this is something which doesn’t happen over one quarter or the other. This is something in formation for last three years to four years, if you have followed us closely, we have rejigged our product portfolio. We have let go off certain part of our portfolio, almost 40%, 42% of it is not part of us anymore. It’s part of Hitachi Energy as well as — as with FIMER, but we have regained those volumes this year. We have come to INR10,000 crore Company. Our revenue kind of projection is good, revenue flow is good. Our backlog is good, our capacity utilization is good, and if you combine those factors, and we continue to execute with the same pace, I think the profitability follows. Profitability doesn’t need to be created, it just follows these actions as we go forward here.
Parikshit Kandpal — HDFC Securities — Analyst
[Technical Issues]. Sir, second question is on this inorganic opportunity which you highlighted. So any plans to getting back into Power Grids business in India?
Operator
Parikshit, your voice is not very not clear. Please use the handset.
Parikshit Kandpal — HDFC Securities — Analyst
One second. Yeah. Sir, I was talking about that inorganic opportunities, any plans to get back into the Power Grids business because that seems to be quite promising for the next few years?
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
Power Grid business, you mean?
Parikshit Kandpal — HDFC Securities — Analyst
Yeah.
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
No, I think we will — we did a portfolio analysis in terms of where we want to be as a Company in future. So, we have chosen that we will be focused on the Process Automation, Robotics Automation, Electrification, wherein the electrification for us starts at medium voltage level and then, of course, the Motion, which is the energy efficiency theme. So that portfolio is something what we will take forward. Power Grid portfolio, we have let go to Hitachi Energy and they are the ones who are pursuing it.
Parikshit Kandpal — HDFC Securities — Analyst
And just a last question on the traction motor orders which you got. So how big is this entire opportunity of Vande Bharat for us and even the locos orders, maybe if you marry it with the traction motor, so how big could this opportunity be and, what will be our role for entire railways?
T. K. Sridhar — Chief Financial Officer
But I think you are asking more questions than what is allowed because we need to give chance to the others. Definitely, this will be replied. You could give it to us on email, Parikshit.
Operator
Thank you. The next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Mahesh Bendre — LIC Mutual Fund — Analyst
Hi, sir. Thank you so much for the opportunity. Sir, I have one question. We have 8% to 15% margins. So, I’m just trying to understand how sustainable these are, and over next two years, what kind of trajectory we can see in this?
T. K. Sridhar — Chief Financial Officer
So, Mahesh, we don’t give any forward-looking statements as per ABB, this thing. So I could only comment as to how did we reach this particular profitability for this — but — for this quarter. Of course, as I mentioned, it was an exceptional quarter with respect to capacities playing out, the commodity and forex variations also playing out favorably, and also our mix playing out.
So this is basically a factor of all these three, which we have as a strategy. And so we have been consistently focusing on it. Our journey is to first hit the INR10,000 crore in volume, in revenues. We have achieved the first step of INR10,000 crores in orders. We are now looking forward to go and to convert into revenues and then automatically, the other numbers follow, right? So that’s basically how it is.
So our dream to come back to the levels of 10% on the PAT is definitely there. We are chasing it, and I think we are looking at it. And we want to be credible. When we say this, we do not want to do a statement now, but we find it will take more time to achieve. So, but we want to be credible that we go steadily in this particular direction.
Mahesh Bendre — LIC Mutual Fund — Analyst
Sure. Thank you so much sir.
Operator
Thank you. The next question is from the line of Amit Mahawar from UBS.
Amit Mahawar — UBS — Analyst
Thank you. Thank you, Sanjeev, and TK, and congratulations on achieving multiple milestones. Sir, I have two quick questions. First is on the services and exports portfolio. If we see incrementally more and more contracts are coming with significant O&M layering, right, you talk about transportation, mobility, low voltage. So, do you think there is a case for services and exports to move beyond current 20%, 21% levels to around 30%-plus in the next three to four years? That’s my first question.
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
So when it comes to services, of course, it’s a very high focused area. We have — actually, we have made services as divisions in the Company. So that means there is an exclusive focus to cover as much installed base as we have. There is always a lag in terms of what installed base we have and how much we cover. So, teams are really working hard to do that. And also most of the customers are upgrading their installations to the newer standards of whether it’s the digital side or they are upgrading it to newer products and more reliable and availability-based solutions. So all that is playing well in services, and we are very encouraged in that area.
As far as the export is concerned — exports are concerned, you have to realize that exports is something which we are a more of a supply base to ABB Group. We are not the ones who drive the export business from here. What we do and what our — part of our ABB India management team strategy is to develop our operations to better than world-class in the sense, whatever is known, we continue to improve them. We try to bring very strong ESG standards to our operations because that also play in the mindset of people who are importing the products from country, India because that gives you an extra layer of confidence in the customer that their supply base is green.
So, a number of initiatives, and also a lot of productivity-based gains, wherein we do the automation in our plants so that the traceability of the products that we produce is quite good. And also, same systems and the processes we apply for our suppliers so that when we are exporting out, the — when the audit is done by a customer or a large customer globally, they can see that the complete value chain and the ESG agenda, as well as our productivity standard as well as our ability to produce in a flexible manufacturing environment is available to our global buyers.
Once all that is placed, then it’s a matter of time that the growth comes, because if our so-called competitiveness is good, our supply chains are local, so relative to what options available to the global managers within the Company, they tend to buy more from such factories.
So that’s what have been playing well for us, and some factories have been converted as a fully — not fully export, but majorly export factories and we have seen the growth of about 100% in some places, we have seen 200% in very short period of time. So, we are not in rush. We prepare ourselves well and then we continue to serve our domestic market growth. And as is required, and as the markets get opened for us on the global side, we continue to serve them. But also learn very carefully about how to serve the export and global customers so that we make sure that the customer experience is always good and controlled for us.
So I see, still, it is at an early stage wherein our export potential is exploited. And as we go forward, I think it will continue to improve.
Amit Mahawar — UBS — Analyst
Helpful, Sanjeev. My second and last question is more to maybe, Sridhar. Sridhar, in CY ’22, have we seen a reduction in payment to parent in terms of royalty, IT tech support, etc? Has it happened in CY ’22 and how do we see that moving? Thank you.
T. K. Sridhar — Chief Financial Officer
Okay. So I think according to us, we track as payments to the Group in two forms, which is in terms of royalty, trademark and any other support fees what we have, right? So, but the market also looks at what we pay as IS. I don’t consider personally IS as a cost as payment to the Group because it is more user-based license cost. So, and also it’s based on the businesses solutions what we give. So that way it’s directly linked to the volumes and the people.
So now coming to the first three elements, which is royalty, the technology fees, the trademark fees as well as the other any support fees, we still are well within the 5% mark, which is there. So, we are trending in that.
Operator
Thank you. [Operator Instructions]. Thank you. The next question is from the line of Deepak Krishnan from Macquarie. Please go ahead.
Deepak Krishnan — Macquarie Group — Analyst
Hi, sir. Thank you for the opportunity. I just wanted to understand, see, from what our parent report about 22% growth and we reporting 4%. Is there largely orders which the parent takes from India where the India business entity has no say? How does that — how do we kind of reconcile these two numbers?
T. K. Sridhar — Chief Financial Officer
Okay. I think there is a concept of demand orders because it depends on what is the constellation of the orders or the structure of contracts, what the customer prefers to take, and also some solutions are directly imported from the Group, right? So, therefore, the 22% what Group would have mentioned is basically because of the orders, what the local customers would have directly placed on the ABB units outside India, right? So that’s how you see 22% as mentioned by the Group, but they see the demand from the geography, whereas we look from the supply side of it.
Operator
Thank you. The next question is from the line of Aditya Mongia from Kotak Securities. Please go ahead.
Aditya Mongia — Kotak Securities — Analyst
Yeah. Congratulations on a very strong set of numbers, and thank you for the opportunity. My question was more on the acquisition part that you were mentioning, the bolt-on acquisitions. I wanted to clarify that, when you say these acquisitions, am I to assume that the conduit will only be ABB India? And also wanted to kind of check that when you speak of an INR1,800 crore quantum, is this linked in some ways to the pipeline of projects that you were seeing or are these completely unlinked?
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
So, as we explained, there are two aspects. One is the global acquisition, which we don’t have the — what you call direct visibility sometimes, but when it comes to that size, that may determine when the Group announces it and if it has a local footprint of it. So at some point, we get involved and we will get a visibility of it.
So, what we are saying is that the pipeline that is available in India and that too our ambition are small and medium size bolt-on things. So yes, it aligns with what we identify in the market is possible and — which can be absorbed and part of our ambition with different business divisions where this demand is coming from. Thank you. The next question is from the line of Viresh from Nomura Asset Management. Please go ahead.
Viresh Mehta — Nomura Asset Management — Analyst
Very good afternoon, sir. This is Viresh Mehta from Nomura Asset Management. Wanted some more clarity with regards to the disconnect between the orders that have been reported at the Group level and at India level. When we look through for the last eight quarters or ten quarters, there has been a broader similarity whereas this seems to be very stark when we look at the last quarter number.
T. K. Sridhar — Chief Financial Officer
Okay. So let me again repeat what I said. There is — so there are orders, which are given by customers and we book it. So that’s simple, straightforward, this thing. There are also certain orders which are given by the customers in India to the ABB Group units globally, which doesn’t need to pass on through the ABB India books because there is a direct transaction, there is a contract, which is directly done by them. So that basically contributes to the balance gap, which you see, right? So in this quarter also, ABB Group units have got a few orders, which is from the local customers directly and that contributes to it while we have grown at 4%.
Sanjeev Sharma — Chief Executive Officer, Country Head & Managing Director, South Asia
So Group sees demand coming out of India and that’s how they inform you, so that gets booked as — this is India-centric demand and at times, there is a mismatch because that particular quarter had that kind of flows.
T. K. Sridhar — Chief Financial Officer
And we’re — when we are talking of this, I think, we are — Sanjeev, we are also talking of the growth between two quarters. I mean the growth of demand, right, or the orders what the Group has got from India customers directly, the last quarter — last year the same quarter and this year the same quarter. So that, I mean, directly depends on how the contracts are finalized. So we have no control on how the customer wants to play — I mean the needs of the customers.
Operator
Thank you. Ladies and gentlemen, due to time constraints, that would be our last question for today. I now hand the conference back to Mr. T. K. Sridhar for closing remarks. Thank you, and over to you, sir.
T. K. Sridhar — Chief Financial Officer
Thank you. Thank you very much for joining us on this call. And also, I would like to thank you for all the support what you guys have given to us in this journey. And probably, again, we talk to you in the next quarter in the month of April or May when we have our Q1 results, which could also be equally interesting as what it is in Q4.
Thank you very much and also, management team who was there on the call. And any queries if you still have, do please feel free to talk to us or reach us — reach out to us on an email. Thank you.
Operator
[Operator Closing Remarks].