Orders exploded 50% in Q1FY27 led by data centers (15-17% of intake).

Sanjeev, if you look at the order flows, excluding the automotive large order in RO, your broad comments still have been fairly positive on the ordering environment as we look for CY '26. Given that metro order also we've announced for Jan, how should we look at the order inflow momentum heading towards the next calendar year? And in general, what are your views on the broad investment sentiment?

I can take the first part. Thank you, Renu. Thanks for the question. Second part, Sridhar, you can look into future and give an answer. So as far as demand outlook is concerned, it definitely looks positive as confirmed by the business leaders who are running different businesses. So when we look into the aggregate demand outlook for ABB India, what it really means is how is the demand outlook is for each of the 18 businesses. So we have the sum total of all the businesses. So right now, we feel that there is a demand building up after a breather in early quarters of 2025. At the same time, it is never a good idea to declare a victory or declare a trend with one quarter results. We shall continue to watch how the quarter 1, quarter 2, quarter 3, quarter 4 builds. I think that will show very clear indications on how sustainable and how resilient the markets are. But as we look into our customer engagements and also the market segment engagement, it seems to be moving in the right direction in our view.

Which could be the key end markets which are driving this?

So if you go into our chart, wherein you see you have a spread of emerging market infrastructure as well as the core industries. So emerging market segments are going really very strong. And also the middle segment, which is infrastructure, where, again, we have good traction. And core industries, which were kind of, I would say, muted in past, but that forms about 52% of our volumes. We are seeing good green shoots and good signs there. There is a good mix of orders coming from the core industry, especially metals as well as in the chemical, oil and gas and other market segment in the core segment. So that we are seeing investment profile increasing in the core segment as well. And that segment, though it is low growth for last many quarters, given that it is 52% of our volume, if that moves, it moves us quite well. So it's a combination effect of all the 3 core areas that we focus on there.

Our margins for last year on an annualized basis were about 16%, excluding impact of the New Labour Code. And now that incrementally demand outlook and volumes are looking better, how should we look at the margin environment for the next 12, 15 months? Can we expect margins to improve? Have they bottomed out? Or are they likely to be range bound the way they have been for the last 3 to 4 quarters?

Thank you, Sanjeev. Renu to follow on your question for the margin thing. On the profitability and especially on PBT over the 5-year period, we have a good traction at PBT level. So today, 2025, we closed at 16.9%, give and take another 0.5% for the Labour Code impact. So, we're talking of 17.5%. Last year, we were 20.5%, no doubt about it. And I think that gap is more attributable to the reasons which were not on the company's control, which is of forex and commodity prices and also the stabilizing of price in the market. So therefore, the premium what we could normally get on account of demand supply situation is something which was not possible in 2025 and also as we had QCO. So now going forward, how does this basically pan out? I think I go back to the slide which Sanjeev said as to what is happening and what is going to be the play in the market. I think there is a bit of a good view that the markets are going to revive with the private capex, which is expected to happen in 2026, thanks to the budgets and also the trade impacts, which are giving a bit of a positive sign at this point of time. So having said that, I think what will remain and risks to manage is, of course, forex and metal prices, right? And our ability to respond to the market with a balanced view between how much price increase to do and how much we should absorb depends on total market situation as such. So, having said that, I think a trajectory at the PAT level, we're talking of between 12% to 15%, still holds good, right? And I believe that if we have volumes kicking in more than what we are growing today at 6, 7%, probably that should give us an extra mileage to manage and do a margin accretion.

Sure. And do you think there'll be a positive tail impact from rating change for motors from IE2 to IE3 standards towards the second half of the year?

See, if I may get that right, then you can please correct me. I think you were talking about that if it moves from IE2 to IE3 minimum efficiency levels for India, what would be the impact? Am I right? Did I get that right? Very good question, and thanks for that. I think it is high time that we mature towards IE3 and IE4 efficiency levels. And if it happens, a welcome move because now if we talk about India growing not only domestically, but also exports, all the majors, what you talk internationally, all the countries have moved to IE4 as the minimum efficiency. And if we have to grow on export part, machinery has to have that kind of motors with that efficiency levels. So I think that's one. Second part is that this will not only help in improving our exports, but also the sustainability and the energy efficiency theme, which is core to ABB's pillars of operations. So with this, we can save a lot of electrical energy, which can be utilized for further expansions. And just to mention that, more than 50% of our own production has already moved toE3 and IE4. And we have been pioneering this efficiency theme in India and also have brought IE5 technology, which is again induction technology, free from permanent magnet, already introduced and customers are accepting that with open arms.

Sir, would it be possible to throw some light on what proportion of your cost of goods is imports from EU as of now? And what is the weighted average tariff that you pay on that?

So I think it's a very operational question, right? So most of our imports are from EU because all of the factories are from EU, right? So I think that being the case, if we are 10% on exports in terms of revenues, we are almost 20% is on imports, right? So I think we are still exposed to imports and net importer as such. So I think that's basically what it is.

Okay, sir. And sir, QCO impact, has it continued in this quarter? Because I mean, based on the news flows we gather that government has kind of rolled back most of the QCO orders? Or is that a wrong impression?

Thanks, Sridhar. Thanks, Atul, for this question because it's a very important topic, and we have been discussing this particular topic from the past 1 year. And there is nothing called the rollback of the QCO. Just to make it a bit understandable. It's actually the timelines which have been enhanced for testing. So that's the crux of the story, where the government has very clearly indicated that QCO for sure is going to be implemented, no doubt in that. The first phase is already in flow. And most of the companies, even the peers and us have already tested our products and solutions as per QCO norms, whatever is the policy, and we have already got it done. However, for the second phase of implementation, the government has given some more time due to the availability of labs, which are required. And that is where all the manufacturers, including ABB, are following this particular process and following the policy of the government. So it's only a question of timelines. It's not the question of roles.

My first question pertaining to 23 diverse market slide that we mentioned, where if I look at the breakup now, on a quarter-on-quarter basis, certain industries have moved towards lower or modest midterm outlook segment, especially larger sectors like auto and food and beverages. But I think despite that, we are mentioning our outlook as being more of optimistic in near term. And second, within these 3 segments, if you can help us with the contribution from emerging industries and infrastructure and transport. I think in opening comment, you have mentioned core industries contributing about 52% to total volumes for the company.

I will give some light on the contribution. I go back to whatever composition is, 10% is exports, 90% is domestic. And this 90% of our revenues come from all these 23 market segments. And out of this 90%, I think 52% is what Sanjeev was mentioning is from the core sectors and the balance 25%, 23% is between emerging sectors and the automotive. So that's a broad split. It is 23%, 25%, and that's how it is.

My question is, sir, can you help us understand the order prospect for the data centers? Are you seeing larger prospects compared to, let's say, at the beginning of CY '25?

Okay. Thanks for this question. Myself, Ganesh Kothawade, I'm responsible for Distribution Solutions Business of ABB India. And as it's a very emerging segment to the electrical industry. And we see a very strong demand coming from the data center. And there are not only the hyperscale supporting of the data centers, but there are a lot of big Indian houses, they also have a very big plan to put up the data centers in India. And apart from the big hyperscale data center, there are many data centers which we see in the pipeline, which is coming from the co-locations also. So in an overall, we are very optimistic and see a very, very strong demand and the inquiry pipeline, which is coming from the data centers.

I just have one question on the pace of ordering, both base and large. We concluded CY '25 with a reasonable growth of 13% base orders. We hardly had large orders until the last part of December. Do you think 2026 is a year where you will have, not only data centers, I can see INR 15 billion, INR 16 billion in the order book now from data centers? That's a large number for you. But also from metals, we have two, three other segments where the large order can outperform significantly in the '26 period. And also in base orders, it's been 2 years that the channel partners have been very, very conservative, which cyclically looks better now that for exporters in India, the tariff barrier concern is behind, the budget was supportive. Private segment for all the companies that report numbers has been going up. Do you think '26 is a year of very significant shift in the ordering run rate the last we saw 3, 4 years ago? So any comments on both base and large orders with some color?

Yes. Thank you, Sanjeev. From a context of 2025, I stated that the markets are quite muted until the first half of the year, and then we started some movements and that resulted in order conversions as well. 2026, I would say that the momentum is there. There are definitely movements. I think from specially to, say, an energy industry that deals with oil and gas, power, specialty chemicals and pharmaceuticals, we see some very good opportunities in power, especially power generation, which has been quite low for past few years. We have a good pipeline of opportunities in power generation. Refining is still strong. There are good opportunities in refining. So in both these cases, we have Greenfield opportunities, which means these are new projects starting up from ground. We also have a good amount of opportunities in the repair and modernization, which is an ongoing activity. So that should cover the base orders from the repair and modernization and the large orders coming in or opportunities available in the Greenfield. Similarly, in the process industries that deals with the metal, mineral, mining, these heavy industries, what we also see is there are quite a good of opportunities for the big-ticket items, and we shall continue to stay close to the customer and see how much we can convert during this year. But overall, I would say a positive outlook as things stand today.

Just to follow up on data center. What is the data center exposure in sales and backlog? Have you seen any acceleration in interactions in data center market? A bit color on that would be great?

So data centers, actually, you get some large orders, it becomes large in the pipeline. But in the 2025, we got a few compared to the previous years. I think in the backlog, which we have of INR 10,471 crores, I think roughly 10%, 11% would be data center orders.

Can I just squeeze one more. Just what's happening in the price for different divisions?

Well, customers always demand lower prices. That's the reality of life. And what we do is we continue to localize, make sure our portfolio is at the right cost level and meet the customers' requests. But at the same time, premiumization of the portfolio is taking place. So we have a good overall effect. So it's always a balancing act. And on the pricing side, but for 1 or 2 particular products, we don't see as such any critical pressures at this point in time.

So this is just a clarification on, I think, one of the earlier answers that you gave, I think, to Renu's question. I believe you mentioned 12% to 15% as the sustainable growth number. I'm not sure whether you mentioned that as a sustainable margin or the sustainable topline growth number. And also on this QCO impact, once the imported stock of materials is done, where do you see the sustainable margin stabilizing?

So let me answer one question. When I talked about 12 to 15%, I told about the PAT margin. So that's where I said that that's something which should be the corridor in which we should move knowing well that we have QCO issues, which will have to be handled for the next two quarters is what we see because that's the material what we have had. And also the orders what we will execute in the next 3 to 4 quarters is what we see, right? And that's what it is. Now coming to the growth of revenues, right? So growth of revenues at this point of time, if you look at our overall revenues, I think we have been growing at 8% at this point of time. So I think if you heard it, I was mentioning that the INR10,000 crores order backlog definitely has 30% of large orders, which got to be executed over the next couple of years to come. And that being the case, so then we need to really book orders in the market during 2026 for revenues in 2026, right? Our ability to book the orders and execute them remains. So I think we will have to make sure that our target is always to have double-digit growth on the revenues as well. So let's see how it proceeds, how the markets proceed, how these orders get finalized.

Congrats on a good quarter. Sir, just wanted to get more color on competitive intensity in the market. Last two quarters, you indicated Chinese competition as well, and we understand some of your European competitors are setting up incremental capacities in India. So in light of that, I just wanted to hear your thoughts around, please?

On the competitive intensity, I think at this point of time, it's largely domestic of the established players. Now as far as the Chinese players are concerned, I think last quarter, what we talked about was if the industrial goods imports are open, we'll have to wait and watch and see what impact can come. We haven't seen any direct impact yet, but we do see in certain large projects wherein one or two customers when they're executing large projects, they may prefer equipment out of China. I think we have seen that in the past, but that was almost, in my memory, 9 months to 1 year ago. But it's not a kind of a very repetitive phenomena yet in the marketplace. As far the European competitors are concerned, I think most of the non-European competitors we have, they are already present in the market. But then, of course, as the market expands, you will also continue to see the expansion of the competitors. But you can see that we are a global company. We face all these competitors in different markets at a global or regional or the domestic level. We know how to kind of respond to such competitors. And our focus to stay number one or number two in the areas we operate stays there, and we continue to do what it takes to manage the competitive intensity. So I think going forward, I think if the market landscape changes, we continue to adapt accordingly, but we haven't seen anything new other than the existing competitive intensity offered by the established players.