X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
To be in ABB’s shoes - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jul 7, 2000

    To be in ABB’s shoes

    The title may leave you wondering what this is all about. Well, in our earlier stories on the engineering sector we have long talked about Asea Brown Boveri’s (ABB) overvaluation vis-à-vis its PSU counterpart Bharat Heavy Electricals Limited (BHEL). May be it’s a good time to check out why it is advantageous to be in ABB’s shoes than in BHEL’s.

    It is a known fact that BHEL is outclassed on basically three counts – its a government owned entity, its overstaffed and it is doing too many things at the same time putting pressure on its margins. But this does mean that ABB is bereft of any problems.

    ABB’s power division was a drag on its profitability due to the slow pace of power sector reforms in India. But ABB’s management realised this and recently hived it off its power generation business as a separate company with Alstom (now known as ABB Alstom Limited) in 1999. As a result the company’s future earnings prospects and profit making abilities have improved dramatically. The company is focusing on industrial automation segment, which will earn it better margins.

    It is aiming to provide complete software services/solutions to integrate management functions and shop floor activities. Its other focus area - transmission and distribution (T&D) equipment, is also set to grow in light of the mammoth latent demand in the segment. India’s T&D to power generation ratio is 0.3:1 as compared to international standard of 1:1.

    On the operations front it is looking to become more cost efficient. The company has trimmed its workforce by almost 28% in the last 3 years to 3,606 employees currently. As a result of this ABB’s turnover is expected to grow at a CAGR (compounded annual growth rate) of atleast 12.1% by FY2002 and its profits are expected to surge at a CAGR of 29% over the same period.

    But all this was not an exercise to bring out the attributes of ABB, but rather to highlight the inadequacies and helplessness of BHEL which come with being a PSU. For the record we would like to add that BHEL has cut its employee size by over 8,000 to 54,000 employees currently. It only goes on to show that the government should stop dithering on PSU divestments and/or restructuring and unlock the hidden wealth of its public sector giants.

     

     

    Equitymaster requests your view! Post a comment on "To be in ABB’s shoes". Click here!

      
     

    More Views on News

    ABB: Large Orders Remain Muted (Quarterly Results Update - Detailed)

    Aug 2, 2017

    Decisions on government initiatives and private investments were stalled in anticipation of upcoming tax restructure.

    BHEL: Margins Dip into the Negative (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The company also saw order inflows of Rs 18 billion during the quarter, which was a massive 41% YoY lower than the previous year's quarter.

    Cummins Ltd: Domestic Revenues the Saving Grace (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The domestic economy continues to grow largely in areas which are positively impacted through continuing government investments in infrastructure.

    L&T: Amidst a Challenging Business Environment (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Bank credit to industry remained muted and investment momentum was driven mostly by public sector spending.

    L&T: Private Sector Capex Remains in a Tizzy (Quarterly Results Update - Detailed)

    Jul 24, 2017

    Vast majority of private players remain more concerned with debt payback rather than starting new projects.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    ABB INDIA LTD. SHARE PRICE


    Aug 16, 2017 (Close)

    TRACK ABB INDIA LTD.

    • Track your investment in ABB INDIA LTD. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    MORE ON ABB INDIA LTD.

    ABB INDIA LTD. - GRAPHITE INDIA COMPARISON

    Compare Company With Charts

    COMPARE ABB INDIA LTD. WITH

    MARKET STATS