ABB India Ltd’s shares fell 6.7% since 19 December. From 23 December, the stock valuation mirrors all businesses except the power grid (PG) segment, which has been spun off into a separate entity—ABB Power Products and Systems India Ltd (APPSIL).
ABB India will now focus on new-age products and services, with only a 7-8% exposure to projects. It is in line with the Swiss-Swedish parent’s global restructuring to exit the PG business and make it a pure play on automation and digitalization.
Investors have already seen the gains. For September quarter, revenues excluding PG segment, rose 17% year-on-year to ₹1,746 crore. This was helped by the motion and electrification segments that together comprise 75% of the business.
Motilal Oswal Financial Services Ltd estimates the return on invested capital of the residual business to grow from 21.3% in calendar year 2018 to 30% in 2021.
That said, while order flows grew 5% year-on-year during the September quarter, there may be volatility in the near term due to the economic slowdown. After all, the restructured ABB India will now have to tap opportunities from smart cities’ projects and private sector enterprises such as automobiles, which could be weighed down by the slowdown.
Meanwhile, ABB India investors get one share of APPSIL for every five held. The PG business revenue was marginally down in the September quarter and profit fell by 23% year-on-year. The PG segment’s 41% jump in order flows may play out favourably when the entity lists in the near future.