In recent years, Indian corporations have increased their focus on sustainability, spurred by a push for energy efficiency, needs for exports to other areas of the world, customer demand for greener products in consumer-facing businesses, and legislation. To keep up, Siemens has invested over $1 billion in India over the previous 6-7 years to buy businesses, create new products, and update existing plants.

Siemens is counting on India’s economic boom, as well as its rapid progress towards digitalization and sustainability, to drive the company’s growth in the next few years. The demand for clean technology and clean transportation has resulted in significant government and private sector investment (in this area). This is also when the company has the opportunity to change and expand.

In recent years, Siemens has undergone significant portfolio changes around the world, including the loss of several non-core businesses to become what it refers to as a focused technology firm.

It sold several businesses, including its electric commercial vehicle powertrain unit, postal and parcel company, and Trench, a high-voltage grid components firm. The corporation also split out its gas and power businesses into a new publicly traded company called Siemens Energy.

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The stock of the company has risen over 66 percent over the last year. When you look at the stock performance over the period of five years, it has given a multibagger return of almost 445 percent. So, let’s dive deep into the article to explore their business and what lies ahead for the company.

Corporate Overview Of Siemens

Siemens is a technology business that focuses on industry, infrastructure, digital transformation, transportation, and the transmission and generation of electricity. It is Siemens AG’s flagship listed firm in India. The company’s business structure is well-suited to meeting the industry’s needs for increased efficiency, quality, flexibility, and speed.

With its diverse portfolio, market-oriented organisational structure, global technology leadership, and strong local competency, the company is well-positioned to collaborate with the country on sustainable growth.

Business Segments Of Siemens

Digital Industries

The Company’s Digital Industries (DI) Business delivers technology for the automation and digitalization of discrete, hybrid, and process industries, assisting in their digital transformation to become more sustainable.

Its portfolio includes industrial software, automation, and drive technologies (for optimising the manufacturing value chain, including product design, production planning, engineering, execution, and after-sales services).

In fiscal year 2023, the Company expanded its engagement with customers across verticals, providing cutting-edge solutions to enhance their digital transformation and sustainability objectives. 

Notable examples included Additive Manufacturing, Industrial Edge, IT-OT integration, Cybersecurity, Digital Twin, and Green Hydrogen. The company also announced the availability of industrial 5G devices.

In fiscal year 2023, New Orders climbed by 3.7% to ₹47,52.9 crore, while Sales (excluding Other operating revenues) increased by 24.1% to ₹43,36.6 crore. During FY23, this category accounted for 23% of total revenues.

Energy

As an energy technology leader, the Company’s Energy Business provides products, solutions, and services across the entire energy value chain, guiding customers through the transition to a more sustainable world using its revolutionary technologies.

The Energy business’s growing demand for power generation and transmission solutions is primarily driven by industrial captive power plants, clean energy investments, capacity expansions, and grid stabilisation as a result of renewable energy integration.

In fiscal year 2023, New Orders climbed by 8.7 percent to ₹67,72.2 crore, while Sales (excluding Other operating revenues) increased by 13.0 percent to ₹59,86.9 crore. In FY2023, this division generated 31% of total income.

Smart Infrastructure

The Company’s Smart Infrastructure (SI) Business connects the physical and digital worlds in grid infrastructure, industrial infrastructure, and urban infrastructure, improving people’s lives and working conditions while also considerably increasing efficiency and sustainability.

SI offers customers a comprehensive end-to-end automation and digitalization portfolio from a single source, encompassing products, systems, solutions, and services from power generation to consumption.

The SI Business did well in fiscal year 2023, with increased demand for solutions in industries such as grid infrastructure, industrial infrastructure, and urban infrastructure.

In FY 2023, New Orders climbed by 24.8 percent to ₹65,62.9 crore, while Sales (excluding Other operating revenues) increased by 20.0 percent to ₹53,96.3 crore. In FY2023, this division generated 31% of total income.

Mobility

The Company’s Mobility Business provides intelligent transport solutions and is constantly innovating its range. Its primary focus areas include rolling stock, rail automation and electrification, a complete software portfolio, turnkey systems, and related services.

During the fiscal year 2023, the Mobility Business received an order from Indian Railways for 1,200 locomotives with 9,000 horsepower (HP), the Company’s single largest purchase in its history.

In fiscal year 2023, new orders climbed by 745.9 percent to ₹282,95 crore, while sales (excluding other operating revenues) increased by 53.3 percent to ₹19,69.7 crore.In FY2023, this division contributed 11% of total income.

Financials Of Siemens

FY2023FY2022FY2021FY2020
Revenue (in ₹crore)19,55316,13713,1989,946.50
Net Profit (in ₹crore)1,961.901,261.901,029.80769.5
ROE15.89%13.89%10.98%8.29%
ROCE20.44%14.82%13.94%11.01%

In the fiscal year 2023, Siemens saw a substantial increase in revenue, surging by 21% to reach ₹19,553 crore as opposed to ₹16,137 crore in FY2022. Analyzing a span of four years, encompassing FY2020 to FY2023, the company displayed a  Compound Annual Growth Rate (CAGR) of 25% in revenue.

Simultaneously, there was a noteworthy upturn in net profit, experiencing a 55% increase from ₹1,261.9 crore in FY2022 to ₹1,961.9 crore in FY2023. Over the cumulative four-year period from FY2020 to FY2023, the net profit showcased 37% CAGR.

In FY23, Siemens maintained favourable financial metrics with a Return on Equity (ROE) of 15.89% and Return on Capital Employed (ROCE) of 20.44%.

Future Plans Of Siemens

Portfolio Restructuring: Demerger Under Consideration

Siemens AG has made a share purchase agreement with Siemens Energy, securing an 18% stake in Siemens India for EUR 2.1 billion, a 15% markdown from current market rates. The transaction is slated for completion by December 2023.

Furthermore, Siemens AG has granted Siemens Energy permission to utilize 5% of its Siemens India shares as collateral for guarantees. Notably, Siemens India is contemplating a demerger of its Grid & Power segment from its existing operations, with both entities poised to operate independently within the next two years.

Additionally, Siemens Energy and Siemens AG are set to swap their respective shareholdings, retaining ownership of their current businesses within the parent entity.

Capex Announcement: Positive Growth Projections

Siemens has announced plans to bolster its power transformer production capacity, aiming to double it from 15,000MVA to 30,000MVA by December 2025, incurring an expenditure of INR 3,600 million. Concurrently, the company intends to ramp up its vacuum interrupters production capacity from 40,000 tubes to 70,000 tubes by the second half of fiscal year 2026.

The management remains optimistic about the sustained global surge in electrification, anticipating continued demand growth for transformers and switchgears.

Conclusion

Siemens Limited has showcased remarkable growth and restructuring efforts, positioning itself as a focused technology company poised for the future. With its ambitious demerger plans, capacity expansions, and optimistic outlook, the company is gearing up for continued success. 

As we conclude, we invite readers to share their perspectives on Siemens Limited’s future trajectory and the potential impact it may have on the industry and India’s economic landscape.

Written by Nalin Suriya

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