'It would have been a bad year without India, China'

Q&A: H Lienhard, President & CEO, Voith AG

Voith AG, the German engineering giant which makes hydropower equipment and paper, among other industrial products, has been able to wade through the global financial crisis supported by its wide portfolio. In an interview with Sudheer Pal Singh, President and CEO H Lienhard says the company has bet highly on the appetite of Asian economies for hydro projects and is working on a strategy for ramping up manufacturing in India and China. Excerpts:

What is your view on the pace of economic recovery vis-à-vis your growth targets?
I see clearly that India and China are growing and the rest of the world, from the US to Europe, has found the bottom. We see the first indication of a recovery, however, on a very low level. India and China are generating enough growth from within. A decoupling of the Asian economy from the rest of the world would, of course, be fantastic for exporting companies like ours. Without India and China, we would have had a bad year.

How has business been in the last financial year?
It was not a bad year. The orders went down, but they did not go down to the extent other companies report. And the reason for that is our mixed portfolio. Our deliveries in hydro, trains, etc have been good. What has gone down is the paper and vehicles segment.

So, your hydro division has come to the rescue?
Yes. And also public infrastructure like trains. Those projects still go on. Our portfolio is balanced across the world. A quarter each in Germany, Europe and America has helped. Similarly, we have one-third business each in products, large plants and services. There were enough positive supplements. In the beginning, we were very much dependent on paper (segment). Today, paper constitutes 34 per cent of our business. The main philosophy of the company is to maintain financial independence.

How do the prospects look in the current financial year?
We believe we could have a substantial year. Hydro and trains segments are still moving. Oil and gas is also going ahead, which I believe is a good sign in the current times.

How has the export percentage of your orders moved in the past one year?
It has not increased and has stabilised. The growth came from more local products, especially in China. The exports, in the long term, will go down. This is because we will increase our capacities in the countries. In India, we have just opened a manufacturing facility for small hydro in Vadodara. This will be a factory for worldwide supply.

What is the share of hydro in your business globally and in India?
Currently, we are just starting with industrial services. We have always debated infrastructure here but not much has happened for many years. We think 3,000-4,000 Mw capacity could be easily awarded in hydro every year in India. The big problem in hydro is that you have a large upfront cost. NHPC and NTPC will have to play a larger role than they play today if we want to set up large megawatt-size projects.

On large projects, one has to evolve long term strategies – in terms of the people that are affected. I think the importance of dealing with NGOs has been undervalued in India.

What are the new areas the company is venturing into?
We are always working on our portfolio, but today we do not see any new areas. We, of course, want to enlarge the business we are already in. Our management has set this goal that by 2025, we want to be embedded in the Indian economy as we are embedded in Europe.

Around a fourth of your business comes from India and China. How do you see it growing?
I think the growth of the company will basically come from Asia. Our business in China will always be bigger, as their GDP is bigger. As the company grows, Germany’s share will go down and Asia’s share will go up. Between 5 and 10 years, I see around 50 per cent of our business coming from Asia.