ABB not to go in for fresh expansions this year

‘New recruitment will be done only when there is demand’.

Power and automation major ABB India said they would not take up any new capital expenditures as part of their expansion plan, in the current calendar owing to the economic environment. The company however said they will not defer the ongoing projects.

The Bangalore-headquartered company spent close to Rs 230 crore in the previous year as part of their annual capex. In the ongoing year, the capex is expected to fall to Rs 70-80 crore which will be spent on projects initiated earlier.

“Most of our expenses have been finalised. But we may not be spending at the same levels. Now we will be more cautious. We have already spent about $50 million (about Rs 200 crore) till December last. This year too, we will not spend so much,” K Rajagopala, regional CFO, ABB told Business Standard.

Last year, the company expanded its instrumentation factory in Faridabad and opened a machine factory in Vadodara. Besides, the company opened a new small power transmitter factory in Vadodara. ABB is also opening a factory in Nelamangala in Bangalore and expanding capacity of the process automation factory in Peenya. Last year, the company opened a machine service factory in Mumbai to serve large power plants.

Owing to a drop in new orders in the fourth quarter (Oct-Dec 2008), the company initiated cost cutting measures which include cut in travel budgets, administrative expenditure and rationalisation of office space. This, however, was not reflected in the company’s 2008 performance where the expenditure went up by over 16 per cent to Rs 6,101 crore.

“We initiated cost cutting measures in the last quarters only, an'd saved a lot of money. We are cutting travel, administrative expenditure and we are trying to rationalise office space. Previously we booked office space in advance, which we have stopped now,” added Rajagopala.

In the ongoing year, ABB announced to be more cautious while recruiting new people. The company said most of the factories which were opened last quarter or are set to be operational this year, would be served by the existing staff who would be transferred internally.

“We will definitely not hire at the same rate we used to when we were growing 30-40 per cent. Last year, we added 1,000 people. This year, we have to watch how the economy is going and based on that we will decide our hiring plans,” said Rajagopala.

Biplab Majumdar, country head and MD of ABB said, the company will to continue to hire in sales “because when we have standard products, we will putt more efforts to sell them.”

Due to the slowness in traditional sectors like power systems and process automation, the company has announced that it will focus on emerging opportunities like energy and water.