in an exclusive interview. After a review of companies across the world, the company has identified India as one of the growth engines and expects organic growth and is also open to acquisitions. Here is the edited excerpt from his interview:
Before Covid-19 hit the world, as then CTO of Siemens AG, you had shared plans for the company’s digital activities; you were optimistic about the potential. The pandemic has placed emphasis on digitization. So how has this business been going for you, especially in the context of Covid?
I was quite optimistic about digitization; The Covid19 has accelerated the trend. We have many of our manufacturing sites fully digitized; they could move some manufacturing tasks from one site to another, and the shortage of components at one site could be compensated by moving the volume to another site. We have served our sites virtually.
But since you announced your digitization initiatives, many companies including Indian companies like Larsen & Toubro and have entered this space. How competitive is he now?
Siemens excels over others because we have a complete software suite; we are among the largest industrial software companies in the world. We also know how to automate, which is the key element that combines the two worlds. We automate everything: trains, buildings, production lines, etc. And that’s our Unique Selling Proposition (USP). We have a third element: our long history with our customers. We have built up some know-how in the field which is necessary to develop and deploy applications. This is where we are different. It’s competitive, but you have to have some key ingredients to be successful, which we bring to the table.
Overall, you have increased your forecast for annual growth. What reassures you to have a forecast like this?
Our forecast for the current fiscal year (fiscal year ended September) now stands at 11-12%; this is due to the post Covid recovery. It will be 5-7% for the next few years on a cycle after the strong recovery of Covid, which is higher growth than we have seen before. There are two things that go into these growth rates, the first is our markets. Our core market is worth 440 billion euros and these markets are growing by 3 to 4% and we are going to gain market share, so that gives us a certain growth dynamic there. In addition to this, we address 20 billion euros of new markets that we develop organically or inorganically; these markets are growing even faster.
With our software and digitization business, we have a current turnover of 5.3 billion euros, and we want to grow this by more than 10% also in this cycle. Therefore, we study growing markets to allocate capital in these areas.
And where does India come in, what does it look like now and what are the goals you have set for your Indian CEO Sunil Mathur?
India is coming into play at a level that I would say is higher than before. In our last year review in January-February, we analyzed all of our markets in terms of size and growth and nominal growth over the next 3-5 years. The United States and China are still in the lead, but India was popping up over and over again for different companies. India has the potential in terms of nominal growth, market size and growth rate to play at the forefront of the market. We were encouraged to say let’s dive in and see what our Indian team can do better and how we can capitalize on these growth rates.
The other thing is that India suffers from Covid a bit longer than maybe other regions. I think it is still in a difficult phase. At this point, I think I would like to thank all of our Siemens employees in India for their hard work and dedication during difficult times; they handled it very well during the crisis. India has an important role to play for Siemens.
How would you rate the Indian government’s response to Covid19? The government is trying to attract investment, are you satisfied with the way things are going on the ground?
We see a lot of momentum (in India); Many things have changed. Can it be even faster, yes. But I would have the same answer for Germany. I believe India has come a long way, but there is so much to do in India that there is a long way to go.
What is your investment plan for India?
I cannot give a specific number; we still speak through it. We are looking at all areas. We recently acquired C&S in India; it has developed well. We are still working on how we can improve our footprint in signage. We are talking about industrial products where we think we can do more with digital offerings. If we are talking about Siemens in total, we are looking at all nine sites. But at the same time, we need to look at how individual markets are developing and how fast they are developing. It is up to Sunil (Sunil Mathur, CEO of Siemens India) to come up with a suitable plan. And the plan that we can unveil will be more ambitious than the previous one.
You mentioned the acquisition of C&S Electric earlier this year. What is your strategy for mergers and acquisitions, especially for India?
Globally, we are looking to strengthen our digitization portfolio – in software or Internet of Things services or digital business. But we’re also looking at the build space and our product portfolio in the software suite. If there are any opportunities in India, we will definitely study them. It is worth bringing more local content and local added value to the market to orient offers towards local demand. It’s something that we work on both organically and inorganically.
What kind of growth do you expect from operations in India?
Hope our Indian business will increase our turnover. We believe there is huge potential and higher potential for growth. We have a very strong presence in India, in manufacturing and research and development. Our challenge in the future would be how we can better exploit it.