Siemens Ltd:Annual Report 2023-24 Analysis

Siemens Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Siemens Ltd. in India traces its roots back to 1867 when Werner von Siemens personally supervised the laying of the first India-Europe telegraph line. The company was formally incorporated in 1957.

Headquarters Location and Global Presence #

Siemens Ltd. is headquartered in Mumbai, India. While operating primarily in India, it leverages Siemens AG’s (the parent company) global presence and network.

Company Vision and Mission #

While Siemens Ltd. doesn’t explicitly state a separate vision and mission statement from its parent company, Siemens AG, it aligns with the broader Siemens vision of “Technology with Purpose”. The mission involves electrifying, automating, and digitalizing the world to create a more sustainable and efficient future.

Key Milestones in Their Growth Journey #

• 1867: Laying of the first India-Europe telegraph line.
• 1957: Formal incorporation of Siemens Ltd. in India.
• Significant expansion through acquisitions and joint ventures over the years, bolstering its presence across various sectors.
• Continuous investment in R&D to develop solutions tailored to the Indian market.

Stock Exchange Listing Details and Market Capitalization #

Siemens Ltd. is listed on the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE). Market capitalization can be found on financial websites like the NSE, BSE, and financial news outlets.

Recent Financial Performance Highlights #

Siemens Ltd. consistently reports its financial performance. Key metrics include revenue growth, profitability, order backlog, and earnings per share. Refer to the company’s latest annual reports and investor presentations for detailed information.

Management Team and Leadership Structure #

Siemens Ltd. is led by a Managing Director and CEO and a Board of Directors. Details of the current management team and board members are available on the company’s official website.

Notable Awards or Recognitions #

Siemens Ltd. has received awards and recognitions in various areas, including corporate social responsibility, innovation, and sustainability.

Their Products #

Complete Product Portfolio with Categories #

Siemens Ltd. offers a diverse product portfolio categorized as follows:

• Automation: Programmable Logic Controllers (PLCs), Human Machine Interfaces (HMIs), Industrial PCs, Process Automation Systems
• Electrification: Switchgear, Circuit Breakers, Transformers, Power Distribution Systems
• Digitalization: Software for industrial automation, energy management, building technologies, and transportation.
• Infrastructure: Building automation systems, smart city solutions, rail electrification, and transportation systems.
• Energy: Power generation solutions, transmission and distribution equipment.

Flagship or Signature Product Lines #

• SIMATIC: A leading brand of Programmable Logic Controllers (PLCs) used in industrial automation.
• SINAMICS: A range of drives and converters for various industrial applications.
• Totally Integrated Automation (TIA) Portal: An engineering framework for automation systems.

Key Technological Innovations or Patents #

Siemens Ltd. has a strong focus on innovation and holds numerous patents across its product lines. Key areas include:

• Digital Twin technology for simulating and optimizing industrial processes.
• Artificial Intelligence (AI) and Machine Learning (ML) in automation and energy management.
• Cybersecurity solutions for protecting industrial infrastructure.

Manufacturing Facilities and Production Capacity #

Siemens Ltd. has manufacturing facilities across India, producing a wide range of products for domestic and export markets. Specific details regarding production capacity can be found on the company website.

Quality Certifications and Standards #

Siemens Ltd. adheres to rigorous quality standards and holds certifications such as ISO 9001, ISO 14001, and ISO 45001.

Unique Selling Propositions or Technological Advantages #

• End-to-end solutions: Siemens offers integrated solutions across automation, electrification, and digitalization.
• Technological leadership: The company is a pioneer in industrial automation and digitalization.
• Global expertise, local presence: Siemens combines global technology with local market knowledge and support.

Recent Product Launches or R&D Initiatives #

Siemens Ltd. regularly launches new products and invests in R&D.

Primary Customers #

Target Industries and Sectors #

• Manufacturing
• Infrastructure
• Energy
• Healthcare
• Transportation

Geographic Markets (Domestic vs. International) #

Siemens Ltd. primarily serves the Indian market but also exports products and solutions to other countries.

Major Client Segments (Agricultural, Industrial, Residential, etc.) #

• Industrial: Manufacturing plants, factories, and process industries.
• Infrastructure: Power plants, transportation systems, and building automation.
• Government: Public sector organizations involved in infrastructure development and energy projects.

Distribution Network and Sales Channels #

Siemens Ltd. utilizes a combination of direct sales, channel partners, and distributors to reach its customers.

Major Competitors #

Direct Competitors in India and Globally #

• ABB
• Schneider Electric
• General Electric
• Rockwell Automation

Comparative Market Share Analysis #

Market share analysis data can be found in industry reports and financial analysis reports.

Competitive Advantages and Disadvantages #

• Advantages: Strong brand reputation, technological leadership, global presence, and comprehensive product portfolio.
• Disadvantages: Premium pricing compared to some competitors.

How They Differentiate From Competitors #

• Focus on digitalization: Offering integrated solutions that leverage data and analytics.
• Strong engineering expertise: Providing customized solutions and support.
• Commitment to sustainability: Developing products and solutions that promote energy efficiency and environmental protection.

Industry Challenges and Opportunities #

• Challenges: Intense competition, fluctuating commodity prices, cybersecurity threats, and evolving regulatory landscape.
• Opportunities: Growth in industrial automation, infrastructure development, renewable energy, and digitalization.

Future Outlook #

Expansion Plans or Growth Strategy #

Siemens Ltd.’s growth strategy focuses on:

• Expanding its presence in key sectors such as infrastructure, energy, and manufacturing.
• Developing new products and solutions that address the evolving needs of its customers.
• Leveraging digitalization to improve efficiency and productivity.

Sustainability Initiatives or ESG Commitments #

Siemens Ltd. is committed to sustainability and has set ambitious ESG (Environmental, Social, and Governance) targets.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from Operations: Increased from ₹152,558 million (FY2021-22) to ₹179,651 million (FY2022-23), and reached ₹204,966 million in FY2023-24.
• Profit Before Tax (PBT): Rose from ₹20,503 million (FY2021-22) to ₹25,451 million (FY2022-23), then significantly increased to ₹35,177 million in FY2023-24.
• Orders Received: 198,509, 463,829, and 235,641 for years, 2021-22, 2022-23, and 2023-24, respectively.
• Profit After Tax (PAT): Increased from ₹15,308 million (FY2021-22) to ₹19,113 million (FY2022-23), and further to ₹26,651 million in FY2023-24.
• Return on Revenue from Operations [PBT (excluding gain on sale of business)]: Increased consistently, from 11.11% (FY2021-22) to 14.17% (FY2022-23) and reached 17.16% in FY2023-24.
• Return on Capital Employed (PBT): 17.68%, 19.54%, and 23.07%, for the periods, 2021-22, 2022-23, and 2023-24, respectively.
• Return on Shareholders Fund (PAT): Grew from 13.20% (FY2021-22) to 14.67% (FY2022-23), then further to 17.48% in FY2023-24.
• Per Share (PAT): ₹42.98, ₹53.67, and ₹74.84, for years, 2021-22, 2022-23, and 2023-24, respectively.
• Dividend: 500%,500%, and 600% for years 2021-22, 2022-23, and 2023-24.

Business Segment Performance #

• Digital Industries: New Orders increased by 10.6% to ₹33,572 million, Sales increased by 15.7% to ₹39,287 million, but Profit from Operations decreased slightly to ₹4,930 million (FY2023-24) from ₹5,035 million (FY2022-23).
• Energy: New Orders significantly increased by 29.9% to ₹87,997 million, Sales increased by 4.9% to ₹62,830 million, and Profit from Operations grew to ₹9,101 million (FY2023-24) from ₹6,873 million (FY2022-23).
• Mobility: New Orders decreased by 88.9% to ₹31,285 million, Sales increased by 38.0% to ₹27,192 million, and Profit from Operations was ₹1,498 million (FY2023-24) compared to ₹533 million (FY2022-23). Excluding the 9000 HP locomotives order, New Orders increased by 21.2%.
• Smart Infrastructure: New Orders increased by 11.6% to ₹73,260 million, Sales increased by 18.6% to ₹63,980 million, and Profit from Operations was ₹9,077 million (FY2023-24) compared to ₹6,587 million (FY2022-23).
• Portfolio Companies - Low Voltage Motors: Sales reduced by 2.8% to 9,141, and profit from Operations was ₹785 million compared to ₹1,097 million in the previous year.

Major Strategic Initiatives and their Progress #

• Demerger of Energy Business: The Board approved the demerger of the Energy Business into Siemens Energy India Limited, with an expected completion in the calendar year 2025.
• Capex Investments: Announced approximately ₹10 billion in capex investments, including expansions for the Power Transformer factory in Kalwa, a Metro train manufacturing facility in Aurangabad, and Gas Insulated Switchgear and Vacuum Interrupter factories in Goa.
• Siemens Xcelerator platform : Over 200 reference cases implemented with customers for solutions, such as Digital Twins and industrial edge.

ESG Initiatives and Metrics #

• DEGREE Framework: Siemens’ sustainability goals are defined under the DEGREE framework (Decarbonization, Ethics, Governance, Resource Efficiency, Equity, Employability).
• Renewable energy usage: As of FY 2023-24, more than 90% of company’s energy consumption is from renewable sources.
• Emission Reduction: Siemens has reduced scope 1 and 2 emmissions by 67%.
• Diversity and Inclusion: Siemens implemented a Gender Equity Program and received recognition for DEI initiatives.
• **My learning world:**Siemens has My learning world platform for employee’s contious learning.

Management Outlook #

• The Indian economy’s strong growth is expected to continue.
• Siemens anticipates profitable growth in line with the market in FY2024-25.
• The Company expects continued demand for technology solutions in digital transformation and sustainability.
• The demerger of the Energy Business is a key focus.

Detailed Analysis #

Financial Position Analysis #

Comparative Analysis of Assets and Liabilities (INR Millions) #

Two-year comparison of FY24 and FY23 segment data.

Significant Year-over-Year Changes (>10%) #

• Energy:
  • Assets increased by 17.2% (FY24 vs FY23).
  • Liabilities increased by 16.9% (FY24 vs FY23).
• Smart Infrastructure:
  • Assets increased by 13.9% (FY24 vs FY23).
  • Liabilities increased by 14.4% (FY24 vs FY23).
• Mobility:
  • Assets increased by 26.6% (FY24 vs FY23).
  • Liabilities increased by 20.5% (FY24 vs FY23).
• Portfolio Companies:
  • Liabilities increased by 24.6% (FY24 vs FY23).
• Others:
  • Assets increased by 40.9% (FY24 vs FY23).
  • Liabilities increased by 58.8% (FY24 vs FY23).
• Unallocable Corporate:
  • Assets increased by 17.5%.
  • Liabilities increased by 28.7%.
• Consolidated Total:
  • Total Assets increased by 16.7%.
  • Total Liabilities increased by 15.7%.

Asset Quality Metrics: Impairment Allowances #

Impairment allowance data for Trade receivables and Contract assets.

• Trade Receivables (Non-current): Impairment allowance decreased from ₹17 million (FY23) to ₹6 million (FY24).
• Trade Receivables (Current): Impairment allowance decreased from ₹1,699 million (FY23) to ₹1,884 million (FY24).
• Contract Assets (Non-current): Impairment allowance decreased slightly from ₹29 million (FY23) to ₹27 million (FY24).
• Contract Assets (Current): Impairment allowance decreased from ₹235 million (FY23) to ₹176 million (FY24).

Debt Structure: Lease Liabilities #

Maturity Analysis (Undiscounted Cash Flows, Consolidated) #

Off-Balance Sheet Items #

• Contingent Liabilities: Totaling ₹13,786 million (FY24) and ₹13,485 million (FY23). These include:
  • Income tax
  • Goods and Services Tax, excise, service tax, and sales tax liabilities.
  • Customs liabilities.
  • Claims against the Company not acknowledged as debts.
• Guarantees: Inter-corporate deposits to related parties are secured by a Global Letter of Support from the Ultimate Holding Company.

Siemens Limited: Financial Performance Analysis (FY2024) #

Revenue Breakdown by Segment #

• Energy: ₹63,452 million (4.35% growth)
• Smart Infrastructure: ₹66,898 million (18.14% growth)
• Mobility: ₹27,335 million (37.84% growth)
• Digital Industries: ₹40,961 million (16.28% growth)
• Portfolio Companies: ₹9,366 million (-1.90% growth)
• Others: ₹1,036 million (-11.61% growth)

Geographic Revenue (FY2024) #

• Within India: ₹172,899 million (84.36%)
• Outside India: ₹32,067 million (15.64%)

Cost Structure Analysis #

• Cost of Materials Consumed: ₹39,526 million (Increased)
• Purchases of Stock-in-Trade: ₹55,099 million (Decreased slightly)
• Project Bought Outs and Other Direct Costs: ₹44,892 million (Increased)
• Employee Benefit Expenses: ₹21,206 million (Increased)
• Other Expenses: ₹17,139 million (Increased)

Margin Analysis #

• Operating Profit Margin: 12.6% (Up from 11.4% in FY2023)
• Net Profit Margin: 13.2% (Up from 10.8% in FY2023)

Non-Recurring Items #

• Demerger related expenses for FY 2024: ₹110 million

EPS Analysis #

• Basic/Diluted EPS: ₹74.84 (Up from ₹53.67 in FY2023)

Cash Management #

Cash Flow and Liquidity Analysis #

Detailed OCF, ICF, FCF Components #

• OCF: Increased to 16,695 million in FY 2024 from 11,794 million in FY 2023.
• ICF: Net cash used in investing activities was (3,910) million in FY 2024, an improvement from (6,588) million used in FY 2023. The primary drivers were a decrease in purchases of property, plant and equipment and other intangible assets, changes to inter-corporate deposits given, and a increase in maturity of deposits with banks.

Working Capital Management Efficiency #

• Working capital was 107,372 in 2024 and 88,627 in 2023.
• Net capital Turnover ratio for 2024 stood at 2.06, and in 2023 stood at 2.23, showing that in 2024, the Company was slightly less efficient in using its working capital.

Capex Analysis by Segment #

• Energy: Increased to 1,515 million in FY 2024 from 679 million in FY 2023.
• Smart Infrastructure: Increased to 1,651 million in FY 2024 from 637 million in FY 2023.
• Mobility: Increased to 507 million in FY 2024 from 271 million in FY 2023.
• Digital Industries: Decreased to 136 million in FY 2024 from 199 million in FY 2023.
• Portfolio Companies: Increased to 90 million in FY 2024, from 36 million in FY 2023.
• Others: Decreased to 277 million in FY 2024 from 392 million in FY 2023.
• Unallocable corporate items Increased to 242 in FY 2024 from 115 in FY 2023
• Total Group: Increased to 4,418 million in FY 2024 from 2,329 million in FY 2023.

Dividend and Share Buyback Trends #

• Dividend Paid: 3,561 million in FY 2024, same as 3,561 million in FY 2023.
• Proposed Dividend: 4,273 million for FY 2024, an increase from the 3,561 million paid in FY 2023.
• Share Buyback: No share buyback activity is mentioned in the provided data.

Debt Service Coverage #

• Interest paid was at 138 and 444 (totaling 582) in FY2024, and 43, 126 (totaling 203) in FY2023, showing increase of 186.70%.
• Debt Service: Included principal lease payments (861) million in FY24 and (748) in FY23.
• Total of principal lease payments and interest paid was 1407 for FY24, compared to 917 in FY23.
• Debt Service Coverage Ratio: Increased from 27.01 to 32.42, which shows improved capability in the group to cover its Debt Service obligations.

Liquidity Position #

• Cash and cash equivalents stood at ‘14,954 in FY2023, which increased to ‘18,359 at the end of FY24.
• Cash and Cash Equivalents: Increased to 18,359 million in FY 2024 from 11,917 million in FY 2023.
• Other bank balances: Increased to 77,320 million in FY 2024 from 64,590 million in FY 2023.

Siemens Limited: Segment-Wise Strategic Analysis #

Energy Segment #

Long-Term Strategic Goals and Progress #

• Focused on supporting the transition to a sustainable world, providing solutions across the entire energy value chain.
• 29.9% increase in New Orders for FY 2024.
• Demerger of the energy business into Siemens Energy India Limited to target the energy transition market.
• Planned capacity expansions in power transmission (from 15 GVA to 30 GVA).

Competitive Advantages and Market Positioning #

• Comprehensive portfolio covering the energy value chain.
• Strong local manufacturing.
• Focus on renewable energy technology and grid stabilization.

Innovation Initiatives and R&D Effectiveness #

• Localization of STATCOM and HV AIS CB components.

M&A Strategy and Execution #

• Proposed demerger of the Energy Business into Siemens Energy India Limited.

Management’s Track Record in Execution #

• Secured marquee projects, including gas turbine modernization and 400 KV GIS for export.

Capital Allocation Strategy #

• Capex Investment of 3600 Million for Power transformer factory.
• 3.3 billion for GIS Factory in GOA.

Smart Infrastructure Segment #

Long-Term Strategic Goals and Progress #

• Combining real and digital worlds across grid, industrial, and urban infrastructure.
• Expansion of factory footprint in Goa for Gas Insulated Switchgear and Clean Air GIS (Blue GIS).
• Increased demand from data centers, grid infrastructure (including EV charging), and industrial infrastructure.

Competitive Advantages and Market Positioning #

• Comprehensive end-to-end automation and digitalization portfolio.
• Strong positioning in e-vehicle charging and data centers.

Innovation Initiatives and R&D Effectiveness #

• Showcased offerings on the Siemens Xcelerator platform (Building X, Electrification X, and Gridscale X).
• Awards for innovative data center power management solutions.

Capital Allocation Strategy #

• Investments of 4.6 billion for Power transformer factory in Kalwa.
• 3.3 billion for the GIS factory.

Mobility Segment #

Long-Term Strategic Goals and Progress #

• Deliver safer, greener, and smarter railways in partnership with Indian Railways’ net-zero goal by 2030.
• Key projects include electrification of Bengaluru Metro Phase 2 and Udhampur-Srinagar-Baramulla Rail Link.

Competitive Advantages and Market Positioning #

• Range of intelligent transport solutions.
• Strong positioning in rail automation, electrification, and software.

Innovation Initiatives and R&D Effectiveness #

• Localization of components for projects (Trainset, 9000hp loco, axle counter).
• Development of new locomotive platform.

Capital Allocation Strategy #

• Capex investment of 1.9 Billion to build Metro train manufacturing facility.

Management’s Track Record #

• Received marquee projects like Electrification of Bengalaru Metro Phase 2 and Udhampur-Srinagar-Baramulla Rail Link.

Digital Industries Segment #

Long-Term Strategic Goals and Progress #

• Provides technologies for automation and digitalization across industries.
• Slowdown in ordering of industrial automation products.

Competitive Advantages and Market Positioning #

• ‘Digital Enterprise Suite’ offers flexibility and efficiency.

Innovation Initiatives and R&D Effectiveness #

• Implemented step time analysis based on Siemens Industrial Edge.
• Deployed a spray dryer optimizer.
• Focus areas include Additive Manufacturing, Industrial Edge, IT-OT integration, Cybersecurity, and Digital Twin.

Portfolio Companies - Low Voltage Motors #

Long-Term Strategic Goals and Progress #

• Motors from 0.12 kW to 1.25 MW (IE 2, IE 3, and IE 4 types) with outsourced manufacturing.
• Sales reduced by 2.8% in FY 2024.

Operational Changes #

• Transitioned from Digital Industries Segment to Portfolio companies.

ESG Framework #

Environmental Metrics and Targets #

• Energy Business: Reports a 29.9% increase in new orders and a 4.9% increase in Sales. Profit from operations increased from financial year 2023 to 2024.
• Smart Infrastructure: Expanded factory footprint in Goa focusing on Gas Insulated Switchgear and Clean Air GIS (Blue GIS) technologies. Electricity savings of 136 MWh and CO2e reduction of around 750 tons. Order increase of 11.6%, sales increase of 18.6%, and 37.8% profit increase in financial year 2024 compared to 2023.
• Mobility: Invested ’ 1.9 billion in a Metro train manufacturing facility in Aurangabad. Contributing to a sustainable transport solution (Bengaluru Metro Phase 2). Involved in the Udhampur-Srinagar-Baramulla Rail Link, including the longest rail tunnel.
• Digital Industries: Implemented technology solutions across manufacturing, including step time analysis, based on the Siemens Industrial Edge platform.
• Cross-Segment: Over 90% of energy consumption is from renewable sources. Scope 1 and Scope 2 emissions were reduced to around 10 kilotons (a 67% reduction from the previous year). 90% of the overall business enables positive customer sustainability.

Social Responsibility Programs #

• Cross-Segment:
  • CSR projects focus on Education, Social and Environment, aligning with UN Sustainable Development Goals.
  • Dual VET project benefited nearly 53,000 trainees from 229 ITIs in six states. The IGnITE project benefited over 21,000 ITI trainees from 127 ITIs.
  • Project Jigyaasa benefited 21,500 students.
  • Soil and Water conservation: 125 hectares, 104 acres of Land made cultivable, Off-grid solar generated: 28 kW, Social forestry: 20K+ saplings planted.
  • Supported around 5,309 families (26,300 people) affected by Cyclone Remal and other natural disasters with water, sanitation, and hygiene kits.
  • Siemens Scholarship Program supported 695 engineering students.
  • ‘We Care’ program promotes physical and mental health.
  • Gender Equity Program to improve women’s participation in the workforce.
  • ‘My Learning World’ platform available for employees and supply chain partners.

Governance Structure and Effectiveness #

• Cross-Segment: * Board of Directors has 9 members, with independence declared by Independent Directors. * Audit Committee and other Board committees’ compositions and meeting attendance are disclosed. * Whistleblower Policy in place and disclosed on the website. * Risk Management Committee monitors risks. * Compliance with applicable Secretarial Standards. * Business Conduct Guidelines are in place, with 100% training coverage for the Board, KMPs, and employees.

Sustainability Investments and ROI #

• Cross-Segment:
  • Capex investments of approximately ` 10 billion announced.
  • Capital investments of ` 239 million on energy conservation, rooftop solar installation, and electric bus charging stations in FY 2024.
  • Digitalization enabled the Electrical Product factory in Kalwa to improve productivity by 30% and increased manufactured variants by three times.

ESG Ratings and Peer Comparison #

• Cross-Segment: Ranked second in the capital goods sector by BusinessWorld magazine due to the DEGREE framework and sustainability initiatives.
• Received Silver Employer recognition from India Workplace Equality Index.

Regulatory Compliance and Future Preparations #

• Cross-Segment:
  • Compliance is a top priority demonstrated by the Business Conduct Guidelines.
  • Statutory Auditor’s Report for FY 2023-24 contains no qualification, reservation, adverse remark, or disclaimer.
  • One instance of fraud by an employee resulted in ` 24.61 million payments for non-existent services.
  • Extended Producer Responsibility compliance for e-waste, battery waste, and plastic packaging waste.
  • Full compliance reported with all applicable Secretarial Standards.
  • One complaint was reported which alleged sexual harrassment, which was investigated and resolved.

Forward Outlook: Siemens India Financial Analysis #

Digital Industries #

• Management Guidance and Assumptions: Management assumes a normalization of demand following shorter delivery cycles, impacting the ordering of industrial automation products.
• Market Growth Forecasts: Growth is projected in core industries due to government capex on infrastructure and private sector manufacturing boosts like the PLI scheme. The emergence of new verticals (semiconductors, batteries) offers opportunities.
• Planned Strategic Initiatives: Focus on implementing technology solutions (Digital Enterprise, industrial edge, cybersecurity, IT/OT integration, AI/ML). Leveraging the Siemens Xcelerator platform for customer solutions.
• Efficiency Improvement Targets: Brownfield enterprises can scale by implementing step time analysis based on the Siemens Industrial Edge platform. One success case shows a 20% improvement in productivity with enhanced machine availability and performance.
• Potential Challenges and Opportunities: Opportunities exist in growing markets and emerging verticals, leveraging technology solutions to partner industries in India. The challenge of a slowdown in ordering of industrial automation products is noted.
• Scenario Analysis and Sensitivity to Key Assumptions: The analysis is highly sensitive to continued government infrastructure spending and the success of manufacturing-focused schemes. A slowdown in either could impact projected growth.

Energy #

• Management Guidance and Assumptions: Management expects continued high growth, increasing demand for electricity, and a focus on decarbonization and sustainability from both the government and private sector.
• Market Growth Forecasts: Electricity consumption in India is projected to grow at a CAGR of 9% till 2032. Generation capacity is expected to double from ~400 GW. Grid expansion and stabilization will align with renewable energy evacuation.
• Planned Strategic Initiatives: Focus on sustainable technology solutions, prudent CAPEX planning, and securing large projects. Demerger of the Energy Business into Siemens Energy India Limited is planned for completion in the calendar year 2025.
• Capital Expenditure Plans: CAPEX investment of ’ 3,600 million over the next 2-3 years to double power transmission capacity from 15 GVA to 30 GVA.
• Efficiency Improvement Targets: Not explicitly quantified but implied through capacity expansion and focus on sustainable technology solutions.
• Potential Challenges and Opportunities: Opportunities are driven by increased electricity demand, policy reforms, and green growth investments (National Infrastructure Pipeline, PLI Scheme, National Hydrogen Mission). Completion of the demerger is presented as creating two stronger, more focused companies.
• Scenario Analysis and Sensitivity to Key Assumptions: Growth is highly sensitive to sustained government policy, economic growth, and the speed of renewable energy integration.

Mobility #

• Management Guidance and Assumptions: The segment aims to deliver safer, greener, and smarter railways, aligning with Indian Railways’ Net Zero by 2030 goal.
• Market Growth Forecasts: Indian Railways has been allocated a record capital outlay of ’ 26.2 billion in Union Budget 2024-25.
• Planned Strategic Initiatives: Partnering with Indian Railways and Metro operators for optimized rail network throughput and higher asset availability. Focus on metros, locomotives, trainsets, bogies, signaling, and electrification.
• Capital Expenditure Plans: Investment of ’ 1.9 billion to build a Metro train manufacturing facility at Aurangabad, serving as an export hub.
• Efficiency Improvement Targets: Not explicitly quantified, but implied through aims of optimized throughput and asset availability.
• Potential Challenges and Opportunities: Significant opportunities in government capital outlay and Gati Shakti projects. Order position is dependent on the timing of project tenders.
• Scenario Analysis and Sensitivity to Key Assumptions: Growth is highly sensitive to government infrastructure spending, particularly in the rail sector.

Smart Infrastructure #

• Management Guidance and Assumptions: Management anticipates increased demand from grid infrastructure (including e-vehicle charging), urban infrastructure (data centers, commercial buildings), and industrial infrastructure.
• Market Growth Forecasts: Rapid urbanization drives demand. Data center capacity is expected to double in the next three years. Continued expansion is anticipated in power distribution networks, renewable energy integration, and e-charging infrastructure.
• Planned Strategic Initiatives: Focus on combining real and digital worlds across grid, industrial, and urban infrastructure. Leveraging Siemens Xcelerator offerings (Building X, Electrification X, Gridscale X).
• Capital Expenditure Plans: Investment of ’ 333 crore in Goa for Gas Insulated Switchgear and Clean Air GIS (Blue GIS) technologies.
• Efficiency Improvement Targets: Not explicitly quantified, but implied through the focus on intelligent and adaptive infrastructure.
• Potential Challenges and Opportunities: Significant opportunities exist in the rapidly urbanizing Indian market, modernization of power distribution, renewable energy integration, and expansion of e-charging infrastructure.
• Scenario Analysis and Sensitivity to Key Assumptions: Growth is sensitive to urbanization trends, government infrastructure spending, and private sector investments in data centers and manufacturing.

Portfolio Companies - Low Voltage Motors #

• Potential Challenges and Opportunities: Business is short-cycled and asset-light, following an outsourced manufacturing model.

Audit and Regulatory Analysis #

Auditor’s Opinion and Qualifications #

• Overall: The auditors issued an unmodified opinion on the standalone and consolidated financial statements, indicating a true and fair view in conformity with generally accepted accounting principles in India.
• Qualifications/Remarks:
  • Multiple accounting software are used, with the core accounting software not having an audit log for modifications using specific access.
  • Backup for some accounting software not made daily.
  • A report under sub-section (12) of Section 143 of the Companies Act, 2013 has been filed by Statutory Auditors in Form ADT-4 with the Central Government of India.

Key Accounting Policies and Changes #

• Revenue Recognition: Revenue from construction contracts is recognized over time, using the input method (percentage of completion based on costs incurred relative to total estimated costs). This involves significant management judgment in estimating total contract costs, revenues, and risks.
• Accounting policy changes: Certain accounting standards changed. No material impact.

Internal Control Effectiveness #

• Auditor’s Opinion: The auditors issued an opinion on the adequacy of the internal financial controls, with reference to the financial statement.
• Control Deficiencies:
  • One instance of fraud identified during the financial year resulting in payments for non-existent services.

Regulatory Compliance Status #

• Overall: The Company has generally complied with applicable statutory provisions.
• Specific Regulations: Compliance reported with the Companies Act, 2013, SEBI regulations (including LODR), and relevant Secretarial Standards, Foreign Exchange Management Act, 1999.
• Cost Records: Cost records, as required under Section 148 of the Act, have been maintained.
• Extended Producer Responsibility (EPR): 100% Compliant

Legal Proceedings and Potential Impact #

• Pending Litigations: There are pending litigations, including those related to income tax, customs, and excise duties. The future cash outflows for these are determinable only upon receipt of judgments. The Company has disclosed the impact on its financials.

Related Party Transactions #

• Existence: Transactions and outstanding balances with related parties exist, including with the Ultimate Holding Company, subsidiaries, and fellow subsidiaries.
• Materiality: The report discloses material related party transactions at arm’s length basis.
• Scrutiny of Inter-corporate Loans and Investments: The Audit Committee is required to scrutinise inter-corporate loans and investments.
• Loans to Subsidiaries: Inter-corporate deposits have been provided to related parties, secured by a Global Letter of Support from the Ultimate Holding Company.
• Compliance: Compliant with section 188

Subsequent Events #

• Demerger: The Board of Directors approved the demerger of the Company’s Energy Business into a separate legal entity, Siemens Energy India Limited (SEIL).
• Approvals: Transaction is, inter alia, subject to receipt of requisite approvals from statutory and regulatory authorities.

Accounting Quality and Regulatory Risk Assessment #

• Revenue Recognition: The use of the percentage-of-completion method for revenue recognition on long-term contracts inherently involves estimates and judgments, representing a potential area of accounting risk.
• Provisions: Significant estimates are used in determining provisions for warranty costs and onerous contracts, introducing subjectivity.
• Internal Control Weakness: The identified instance of fraud and the reported issues related to audit trails and backup of books of accounts indicate potential internal control weaknesses that need to be remediated.
• Regulatory Focus: The disclosure of a whistleblower complaint resulting in payment for non-existent services highlights the need to manage regulatory risk as reported by the statutory auditor.
• Related Party Transactions: The Company has ongoing transactions with the related parties. The arms-length nature and board approval were audited.
• Litigation: There are ongoing litigation matters related to tax, duties and other legal proceedings, implying legal and regulatory compliance monitoring.