Key takeaways of the call

The BoD of the company following its in-principle approval for the segregation of the company's power grids business from the other businesses of the company on Feb 13, 2019 has decided that the a National Company Law Tribunal (NCLT) approved demerger was the preferred option for effecting such segregation. On March 5, 2019 it has approved a scheme of arrangement amongst the Company, ABB Power Products and Systems India Limited (a newly incorporated wholly owned subsidiary of the Company) and their respective Shareholders and Creditors, providing for the demerger of the Company's power grids business to ABB Power Products and Systems India ("Demerger"). The Board of Directors of ABB Power Products and Systems India subsequently (on the same day) also approved the demerger of the Scheme of Arrangement. The Demerger will be undertaken by a NCL T -approved scheme of arrangement under the relevant/applicable provisions and rules there under of Companies Act, 2013 as well as Income-tax Act, 1961 and circulars of Securities Exchange Board of India. The Demerger is subject to necessary approvals including from the Shareholders and Creditors of the Company and the NCL-T.

Under the scheme, the power grids business carried out by ABB India ("Company") as defined in the scheme of arrangement ("PG Business") is to be demerged to ABB Power Products and Systems India ("APPSIL") pursuant to a scheme of arrangement amongst the Company.

The shareholding pattern of the Company will not change pursuant to the Demerger. APPSIL will issue equity shares to the shareholders of the Company on a pro rata basis such that the shareholding pattern of APPSIL post the Demerger will mirror the shareholding pattern of the Company. The shares held by the Company in APPSIL (including the shares held through its nominees, if any) shall stand cancelled as an integral part of the Scheme. Upon the Scheme becoming effective in consideration of the Demerger, APPSIL shall issue and allot equity shares to the shareholders of the company in the following manner: 1 (one) fully paid-up equity share, of face value Rs. 2/- (Rupees Two only) each in APPSIL for every 5(Five) fully paid up equity share(s) of face value Rs. 2/- (Rupees Two only) each of the Company.

Share exchange ratio i.e. one share in APPSIL for every t share in ABB India is arrived based on Net Asset Value method.

The Demerger is proposed for the following reasons and is expected to have the following benefits: (i) The Company have been driving industrial change as a pioneering technology leader. The Company is now taking fundamental actions to realign its business to focus, simplify and lead in digital industries for enhanced customer value and shareholder returns. (ii) These actions include the separation of the Company's portfolio of digital industries from the Company's traditional, long gestation, projects led, business of power grids, with requirements that include access to financing, by transfer of the PG Business to a demerged legal entity. (iii) The simplification of the Company's business model and structure with the implementation of this new organization is expected to provide each business with full operational ownership of products, functions, R&D and territories. These actions are likely to position the Company with a leadership role in digital solutions, and evolving technologies such as artificial intelligence in India, while allowing APPSIL to independently focus on a likely leadership position in the PG Business with its unique and established market dynamics.

Order inflow of PG business (demerging business) for CY2018 was Rs 3386 crore compared to Rs 3706 crore in CY2017. Order Backlog of PG business as end of Dec 2018 was Rs 5800 crore. The Order Backlog of PG includes the large HVDC order (RP 800) with about 35-36% of that is yet to be completed.

Turnover of the PG Business for the financial year 2018 was Rs 4171.78 crore. This accounts for 38.4% of total turnover of the Company for Financial Year 2018 and includes revenues from a one-time large order of HVDC from PGCIL.

The Company's customers' businesses in the country are being profoundly impacted with continuous advances in technology driving an unprecedented rate of development. Indian customers are looking for more complete solutions, combining the right products with leading engineering expertise and domain capability. The planning of fundamental actions whose objective is to focus, simplify and lead in digital industries is expected to allow the Company to more effectively meet customers' needs and capture market opportunities in Indian industries at an inflection point of digital transformation, with even stronger customer proximity.

The new structure with a demerged self-contained PG Business is likely to help deliberate refocusing onto industrial customers. Focus on digital industries in an era of energy and fourth industrial revolution, needs to be distinguished from the slower cycle, government influenced, financing support enabled large projects of PG Business.

The proposed Demerger is expected to assist the current power grids division to independently pursue the business excellence built over a long period in the power infrastructure with its robust and time tested business model.

The Demerger and consequent issue of equity shares by APPSIL are proposed to allow Shareholders of the Company and APPSIL and investors to invest in the distinct key businesses and allow Shareholders of the Company and APPSIL unlock the value of their investments.

Equity shares of APPSIL will be listed on the stock exchanges

This EPC substation & electrical balance of plant (EBOP) both part of others segment will not go to APPSIL. Outstanding EBOP or Substation EPC contracts will be closed/completed by 2019 end or early 2020. These two businesses were not part of identified business as part of Hitachi Deal arrived by the parent globally.

Endeavour of the company is to complete the demerger by middle of June 2019 but depends on how long the statutory approvals to take.

PG is an ongoing business and it has to serve the customers. So the capex and investment will continue as planned.

Some transformers and switchgears for industrial projects will be required for ABB continuing business and that will be sourced from APPSIL (demerged PG division). Similarly some Medium/Low voltage switchgears that are part of ABB continuing business will be required by demerged PG division for TL projects/substation projects at the lower end. This is the minimum dependency or continued relationship between demerged PG business and continuing businesses of the company.

ABB portfolio excluding now demerging PG [PG is largely focused on government orders] is very much industry focused with railway and infra being two key focus verticals. The Industrial Automation business provides all solutions for industries, digital techniques for productivity improvement for Energy sector such as Power, O&G as well as process industry etc. Electrification products focused on products/equipments that help to deliver power to end users beyond substation. Motion Drives division focuses on products such as motors drives generators etc and is driven by both new and replacement demands. Robotics – it has solid global business presence globally and in the country. The Austrian company that it has acquired help industrial Robotic automation. Common layers of continuing business is ABB digital platform to extract data and value added service for customer based on that data.

Some products in electrification products such as Medium Voltage Switchgears are integrated/relationship with PG business and that will continue.