Wednesday, February 13, 2013

New energy efficiency standards likely to come in India in 2014: David Farr, Emerson Electric

The government needs to make moving capital in and out of the country more flexible, says Farr. Photo: Ramesh Pathania/Mint
The government needs to make moving capital in and out of the country more flexible, says Farr. Photo: Ramesh Pathania/Mint
New Delhi: India needs to be flexible with its rules and controls to encourage more foreign investment, says David Farr, chairman and chief executive of the $25 billionEmerson Electric Co., referring particularly to troubles with land acquisition that multinational companies face in the country. The US-based power equipment maker and provider of air conditioning and refrigeration solutions for industrial and residential segments has been present in India for the past three decades; it is working on boosting its business in the country to about $1 billion in three years from about $700 million now. While key sectors in the Indian economy have slowed, Emerson expects the country to be its third fastest growing market this year, along with China, Farr said in an interview. Edited excerpts:
What is your target for the coming years for India?
Well, my target is a billion dollars so that I can bring my board here. We are approaching about $700 million in India right now. Hopefully, in the next three years, we’ll be at the billion-dollar mark. Taking a little longer as the economy has slowed down, and so have the investments, so the growth hasn’t happened. We’ve continued to make a lot of investments in India over the years, which include acquisitions. We are using India not only to do business here but also to expand our business in the Middle East. Back in early 90’s, India was probably around $40-50 million.
What sector are you particularly targeting in India?
If you look at Emerson, we have six businesses, and in India, all six are present, but three are extremely strong. Our process business, which includes power, oil and gas, chemicals, is obviously very strong in India and has been growing significantly. We had started here initially with joint ventures, and over the years we have acquired those joint ventures. Last one we acquired was Fisher Sanmar from down south in Chennai about 18 months ago. We are also very strong in network power systems, and there we sell to the telecommunications industry and the IT (information technology) industry. We are large in the climate technology business, selling compressors for air conditioning, refrigeration.
We supply products, solutions and services to government and private companies working in the oil and power sector. Any oil and gas project underway in this country, we’re involved.
Is there any new acquisition in India on the anvil?
We are currently working on a small acquisition, a $10 million acquisition. It’s in Pune and we are writing the agreement and hopefully we’ll be able to finalise that in the next couple of months. We probably do one acquisition a year, which ranges from $5-100 million.
Has the demand from India for your products been significant as compared to countries like China?
I would say India has been in kind of a slow period for a while, but China was slow last year too. We also have to keep in mind the size of the business. We are a $25 billion company, India is $700 million (in annual sales)... China is a $3 billion business. India has continued to grow but it has slowed down. Some sectors of the economy have been slow, IT sector is particularly slow. And I would say some oil and gas investments have taken longer to get off the ground, but they are now moving forward. We did a review today of India and two of our businesses are going to grow 10-plus% this year and most likely next year too. India and China will be the third fastest growing markets for us this year. We’ve made a lot of investments in India in the last four-five years. We produce 80% of our products sold in this country right here.
Are you helping the government with respect to energy efficiency standards in India?
It typically takes 10 years for a government to move, but the Indian government now has started to move, and efficiency standards are happening. All governments have this issue where you try to figure out how to bring new technologies into play from an efficiency standpoint without totally destroying your local industry, because, typically, local industries start up using very inefficient technology. New energy efficiency standards are likely to come in India in 2014 and we are helping them create the standards.
What issues do you have in dealing with the Indian government and systems?
Governments all over the world face issues. We have been working in India since 1983 and we would like returns for the money we invest. The Indian government is now enticing companies like Emerson to invest more in the country. But we would like (it) if regulations and controls in the country are reduced.
Getting land has always been difficult for us; to acquire land has sometimes taken five-six years, which is a huge time. Also, they need to make moving capital in and out of the country more flexible. India is realising it and the government is trying to figure out a way so that multinational companies have more flexibility. Flexibility is necessary to encourage companies to invest.

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