Henri Lafarge, the CEO of Alstom, envisions India emerging as the largest market for the company in the forthcoming years.

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In an exclusive interview with CNBC-TV18's Shereen Bhan, Lafarge expressed his confidence in India's potential by revealing that Alstom has already invested over 300 million euros in the country. Moreover, the company has ambitious plans to further bolster its manufacturing capacity in India.

Lafarge highlighted the remarkable growth trajectory that India has shown for Alstom, with a particular focus on the buoyant urban market, notably in Metro projects. Alstom has actively participated in various prominent Metro initiatives across India, solidifying its position in the sector. Additionally, the company has forged a strong and promising relationship with Indian Railways, especially concerning locomotives.

As the CEO, Lafarge believes that Alstom's strategic investments and active involvement in India's transformative infrastructure projects will undoubtedly pave the way for the country to become Alstom's most significant market in the years to come.

Below are the excerpts of the interview.

Q: Let me start by talking to you about the global outlook. It is a challenging environment that we live in today. Inflation, of course continues to be a big concern. How much of an impact is that likely to continue to have as far as the guidance that you have held out for 2025-2026?

A: The global environment is pretty good for us. There are a lot of countries in the world which are investing in railway infrastructure, this is the most sustainable means of transportation so not surprisingly, a lot of public authorities are heavily investing in this means of transportation. So the global market is very nice for us. It is very positive, very buoyant, I have to say from Europe to North America to Asia and of course, we will come back to that in India. So we have very good prospects.

Of course, we had some macro-economic challenges in the previous years, we had the inflation, we had supply chain disruptions which had happened. But I think these things are more smoothing now in 2023. So we are moving positively towards the next year.

Q: You had unprecedented order backlog as well in excess of 87 billion euros. So you feel confident that demand is going to continue to look strong for you in the year ahead?

A: The demand is extremely strong. We have in the next 18 months record level of tenders to be submitted. So the pipeline has never been as big as it is today. Again worldwide in different regions of the world it is probably one of the first time where all the continents are positively oriented. So there is no region which is lagging behind, all the regions are heavily invested in rail. A lot of large cities are investing in Metros to replace cars as well as for main line. This of course allows people to be transported, but it is also a way to decrease the emissions of carbon dioxide.

Q: I want to talk about your India plans because you have been an investor with long term commitment here in India. This is a big area where the government is accelerating its growth as well as investment plans. How strong is the Indian market for you today?

A: So let me tell you that India has been a fantastic growth story for us both for the domestic market as well as for the export market. For the Indian markets, we have the two or three main pillars. The first one being the urban market where we have almost 50 cities with the Metro projects and Alstom is involved in each and every Metro project in all the cities in India, whether it is on rolling stock or signalling or infrastructure. So the urban market is buoyant.

But the main line market is extremely important now, both in terms of passenger mainline and this is relatively new for us in terms of components, traction equipment as well as for locomotives.

Q: I want to talk about the India story with you a little bit more in specific. Last year I believe it was your fastest growing market that is 2022. Does it continue to be your fastest growing market?

A: Absolutely, I mean, our turnover in India has grown by more than 40 percent this year. Again, it is on back of the local market, the Indian market which is booming, but we are also exporting more and more. We have more than 25 percent of only engineering being done in Alstom has been in India and we are aiming at 33 percent, so at least one-third of the entire engineering activities of Alstom will be done in India.

We have also our main traction components, traction boxes factory which is in Coimbatore which is one-third of the market we have that in India. So India for Alstom is today the first country in terms of number of employees. So the growth is supported both by the Indian market which is growing very fast as well as from a growing pattern of export markets as well.

Q: A billion euros in turnover from India that was the target that was set for 2023. Do you believe you are on track to be able to achieve that?

A: We have 4.2 billion euros of backlog to deliver. So yes, we are on track to this kind of number.

Q: Let's talk about the big opportunity that seems to be opening up and that is the Vande Bharat opportunity. You have emerged as the lowest bidder. L1 as far as that over Rs 30,000 crore order is concerned. But there are reports suggesting that there is a renegotiation underway with the government of India. Can you shed some light on that for us?

A: First of all, let me outline how important is this contract. It's the first time that we will put in India, an aluminium technology at large scale. So we are going to deploy this technology which we don't yet have in India--we have only stainless steel technology at present-- but we have the aluminium technology now which will allow us to implement a aluminium hub for the global export. So it's an extremely important project for Indian teams as well as Indian railways, I mean. Since it's the large railway in the world, it will allow us to modernise some Indian railway factories. And it's also a very important project going forward for the exports of India.

So I will not call it renegotiation, as always, we have conversation with Indian railways to finalise the project, finalise the contract. As you can imagine for such a large project, there are a lot of discussions and we are discussing and I am very confident that we will achieve these discussions.

Q: But part of the discussion is the ask from the Indian government to bring down the price even lower because I believe that it was set at Rs 151 crore per train set, which was 11 percent lower than the next bidder, which was your competitor Stadler. So what is the ask of the government as you conduct these conversations?

A: First of all, we believe that we made a very, very good price for these trains, of course you don't expect me to share with you all the day-to-day dialogue that we have. Again I am confident that we will finalise the contract. It is a fantastic project for Alstom, for the Indian railway and for the Make in India in general.

Q: But while you can't discuss the specifics of the contract or the price negotiations, what's the timeline by when you expect clarity on moving forward with this?

A: As soon as possible.

Q: Eventually if this gets done and whatever price it gets done at, what will that mean in terms of operationalisation of this and what kind of investments will you need to make to be able to cater this opportunity?

A: So one thing which is important to know is that again, this will be a new technology. So we are starting actually to invest in terms of capabilities in terms of knowhow. So in Bengaluru, we have a large engineering team to design these trains. Parts of the train and the aluminium technology will be done in the state of Gujarat in Savli, in our factory of Savli where we are going to manufacture the body shell within the sites of India Railway.

So there are several sites which will be involved and which will need heavy investment both internally in Alstom and on the sites of Indian Railway.

Q: Is there an estimate of what the requirement will be on the Alstom side?

A: No, we don't have clear estimate there, but it is several tens of millions of euro.

Q: That's as far as the Vande Bharat opportunity is concerned. Is there any visibility on further tendering that the railway may do that you could be potentially interested in?

A: The Indian railway has launched several very large tenders. So as an equipment manufacturer, we are probably unique in that perspective that we have all the type of rolling stock- we are producing locomotives, we are producing EMUs, classical hydrogen trains, intercities, so we are potentially interested by all the tenders which will be launched by Indian Railways.

Q: Let us talk about the metro opportunity as well because you have recently done further orders with the MP Metro Rail Corporation as well as the Delhi Metro Rail Corporation (DMRC) here in Delhi. How is that looking at this point in time, the metro landscape in India at this point in time, given your previous experience?

A: Well, we have an increasingly large number of cities which are being equipped with metros. India has become the first metro network in the world after China, Japan and the US and it is growing day after day. So what is interesting is the cities which are already equipped or partially equipped with metros, Delhi and also Mumbai, they are extending the networks. Even Bangalore and Chennai are extending their networks. So all the metros we are already implementing are extending their networks.

We also have new cities with new metros and we have been awarded metros in cities, one of them is Agra and in the past in Lucknow, in Kochi, in Bhopal and in Indore city. So we have the metros being extended and as I said, hopefully upto 50 cities with some metro projects.

Q: Given the growth that you see in the Indian market as well as the further opportunity to be able to sort of expand here, what could the Asia Pacific contribution look like for you over the next five years?

A: So, globally, India for us is a footprint exporting not only engineering component, also exporting some complete trains. We have exported trains in Australia, we have exported metro in Montreal, so we're also exporting in different places of the world. Asia Pacific overall is probably the fastest growing part of the world for Alstom. And today it's representing I would say 20 percent of Alstom and it is growing fast.

We are present in Asia Pacific from Australia- Australia is booming in terms of public transportation, it was probably lagging behind in the recent past. So they are investing a lot, particularly in urban transportation. We are very much present in all countries of Southeast Asia. We have integrated the monorail, quite recently, for example, in Bangkok, but we are present in Malaysia, in Singapore, we have a metro in Vietnam as well. We have also been just awarded a metro in Philippines. So we are present in all these regions. So it's a very large and dense market for us I would say.

Q: The export opportunity that you've been touching upon, and you believe that India is going to be able to leverage that for you and of course for the country as well. A slightly longer term trajectory of how much headroom for growth, potentially, do you believe the export market could throw up for Alstom from India?

A: I think it's an immense potential for export. We are working with the Indian authorities as well to make sure that financing is available. So, we are working on some opportunities which we had not envisaged before to Central Asia to Middle East, Africa. As manufacturing capabilities and manufacturing quality is improving in India, more and more countries are open for the Indian imports in that case. I clearly encourage a lot of discussion on free trade agreements between India and other countries, which will help for the import export from India. So I can see that as a huge, huge potential, which will be again coupled with local growth as well, because the market in India will grow very fast. So I will not be surprised that in the coming years, India will be by far the largest country for Alstom.

Q: What's been interesting about the Indian market for you as you've gone about investing, especially in the last decade or so, as the infrastructure story has really come to open up, what's been the interesting and unique aspects of operating in India for you?

A: First it has been a fantastic challenge for us. We started relatively small a few years ago and quite timely, I have to say because it was at the beginning of the ramp up and the infrastructure growth in India. We have always been up to the expectations. Our colleagues in India have always kept up with expectations, in terms of growth, agility, capability and technology. So we are now innovating more and more from India. For example, the most sophisticated signalling system, which is the ERTMS, European standard signalling system is being implemented today in India. So we have not only moved in terms of quantity in terms of quality, but also in terms of technological content.

Q: Speaking about signalling and we've had a horrific accident taken place in India, just a short while ago. Has there been any fresh conversation with the government on the signalling side of things with Alstom?

A: It was a terrible accident and a bitter reminder about the importance of safety in railways and the importance of signalling systems in railway. Of course Alstom is here in India and we'll make sure that we can provide any technology which is required. There is already a huge investment plan by the government to deploy signalling systems throughout the country. So we are participating to this plan. And, of course, it is best to avoid as much as we can these kind of accidents.

Q: I want to talk about the changes that we're seeing for Alstom globally as well. And you've embarked on a strategy to ensure that the company remains agile and dynamic, it responds to the challenges that we are presently faced with but also is future ready. And as part of that is really the move towards a greener Alstom- noise reduction, passenger experience, all of those things are something that you've been focused on and working on. What should we realistically expect in terms of innovation, as well as further milestones that you hope to achieve on that front?

A: One of our main goals in terms of innovation is to improve the environmental performance of our products. This comes through energy saving primarily, because most of our trains are electrical train. So we need to make sure that each generation basically consumes 20 percent less energy than the previous generation. So we achieve that for locomotives, metros etc, each time we save 20 percent of energy. But we have some parts of the network, which is not electrified, it's true in Europe, it's more so in the US where most of it is not electrified and it's true in India as well. And for that, we need to invent, develop some green technology, green traction. We have two options, if I may say battery for short holds or the hydrogen option. With the hydrogen we have two lines, which are now under operation in Germany. Of course, we need to have a green hydrogen for it to make sense. So for that we need to have a complete supply chain of hydrogen.

I was discussing with an Indian CEO two days ago, and there was a general consensus to make hydrogen as one of the future technology, needed technology in India for the development of sustainable infrastructure.

Q: The government is focusing on green hydrogen, and in fact, there's been a scheme that's been announced by the government to push the production of green hydrogen and set up that ecosystem here in India. But you spoke about speaking with Indian CEOs, you also met Prime Minister Modi, when he was in France for the Bastille Day celebration as the guest of honour. What was the sense, what was the message that you got from the Prime Minister about expanding and investing further in India?

A: Prime Minister was extremely positive and welcoming on the investment, and the green investment in particular in India. So it was very refreshing and very positive to hear him welcoming us in India. For Alstom, it was music to my ears, we have invested a lot in India to be compliant with Make-in-India and not just to be compliant with the law or the policy, but also because we strongly believe that this is a way to do business in India. And it's also for the interest of Alstom to be fully embedded in the local environment, in the local infrastructure. So I think there are a lot of very positive messages which are encouraging our investment even further.

Q: So how much would you say you've invested in India over the last five years? And what could you potentially look at investing in India over the next five years?

A: To some extent, it is a bit exponential, we have invested more than 300 million euros in capex, but more than capex, for us it's of course, the capabilities and the engineering capabilities. The fact that we have more than 12,000 employees now in India, more than 5000 engineers in Bangalore doing 25 percent of all our trains worldwide. So this is our main investment in addition to our manufacturing sites. We have six manufacturing sites. But I think both are equally important- the physical investment as well as the know-how investment which has been right over the recent years.

Q: Do you intend to up your headcount at your Bangalore facility? And are you looking at any further manufacturing facilities?

A: We are increasing our headcount in Bangalore. And that's where we are setting up all the investment. We also have other engineering center in Hyderabad for example. So we're welcoming a lot of engineers in our engineering centres. Yes, in terms of manufacturing capacity, we're increasing our capabilities and capacities in our different sites. We have one site in Madhepura for example, and we'll be relatively opportunistic on whether we extend one site or whether we open new sites. We're opening new depots- I was this morning visiting a depot, we are doing some maintenance operations and so forth. So it really depends on the different contracts that we are achieving and completing.

Q: One of the things that I know that Alstom is focused on is improving your metric as far as diversity and inclusion is concerned, and you want to have women in managerial roles, in engineering roles, from the current almost 24 percent to about 28 percent by 2025-2026. How strongly are you pushing that, and how important is that going to be for you here in India as well?

A: So globally, it's extremely important for us. I think it's extremely important for Alstom to be inclusive not only in its employee base, if I may say but also in its products. So we are looking a lot on our products. Our products are designed, manufactured and developed in order to welcome all type of passengers- and that's, of course for people with disabilities and difficulties and so forth. Internally we are working on all kinds of inclusion and diversity. We were talking about gender diversity, which is extremely important for us, we are also talking about any kind of cultural or national diversities, we are making sure that people can exchange places. For example, a lot of Indian colleagues are working around the world. We have around 150 to 200 Indian colleagues, which are employed in different sites of Alstom worldwide. So we are also mixing the nationalities and the culture so that people can be more creative.

As far as women are concerned, yes, we are putting a lot of focus on gender diversity globally and in India. Gender diversity is very related to local cultural habits. So we are also pushing the local management to take local actions. For example, just one of the action that we can take in India is to make sure that women can go safely home at night if they have to stay long hours at offices. We are making sure that somebody will accompany them when they are driving back home or something like that. Sometimes it is day to day actions, so that everybody feels comfortable and of course, in particular all the women.

Q: You said that this is a unique time, because literally every market of yours is firing irrespective of the macro economic challenges, be it Europe, the US or Asia Pacific. So what would worry you? If the supply chain issues are starting to ease, hopefully inflation will start to ease as well, what are you most concerned about today? What could impact your guidance that you've held out?

A: Today we have a very large backlog. So the first challenge of Alstom is execution. We need to deliver this backlog, we need to embark a lot of new people, for example new engineers in India, several thousands of new engineers in India, we need to train them in order to always deliver with the same level of quality and customer satisfaction. So my worry is not the market. The supply chain is improving. So the most important factor is our own internal quality and delivery capabilities. With this kind of growth, we need to be perfect in our delivery.

(Edited by : C H Unnikrishnan)