Honeywell Automation India, the Indian subsidiary of the US conglomerate Honeywell International Inc, reported its slowest profit growth in five quarters for the first quarter of FY24, as expenses, led by rising costs, outpaced revenue. The period ending on June 30 recorded a modest 1.4 percent increase in profit, reaching Rs 1.03 billion.

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This contrasts with the impressive revenue growth of nearly 19 percent, amounting to Rs 9.32 billion during the same period. However, this growth rate was more subdued compared to the remarkable 27.2 percent surge in revenue witnessed in the quarter ending on March 31.

Ashish Gaikwad, Managing Director of Honeywell Automation, discussed the factors contributing to this margin trend in an interview with CNBC-TV18. He attributed the margin challenges to a combination of a competitive market, an extended business cycle, and one-time costs. Gaikwad explained, "The domestic market is exhibiting growth in India, in contrast to the more stable exports market. This dynamic exerts pressure on pricing during competitive scenarios. Additionally, our long-cycle businesses, particularly those involving fixed-price contracts, are susceptible to the impact of inflation and rising input costs, which affects our overall margin. Furthermore, there were specific one-time events that arose, which we had to manage, thereby influencing our overall margins."

Despite these challenges, Honeywell Automation India remains steadfast in its pursuit of strategic objectives. Notably, the company's order book for the current period is approximately 41 percent higher compared to the corresponding quarter of the previous year.

Looking ahead, Gaikwad shared insights into the market outlook, highlighting the company's commitment to capitalise on the strong growth observed in the domestic market. He remarked, "We are witnessing robust expansion in the domestic market and are fully dedicated to participating in this upward trend. As we intensify our engagement in this growth trajectory, the contribution of exports to our overall portfolio may exhibit a relatively lower proportion. In the preceding fiscal year (FY23), our export contributions constituted 41 percent, with the remainder being driven by the dynamic domestic market."

Will see domestic business growing faster than exports

Gaikwad also said that the domestic business would likely grow at a faster pace than exports. The company aims to achieve growth rates that are double that of the GDP. He added, "Our ambition is to achieve a growth rate that is two times that of the GDP, although this might vary depending on the business mix quarter by quarter."

Gaikwad highlighted the company's focus on two critical mega trends: industrial digitization and sustainability. He said "Our efforts span across industrial digitalisation, automation, and sustainability within the industry. We are actively involved in providing automation solutions to various sectors, including battery manufacturing facilities, automation of electrolysers, and renewable fuel processes like ethanol."

Shares of Honeywell Automation are trading Rs 40,079, down 1.22 percent from its previous close on the BSE.