The Hindu Business Line : ABB plans Rs 50-cr capex in 2004

ENGINEERING major ABB Ltd plans to spend close to Rs 50 crore as capital expenditure for the current financial year 2004 as it adds capacity and product range to fuel growing demand, the Chief Financial Officer, Mr K. Rajagopal, said. Such funding will be from internal accruals, he added.

ABB currently has close to Rs 400 crore cash on its books of which Rs 200 crore are investible surplus. This money could be used by the company to add to its existing capacity and some product line acquisition. Its order backlog as on December-end was Rs 1,071 crore.

Meanwhile, the company expects its "prudent" treasury management to contribute substantially to the net earnings, even as the firm's keenness to outsource such portfolio management to banks is restricted by the Reserve Bank of India norms. The company has an internal target to generate 10 per cent yield on its idle cash through treasury management.

The other income for the company in fiscal 2003 was Rs 34.69 crore of which a substantial sum was parked in tax-free bonds and the remaining distributed in government bonds and mutual funds that exclusively invest in government papers, Mr Rajagopal said.

The company's strategy to hedge its export receivables has helped it to gain in earnings for the last fiscal, even as the rupee hardened against the dollar. "We take forward cover for a full order as soon as the order is booked," Mr Rajagopal said, adding that the company de-risks such exchange risks in imports through hedging in a currency basket. The forex management has helped the firm net close to Rs 17 crore gains last year, Mr Rajagopal said.

Tight inventory management, shrinking receivable period and vendor financing from banks have also helped the company unlock close to Rs 12 crore within its system through effective use of information technology, Mr Rajagopal said. Internally, the company has set a target of collecting 25 per cent of receivables per month and such initiative has helped in shrinking the debtor days to 115 by 2003-end from 154 as on 2000. Inventory has also reduced to 8.2 per cent last fiscal from 9.5 per cent a year ago.

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