Danfoss, a leading player in providing energy-efficient solutions, is planning a fresh investment of ₹500 crore in India in localisation and capacity expansion.

Denmark-based Danfoss seeks to continue its investment-led strategy in India given the country’s strong growth outlook. It has invested ₹2,000 crore in India in the past 10 years.

After recording strong growth in H1 of 2023, the company faced challenges in H2. Overall, the group ended the year 2023 with a growth of 7 per cent (in local currency terms). Its revenue stood at 10.7 billion euros in 2023, up from 10.3 billion euros in 2022.

“But, India proved to be a star-performer and became the fastest growing market for Danfoss with a growth of about 20 per cent in 2023. We had said we would like to reach a revenue level of ₹5,000 crore by 2025 in India and we are absolutely on track for that. In 2023, sales in India crossed ₹3,400 crore,” Ravichandran Purushothaman, President, Danfoss India, told businessline.

For the group, Asia Pacific sales growth was negative, mainly driven by the economic slowdown in China. But, India continued to deliver a strong growth performance and is poised to emerge among the top 5 markets soon.

“We have planned a capex of ₹500 crore over the next 12-20 months, primarily in localisation and expansion of capacity across our six factories in India,” he said.

The expansion will see the company adding more than 500 people, taking the total strength from about 3,400 to 4,000 by the end of this calendar year.

Areas of localisation

The proposed investment in localisaiton is prompted by the need to stay cost-competitive by building a value chain in order to prepare for the emerging business opportunities due to the realignment of the supply chain on account of geopolitical factors and the PLI schemes that are aimed at supporting India’s energy transition and associated areas.

The company, which helps its customers to decarbonise their businesses, has identified 4-5 areas for localisation in order to take advantage of opportunities in the energy transition space, where the company has emerged as one of the significant players. Since the future energy system appears to be electric and where improving energy efficiency will be key, it sees a favourable growth outlook.

Danfoss supplies power modules for solar investors and controllers for connecting solar plants to the grid, among others. Further growth opportunities are opening up with the government’s increasing focus on RTC (round-the-clock) power supply, which requires battery storage and Danfoss offers standalone BESS (battery energy storage system) solutions. “We help the peak loads to move to the off-grid ie, we bring them in and take them out,” he added.

In the area of industrial decarbonisation, the company has been selling its products and solutions to the power sector and to hard-to-abate industries such as mining, cement, steel etc. It has now started supplying systems such as converters to electrolyzer manufacturers in the green hydrogen space. 

Net zero targets

It also sees opportunities in the net zero targets of corporates. “More than 500 companies, listed on the Indian stock exchanges, have announced their net zero targets. All these companies have started to measure about their Scope 1 and 2 emissions,” said Purushothaman.

In the area of commercial building decarbonisation, the company has been offering solutions in the areas of energy, water and waste management. However, heat pumps are now emerging as a solution to decarbonise. “We collect the heat from buildings and bring it back for water heating or cooling using heat pumps. This heat pump technology has become very important both in industrial and commercial applications globally,” he added.

“Industrial heat pumps offer a compelling solution for industries looking to optimise their energy usage, reduce their costs and dependence on fossil fuels, comply with environmental regulations and enhance their overall operational efficiency,” according to a recent report by McKinsey.