Honeywell Automation India faces margin pressure amid competitive market and rising costs

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.

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."