Honeywell Automation India Ltd was promoted as a joint venture between Tata Industries Ltd and Honeywell Inc, US, to manufacture process control and management systems in India. Incorporated in 1984 under the name Tata Process Controls Pvt Ltd, the company’s name was changed to the Tata Honeywell Ltd in 1987. It went public in 1989 and commercial production commenced. The main business is to manufacture and distribute state-of-the-art process control systems, in which company has a 260 systems par year capacity. Company expanded its products portfolio by acquiring distribution rights for the complete Honeywell product line from Honeywell, Europe from January 1999. With the addition of industrial and building control products, company can now offer complete solutions in its industry. In March 2002, the company entered into an alliance with i2 Technologies, the leading provider of dynamic value chain management solutions, to deliver Supply Chain Management (SCM) solutions in India.In December 2004, Tata Honeywe ll Ltd. has changed name of the company to Honeywell Automation India Limited.

Products & Services—

Honeywell Automation India (HAIL) is a leading supplier of industrial automation and control solutions to core industries including petrochemicals, refinery, oil and gas, mining, metals, life sciences and power generation. The industrial automation and controls business is the company’s largest business segment, accounting for almost 65% of total revenue. Company has maintained its dominant market position with over 35% share. Company’s other business divisions include measurement & control, industrial services, hi-spec solutions and building controls. With emerging infrastructure expansion, the company expects to spot major opportunities in oil & gas transportation, power & liquefied natural gas, and has decided to focus on these sectors. Company also expects the scope of the building control business to grow in both industrial and commercial markets. Company provides high value design and engineering services through its global services unit. It mainly comprises services to Honeywell, which account for 60-7
0% whiles the remaining 30- 40% is largely to US clients also including countries like Australia and Europe. HAIL has also introduced embedded system design and product development and migration services, which it provides to its parent operating through three Software Technology Park of India units. HAIL is exploring further opportunities in the manufacturing and technology services space.

The market growth will be primarily driven by increase in industrial investments in the core sectors coupled with growth in services sector like IT and ITES services. HAIL is expected to outperform the market growth and plans to strengthen its presence in power (T&D) and oil & gas.

HAIL is the market leader in the building automation space (24% of FY04 revenues) with a share of over 23% and is one of few players to have completely integrated solutions and a strong after-market service back up. This segment has been growing at a fast pace of 30% in the last three years driven mainly by the huge growth in IT and ITES, biotech and hospitality sectors. Going ahead, building solutions market should grow at 20% CAGR and we expect HAIL to beat market growth and further consolidate its market share.

Valuations

At current market price stock is trading at 28.54 P/E multiple of its Y2010 estimated earnings. We recommend investors to buy “Honeywell Automation India Limited” medium to long term investment horizon.