Honeywell is entering a new phase of growth after completing a major restructuring exercise that has separated its aerospace business from its automation operations. For Chairman and CEO Vimal Kapur, the move is not simply about creating a more focused company but positioning Honeywell for the next 15 to 20 years, as industrial automation, energy infrastructure and advanced manufacturing undergo significant changes.

The restructuring brings two businesses with distinctly different growth cycles under separate corporate structures. While aerospace requires substantial investments in manufacturing capacity to meet long-term demand, Honeywell's automation business is increasingly focused on developing new offerings, software and capabilities to serve a rapidly evolving industrial landscape. Speaking exclusively to CNBC-TV18 Kapur said the sharper focus will help the company become more purposeful and growth-oriented.

Honeywell expects 2027 to be its first full year as a standalone automation company, with revenue projected to exceed $20 billion. It is also looking to expand its presence in high-growth segments such as data centers, liquefied natural gas , semiconductor manufacturing and life sciences. The company is pursuing these opportunities through a combination of organic investments and acquisitions.

India is an important part of this strategy, not just as a domestic growth market but also as a potential sourcing and manufacturing base for Honeywell's global operations. Having established its Global Capability Centre in India in the mid-1990s, the company is now looking to deepen local supplier relationships and develop products in India for international markets. What's the economic temperature at this point in time?

I mean, you've just come off a strong earnings quarter at $5 billion. You've upped your annual guidance as well. So, as far as you're concerned, the temperature is warm. Our business is a good mix of long-cycle and short-cycle businesses.

The short-cycle businesses are performing extremely well, and we have a very large backlog of $19 billion. We printed a strong third-quarter performance globally. We upped our guidance for the fourth quarter, and we feel good about 2027, as long as things remain the way they are, with that caveat. We remain optimistic, there are a couple of issues in the world right now, but we do believe that if the current situation prevails, we'll have another strong year in 2027.

And on course to crossing $20 billion?2027 will be our first normal year because this year was a half-year as a combined company along with aerospace. The second half was as a standalone company. So, next year, our revenue will be a little over $20 billion as a first year, and we want to build a new Honeywell Technologies from this baseline of a pure-play automation player. We serve mission-critical segments, and we're really excited about the opportunities ahead.

Before I talk to you about India, let's just build on this massive restructuring exercise that you've just completed. What would you say are the metrics that you would hold up to say that this has been a successful exercise, at least in the short term, in terms of unlocking value? The value creation here is really about looking ahead over the next 15 to 20 years. The reason we did that was that the aerospace cycle is very, very long at this point, 10 to 15 years, and therefore, aerospace has to put in massive supply capacity to serve that market.

The automation business, on the other hand, will benefit from AI, and we'll talk about that. There are two very different paradigms. One is that I need more suppliers, more factories and more volume. The second is that I need to develop new offerings, new capabilities and software. That was the real paradigm shift that made us do it. So, what we have really done is a 20- to 30-year play.

Near-term markets will reward us or otherwise, depending on how they see our financial performance and their conviction in this thesis, which will be reflected in our market cap. But, longer term, I'm a big believer that this is going to create a lot of value for our customers and our shareholders.

What has it changed internally for you already? I mean, in terms of the basics of execution, decision-making, etc. What has it changed for you within the company?I'm one of the few CEOs who has made his job half.

Not many people want to make their jobs smaller, but I think the focus really helps. My learning is that once you are a focused company, as we are today, you're more purposeful. You don't have to build a strategy segment by segment. We are one company. We do automation across the board, and our business model is that we build an installed base and then serve our customers through services and software.

Everybody does that, so we don't have to reinvent the strategy for Business A and Business B. That makes it very easy. And then you're always thinking about how you grow consistently with this business model. So, focus helps. I mean, we have read about it, but sometimes, when you are in the thick of things, you can practise it, and that's really helping us become a more growth-oriented company.

Let's talk about growth here in India. This is, of course, your largest base outside the US, and it's a significant market for you. Of course, you have a listed subsidiary here in India as well. The expectation was to reach $1 billion in revenue in India by 2025, but, of course, now the aerospace business has been taken out. So, when do you hit that number?

It should be next year, roughly speaking. There's no reason we shouldn't grow at our typical rate of 15%. So, we first have to finish this year, we have one more quarter left, and then 2027. Depending on whether we grow 15% or 20%, we may hit it next year or shortly after. We are constantly growing in India.

India's economic drivers are very suitable for Honeywell's portfolio: energy security and the move towards advanced manufacturing, such as battery manufacturing, semiconductors and solar panels, data centers and AI, it looks like they are all meant for us. So, our portfolio is very suitable for all this, and that's really driving our growth on a consistent basis, which will allow us to hit this billion-dollar number soon.

So, is India a perfect match for Honeywell today compared with what it was earlier? I mean, you've had a 90-year history in this country. Is it the perfect match today?

Absolutely. Yeah, I mean, we are perfectly positioned from a portfolio perspective for where India is headed at this point in time. Growth requires building more energy infrastructure and ensuring energy security. We have a lot of capabilities in that area.

Infrastructure is being built out, including airports, metro rail and all the infrastructure that we build around automating these facilities. That's our core business. But data centers, the use of AI and everything else you read about also looks like they are meant for Honeywell. We are excited about the market opportunities and how we can continue to develop more capabilities here.

We also believe in India for India, but India for the world, which has been a big part of our thinking. Maybe, for your viewers, a big fact is that Honeywell set up what is called a Global Capability Centre in the mid-1990s. So, we were 30 years ahead compared with everybody else. We have thousands of people who serve Honeywell in different areas of engineering work, product development and solution development. We always believed in India for the world. So, for us, it's not a new story.

What's new for us is that, as Make in India becomes more prominent, more and more sectors are diversifying, such as semiconductors. That's expanding the supplier base.

As those capabilities grow, that becomes a potential supplier base for us. So, we are now at a stage where we have achieved strong growth in our domestic business. Our engineering capabilities have been monetised on a scale that we are very pleased with. Now, sourcing from India is our real focus. We have five manufacturing facilities to serve the domestic market. We do export, but not on a large scale. The opportunity for us is to look at the supply base in India for the rest of our manufacturing, and I feel very bullish about how this will take shape over the next few years.

Let's try and put some numbers to this story because there are many aspects to the India story that you just articulated. Let's start with the Make in India story for the world on the export front. Today, which is the more nascent, newer story, what can we expect five years down the line in terms of what that headline number could potentially be?I think, for us, the measurement will be how much we buy from here. So, if you do the math, with $20 billion in revenue and an operating margin of 22%, so it balances out cost of goods or services.

The question is how much of that we buy from where, and what share of that demand India will get. Today, that share of demand is small, and the metric will be whether it becomes 5%, 10% or 15%. It will really depend on how deep the supply chain is because it comes down to the component level. We don't buy a finished product. We make the finished product. We need sub-components and sub-assemblies. That's what we really need. We need castings for some of our products, for example, for the housing.

We also need electronic components that go into our products. So, I think the metric is going to be whether a company like ours can source 10% of its requirements from India. That will be pretty material.

If every company does that, there are hundreds of Honeywells in the world, and it makes it a pretty big proposition for the country.I think that is the opportunity everybody is looking at at this point in time. But when do you believe we are going to get anywhere close to that 5% to 10%?We believe it starts now. So, we have put supplier development engineers on the ground. Our first point of action is to work with our suppliers and tell them what specific specifications, quality requirements and inspection requirements we have, and work with them to bring them up to our standards.

Then we may start with a small volume, but we don't put in this effort just to buy small volumes. Why would we have people on the ground otherwise? We will then grow from small volumes to large volumes. So, what value addition are you already seeing here in India on account of what you're doing? As I said, our spend is not material at this point in time. So, reaching 5% or 10% is a relatively low bar, and I think that can happen in two to three years because we do see strong capabilities developing here.

The overall environment is strong in terms of the capabilities of our engineers and the people we are hiring who can do this kind of work. So, it's not a capability issue. It's about whether suppliers can meet my standards and how quickly they can do so. How do we work together to build common specifications? Is that the big stumbling block? Is that the big deterrent at this point in time, the lack of common standards? No, I want common standards more in the sense of suppliers meeting the product specifications we need.

It's not a deterrent. It's just a cycle. It takes that much time for us to go through the process of taking a component, testing it as part of our solution and product, certifying it, and then starting small before scaling up over a period of time.

So, it's not that it's a stumbling block. It's not a stumbling block? No, it's a process of growing through the cycle. So, it's a cycle that you're working through. Let's talk about the story that you said, in your own words, was ahead of the curve by almost 30 years, which is the Global Capability Centre story. Where is it today in terms of what it's able to generate for you, both in terms of contribution and growth? In terms of contribution, many of our products are now fully owned in India.

That's been the case for several years. What it means is that the development teams have full decision-making rights. They get the specifications and are responsible for managing the product from an engineering standpoint. We've reached a point where we even have some global offering managers based in India. That differentiates us because we are far ahead in the cycle. For us, this is not an engineering shop where we use a bunch of people. This is really about the full product development cycle.

We are now confident enough to say that we can make products in India for India and for the world. That means making a product in India for the domestic market, which can then be scaled up across the rest of the world. We have reached that stage now. Our offering managers have to be based here. They need to imagine a product that we may first sell in India, perhaps for only two years, but with the vision of scaling it up in the global market. I'm looking to create a category worth $100 million or $200 million.

We have that capability today, and we are at a stage where our engineering operations are no longer limited to traditional product development. They are moving towards imagining products based on local needs but with a global market opportunity. When do you believe you'll be able to develop your first product made in India for India and the world?I think some of them are happening right now. We are looking for more opportunities to scale them up.

This operation is already well proven, so it's not new for us. But our ambitions have become bigger. That's why we are now looking at $100 million categories rather than $20 million categories. So, it's more about having larger-scale ambitions. As some of the sectors we discussed continue to grow, I think they can create a new set of opportunities.

You talked about bigger ambitions, and you listed the $100 million number. Is there a timeline for that ambition as well?

The timeline is the sooner, the better. I would say these things are happening as we speak. So, these are not plans that are waiting for five years from now. These are already in the works.

Most of our product managers today come up with categories worth $20 million or $30 million, and we want to make them bigger. We want bigger ideas. I always tell my teams that we want fewer big ideas, not many small ideas. It's better to have three ideas, each worth $100 million, rather than 20 ideas worth $10 million each.I think that's a change in the mindset of people who take on bigger responsibilities.

They don't lack capability; they just lack exposure.

That's a perfect segue to my next question. Given the current global environment, as well as the opportunities that you foresee, what are the one, two or three big bets that you're willing to take at this point in time? Given that the corporate restructuring is behind you and you've also done a fair amount of M&A, what are those three big ideas or big bets that you're willing to take at this point in time?

As a company, our strategy is, first of all, to align our portfolio with areas where the world is growing. We call them high-growth verticals. We have identified four that fit into Honeywell's portfolio. The first is data centers, followed by LNG, which is required for data centers, semiconductor fabs and life sciences.

In each of these areas, we want to build more offerings, either organically or inorganically.

Many of our acquisitions have been aimed at accelerating our capabilities in these areas. We made two acquisitions to grow our LNG business, and that's shaping up quite well. Those are the areas where we will place our bets. But we also have to look at horizontal opportunities because we are an automation company. There are a few vectors that cut across industries, such as cybersecurity for the operational systems we supply. So, organically and inorganically, what can we do in those spaces? Our bets are very well aligned with our strategy, mostly organic, but sometimes inorganic.

Let me pick up on two of the aspects you just spoke about, which are dominating headlines at this point in time: AI and what's happening in the AI space. Whether we are likely to see a financial market meltdown in the AI space is an open question at this point in time. This week has been tough for many of those stocks, but on the ground, capex is still being committed, with record-breaking numbers being announced by companies every day. What's the pulse check you get from your vantage point today on the AI story? Which camp do you belong to? Are we close to a correction, or is this likely to continue?

In the near term, we also supply to data center builders. This year, we talked about it even on our earnings call: our orders in the data center vertical have grown by more than 100%. So, I have no data point to suggest that there's any meltdown or correction happening. Our pipeline is even stronger as we speak today, including in India.

If I had been sitting here a year ago, our bookings from data centers would have been practically nothing. This year, they are nearing $50 million. Going from nothing to that figure just shows how the space is becoming totally global.

We are really focused on serving customers, but also on how we use AI to change our own business from an offering perspective. Automation systems generate data.

That data has essentially been used all this while to control critical equipment because we serve mission-critical segments. Our systems will be running a hospital, a data center, a refinery or an LNG facility. That data can now be used to train systems and turn these facilities into learning systems, which will help people run these mission-critical sectors more productively. So, the definition of automation is changing. Automation systems are becoming autonomous.I always remind people that the best example is cars.

Cars were manual, then they became automatic, and now they are moving towards becoming autonomous. Similarly, many industrial facilities were manual. They became automatic, and they can now become autonomous. Autonomy is required there not just for productivity, but also because of the shortage of skilled people, which is a common challenge across the world, including India. I was reading a report that India has a shortage of around 30% in skilled workers. That's true of the rest of the world as well.

So, for us, AI is about how we use it to change our offerings and build autonomous systems to fulfil a very real need: the lack of skilled people in a high-growth economy.

You're talking about the lack of skilled people, but this also begs the question of what the workforce of the future is going to look like. Are we going to continue to see net additions to headcount? Are we going to see a decrease in the workforce? This has split people into different camps. Do you believe that we're actually going to see a decrease in workforce additions going forward?

As far as Honeywell is concerned, we believe AI will help us drive productivity. We have always used productivity tools. So, for a company like ours, this is not a novel idea. We have another productivity tool. What's different is that AI can be used for large-scale process transformation across the entire enterprise.

I can transform my sales process, my supply chain operations process, etc., and that can deliver productivity gains. We have committed to the market that we will grow by 4% to 6% in a year, typically 6%. That's what we aspire to. So, we can grow by 6% without necessarily adding 6% to our headcount. But that doesn't mean we'll reduce our workforce because we have a good problem to have. We look at it as a productivity tool at the end of the day.

I was trained as a Green Belt 20 years ago at Honeywell. I'm Green Belt-certified. That was a productivity tool in 2005. Lean processes and robotic process automation were also productivity tools. So, we have gone through these cycles of massive opportunities. This opportunity is greater than those earlier ones. I agree with that. But how much greater is it, and will it create a different type of workforce? Absolutely. There's a skill inversion, and that's what we really need to talk about.

Skill inversion always creates this dialogue around job losses. I think the right dialogue is that skills need to change and align with the new capabilities that are required, which obviously creates a sense of uncertainty in certain parts of the workforce. And that uncertainty is playing out and is not being helped by the commentary coming from AI companies either. Our slogan is very clear. We want to use AI. In fact, I tell all our colleagues and my workforce that if you use AI, you will keep your job, and if you don't use AI, you'll likely lose your job because it's a skill transformation.

So, please be part of it because if we become more productive, it's good news for us. We are a growing company. We'll find another role for you if we are saving some time. But by not using it, we can't leave ourselves behind as the workforce of the future changes. Well, one of the other things you spoke about, and which has also been dominating headlines this month, is what we're calling Black October because of all the cyber-related incidents we've seen. As a CEO today, how concerned or worried are you about this and the vulnerabilities that are emerging?

This is something we should be concerned about because we are a large business to run. We have to think about how we protect our assets, capabilities and systems. We have always paid a lot of attention to that over the last several years.

As a matter of public record, Honeywell had a cyberattack in 2021. So, having that first-hand experience gave us a completely different mindset.

But we also provide offerings to our customers to protect the operational systems we supply. So, cybersecurity is a big part of our business.

What has changed is that many of our customers live with the risk of not being detected because you need a hacker to hack you. Now, AI can hack you in minutes.

So the risk has become much higher because detectability is real-time now. That's something we all have to think about, and we're working with our customers on how we can continue to strengthen their defences. The risk is mostly with older systems because they were not really designed and architected for today's world.

Modern systems are probably much better architected. I'm not saying they are risk-free, but, relatively speaking, the risk is much lower. But do you sense a panic or urgency today?

If you ask any of our customers about the top issues worrying them, skills shortages come first, followed by cybersecurity risks. Everything else related to their business or the vertical they serve comes after that.

Depending on whether you're in life sciences, semiconductors or refining, you then talk about your industry-specific issues. But these concerns cut across most sectors. I think most people understand the scale of the problem, but investments have not kept pace with the scale of the issue.

And I think that's something we all have to be worried about. Is geopolitics among the top three risks that people talk to you about, or not? Geopolitics has become part of the operating environment for most companies like ours because we can't forecast wars. Nobody forecast the Ukraine war. Nobody forecast the Iran war. It essentially means we have to be agile enough to deal with these situations at very short notice.2026 is a great example.

We lost a few hundred million dollars in revenue due to the Middle East war, but we cannot change our earnings guidance because that happened. The markets don't allow that flexibility, and we need to have the agility to deal with it, have alternative options or address that specific issue in the most resilient way possible.

That's an important point you make because a lot of conversation has happened around resilience, and I think this has become much more of an issue post the pandemic. But, as you said, you cannot forecast a war, and we've seen that play out over the last 12 to 18 months. How have you managed to deliver the guidance you held out, and in fact, do better than that as well? What has been the secret to the agility you just spoke about?I think there are two parts to it.

One is that you plan for it. So, if we have to deliver 6% growth, we have to plan for 8%. You have to structure your business around that, fully expecting that 2% will go away.

We had an investor day in June, and we showed this as our path to growth: 8%, with a 2% contingency. That came as a bit of a surprise because nobody shows that. But in today's world, if we don't have that contingency, we don't want to come back to you with excuses such as supply chain disruptions or semiconductor shortages.

Just expect these things to happen, but run your business in a manner where you plan for a higher growth rate and then deliver what you have committed to.

I think that's one imperative. The second imperative is how agile your operations, systems and people are in dealing with these situations. If everybody freezes with every issue, you cannot deal with these challenges all the time. So, yeah, this is something that all of us have to deal with in real time.