Captains Speak     

Published: January 31, 2025
Updated: January 31, 2025

Cummins India

Poised to record double digit growth

Prospects for Cummins India for fiscal 2025 are heartwarming as far as sales are concerned, and the company is poised to record double- digit growth. What is more, margins will expand after the company took up an exercise to control costs and improve efficiency so as to see better margins.

This was maintained by Shveta Arya, managing director, while addressing a conference call organized to discuss the Q2 FY25 performance of the company. Ms Arya pointed out that of the Q2FY25 standalone domestic sales of Rs 2,008 crore (up 47% yoy) powergen was Rs 896 crore (up 84% yoy, 12% qoq), Distribution was Rs 658 crore (up 20% yoy, 1% qoq), and Industrial was Rs 406 crore (up 35% yoy, 9% qoq). Of the exports revenue of Rs 440 crore (down 13% yoy), HHP sales were Rs 200 crore (down 24% yoy, down 1% qoq) and LHP Rs 198 crore (down 5% yoy, up 28% qoq).

According to her, of the domestic powergen revenue of Rs 896 crore for Q2FY25, the mix is HHP Rs 452 crore, MHP Rs 178 crore, LHP Rs 199 crore, and projects Rs 68 crore. Similarly, in the case of Q2FY25 domestic industrial, the construction segment’s contribution is Rs 146 crore, rail Rs 105 crore, mining Rs 52 crore, compressor Rs 58 crore, and the balance from ‘others’.

Pointing out that “the company has a strong portfolio of CPCB IV+ emission norms-compliant products to meet customer demand across the entire product range,” Ms Arya added that “all its CPCB IV+ emission norms-compliant products were certified well ahead of the time. Complete transition to CPCB IV+ emission became effective from July 1, 2024, and with a strong product portfolio meeting new norms, the company is well-positioned to capitalize.”

NEW LAUNCHES

CIL launched its CPCB IV+ products last year. The company was the first to launch its full range and market supply chain. Now, the company is watching the marketplace, and has seen a 15-25% increase in pricing with the transition to the new emission norms. CIL expects price discovery to get established over the next two quarters as customers have more options. With more options for clients, price levels will settle soon. The company expects a clear picture on prices over the next 3-4 months and remains confident that its products will be well-accepted as they are competitively priced.

According to A. Patil, CFO, sales guidance for FY25 points at double-digit growth. Cummins maintained revenue growth of two times the real GDP growth over the longer term, with a positive margin bias. The company is cautiously optimistic about export demand recovery as economic and geopolitical events have impacted end markets. With its diversified portfolio of products, it remains optimistic about the recovery in exports demand.

Ms Arya added that the company, with the transition to new emission norms, remains cautiously optimistic about the demand outlook for the near term and optimistic about the long-term growth prospects. CPCB IV+ are below the 800 kva range of powergen products. The supply of gensets to DC is large and is outside CPCB IV norms. Channel inventory levels for CPCB IV+ products are now adequate with no inventory of CPCB 2 engines under less than 800 kva.

Referring to the projects business, she said that this business involves installation of heavy powergen solutions at client sites such as data centres. A large share of the projects business is in the genset business segment, and because of a mix change there is an impact on margins. The projects business is part of the regular business of the company, and in some quarters it will be higher and in some quarters it will be lower, she said.