Cummins India Confident About Robust Demand, MD Ashwath Ram Says

Cummins India Ltd.'s revenue crossed an all-time high in the last fiscal but the maker of fuel engines and generators to power equipment refrains from offering guidance for the new financial year citing global uncertainty.

Commodities are not flattening even after a "huge" price increase in the last eight months, Ashwath Ram, managing director at Cummins India, said in an interview with BQ Prime's Niraj Shah. An accurate prediction of when the global circumstances will change is tough as there is a lot of uncertainty, he said.

“China opening up will improve the logjam on logistics."

He said, even though many of the electronics supply chains are based out of China, commodities that require metals like nickel and other raw materials that are needed for semiconductors come from the Chinese region, and when access to those regions gets hindered, the supply flow is interrupted and new sources are not able to ramp up as quickly.

"We are trying to meet 80% of the robust demand by choosing to allocate priorities based on our customers and materials available," Ram said.

Cummins India said 2021-22 was a “record year” when the company's turnover crossed Rs 6,000 crore, and the momentum is likely to continue. However, the fourth quarter ended March was weaker because of supply-chain disruption.

Cummins India Q4 FY22 (Consolidated, YoY):

• Revenue up 20% at Rs 1,502.12 crore vs Rs 1,256.25 crore.

• Ebitda up 23% at Rs 208.16 crore vs Rs 169.75 crore.

• Ebitda margin at 13.86% vs 13.51%.

• Net profit up 28% at Rs 216.27 crore vs Rs 168.56 crore.

• Recommended final dividend of Rs 10.5 per share

European Demand

Cummins expects the demand for low-horsepower engines to continue in the European Union as it comes out of a “multi-year downturn cycle”.

“The past two years has seen a momentum which shouldn't fade away because of the pent-up demand that is being met at the moment," Ram said.

Cummins faces competition from peers in China and Vietnam, but the company is "more cost competitive now and we have launched more products that are best suited for the needs of the market", Ram said. "We are better placed to deal with the competition.”

No Threat To Diesel Generators

Last year, India's national capital Delhi imposed a ban on diesel generators as air pollution spiked in winter. And the nation is committed to moving to stricter emission standards.

Cummins does not see that as a threat to its portfolio of diesel generators. Calling the company "fuel agnostic", Ram said 90% of sales come from what he called "clean diesel" products complying with global emission standards. These, he said, are less polluting than fuel cell where hydrogen is generated from coal-based thermal power.

Citing India's power shortage, Ram said the demand for diesel growing in the next decade and a half.

Cummins, however, has products ready than can use other fuels like LNG, CNG and ethanol, if the government makes them available, he said. The company, Ram said, is launching “Hydrogen Ice” at Auto Expo 23, that will allow to burn hydrogen in existing internal combustion engines with some modifications and get over 80% of the calorific efficiency of diesel today.

Watch the full conversation here: