CUMMINSINDNSEQ2 FY22November 9, 2021

Cummins India Limited

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Key numbers — 40 extracted

INR 1689 crore

For the quarter ended 30th September 2021 with respect to the last year same quarter, our sales at INR 1689 crores is higher by 48% compared to INR 1141 crores recorded in the same quarter last year. Domestic sal

48%

ptember 2021 with respect to the last year same quarter, our sales at INR 1689 crores is higher by 48% compared to INR 1141 crores recorded in the same quarter last year. Domestic sales at INR 1250 cr

INR 1141 crore

h respect to the last year same quarter, our sales at INR 1689 crores is higher by 48% compared to INR 1141 crores recorded in the same quarter last year. Domestic sales at INR 1250 crores increased by 68%, expor

INR 1250 crore

igher by 48% compared to INR 1141 crores recorded in the same quarter last year. Domestic sales at INR 1250 crores increased by 68%, exports at INR 439 crores increased by 10%. Profit before tax and exceptional i

68%

1141 crores recorded in the same quarter last year. Domestic sales at INR 1250 crores increased by 68%, exports at INR 439 crores increased by 10%. Profit before tax and exceptional items at INR 293 cr

INR 439 crore

rded in the same quarter last year. Domestic sales at INR 1250 crores increased by 68%, exports at INR 439 crores increased by 10%. Profit before tax and exceptional items at INR 293 crores is 55% higher as comp

10%

t year. Domestic sales at INR 1250 crores increased by 68%, exports at INR 439 crores increased by 10%. Profit before tax and exceptional items at INR 293 crores is 55% higher as compared to INR 189 c

INR 293 crore

sed by 68%, exports at INR 439 crores increased by 10%. Profit before tax and exceptional items at INR 293 crores is 55% higher as compared to INR 189 crores recorded in the same quarter last year. For the quart

55%

s at INR 439 crores increased by 10%. Profit before tax and exceptional items at INR 293 crores is 55% higher as compared to INR 189 crores recorded in the same quarter last year. For the quarter ended

INR 189 crore

ed by 10%. Profit before tax and exceptional items at INR 293 crores is 55% higher as compared to INR 189 crores recorded in the same quarter last year. For the quarter ended 30th September 2021 with respect to

45%

ber 2021 with respect to the sequential or last quarter, our sales at INR 1689 crores is higher by 45% compared to INR 1167 crores recorded in the last quarter. Domestic sales at INR 1250 crores increa

INR 1167 crore

spect to the sequential or last quarter, our sales at INR 1689 crores is higher by 45% compared to INR 1167 crores recorded in the last quarter. Domestic sales at INR 1250 crores increased by 46%, exports at INR

Guidance — 20 items

Ashwath Ram

opening

“From a Cummins India financial guidance perspective, the company is quite hopeful of sustained improvement and economic recovery across industries and segments.”

Ashwath Ram

opening

“Thus, the company is not providing a full year guidance for revenue for FY 2022.”

Ashwath Ram

“Now with the monsoon getting over, we have started to see the road construction activity beginning to ramp up and the government's ambitions are to go to greater than 60 kilometers a day, in fact they are aiming for 100 kilometers a day.”

Ashwath Ram

“October 28th, 2021 Yeah, so actually, it's more a guidance to say that, this is something we are advising you, five years from now you should be ready to move etc.”

Ashwath Ram

“We have committed that by 2050 we will achieve zero emission footprint and we have already published and committed publicly that this is what we are going to do.”

Sandeep Tulsiyan

“October 28th, 2021 we took a project to complete one Data Center for 100 megawatt plus that you mentioned, would want to understand a little bit more about the gensets which are 50 liter plus in size, what is the kind of competitive landscape for these engine based gensets, as well as what are the indigenization levels of Cummins versus other peers in this range?”

Sandeep Tulsiyan

“Would I be correct in saying that this compression is more to do with the mix, you know exports being lower as well as the project order that we executed rather than the pure raw material inflation in fact, that was there in the quarter and which may come in subsequent quarters.”

Ashwath Ram

“If I look at it from a longer term, I will say beyond 18 months kind of perspective, we expect it to be even better.”

Ashwath Ram

“So, I would say in the short term, it will continue to remain slightly subdued as compared to our best quarters ever in rail, but when I look at it from a medium term outlook, I can -- I'm very bullish on this segment for us as a company.”

Renu Vaid

“So, my first question is, broadly if we knock off this large project that we have received, that is executed on Data Center side, base business volumes at approximately 15 billion INR still seem to be pretty much strong.”

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Risks & concerns — 11 flagged

However, potential wave three of COVID as well as forecasted supply chain disruptions make it difficult currently to give a steady or stable outlook.

— Ashwath Ram

Second question is on the gross margin compression that we saw during the quarter.

— Sandeep Tulsiyan

What we are seeing now is a short term impact of one, the entire segment working at a slower pace and of course electrification happening, but we are gearing our business to deal with the electrification and actually opening up more markets for us.

— Ashwath Ram

So broadly just to summarize, irrespective of the technology base, do you perceive a fundamental risk to backup solutions or demand, especially for large corporates who are looking to move towards net zero for the [indiscernible] mandate for compliance?

— Renu Vaid

Okay, so in terms of price hikes, you know, for production in various categories, what are the kind of price hikes which we have taken, and as you know, commodity costs continue to put a lot of pressure -- Very significant, but still lagging behind commodities.

— Ashwath Ram

So, it's a very, very big challenge right now.

— Ashwath Ram

I'm asking this question because this number is getting too volatile every quarter and you have stated earlier this is largely because of the supply chain.

— Ashwath Ram

So, it's very difficult for me to pinpoint and tell you that this is the exact order backlog.

— Ashwath Ram

Maybe I would say 20%-25% more from where we are today, that would be my guess as of now, but it's very difficult for me to give you a very good answer to say how much is the real backlog.

— Ashwath Ram

So, yes, so it does have a slight impact of dilution on margin.

— Ashwath Ram

So, I wanted to understand whether it is practically implementable in India because you know, earlier gensets don't have any registration number, it's very difficult to track.

— Ashwath Ram

Q&A — 3 exchanges

Sir, are you able to hear me?

Ashwath Ram

I can hear you clearly. Yeah, sir. Congrats on a good set of numbers. So, basically just wanted your sense, we had registered a significant growth in the power gen business of around say more than 100% year-on-year at revenue of around 620 crores there. What were the sectors which had driven the growth in this? Was there any one- off large order which we had seen, if you can give more clarity on that? Yeah, certainly, we had one large Projects business order which was for a big Data center and a one-time kind of order which contributed to nearly close to -- a little lower than $20 million in t

Yeah, a very Good Morning. Am I audible? Yes, sir. Good Morning. Mr. Ram. My first question is on the large size gensets that we do for Data Centers where CIL Quarter 2, FY22 Financial Results Analyst Call Cummins India Ltd. October 28th, 2021 we took a project to complete one Data Center for 100 megawatt plus that you mentioned, would want to understand a little bit more about the gensets which are 50 liter plus in size, what is the kind of competitive landscape for these engine based gensets, as well as what are the indigenization levels of Cummins versus other peers in this range? And other

Sandeep Tulsiyan

So anytime you need more than 2000 horsepower from a -- and where space is at a premium and you want greater density of product, you need these kinds of engines. And we have the largest level of localization as compared to anybody else because we have the 50 liter which we have now made capable of going all the way up to 2000 kV and nobody else has a product of that size. So, that certainly gives us a significant advantage, and the 50 liter product for us is that greater than 85% localization. Now as we move higher than 50 liters, and we have 60 liter products, we have 78 liter products, we ha

Hi, Ram sir. Congratulations on having a good quarter. So, my first question is on the scrappage policy, which you spoke earlier in the call. So, what's your stance on whether it is implementable in diesel gensets and if yes, then how big this opportunity could be overall?

Ashwath Ram

I'm sorry; could you repeat the question, please? Hello? Earlier in the call you mentioned about this scrappage policy discussion with our MOEF to reduce the emission footprint in India. So, I wanted to understand whether it is practically implementable in India because you know, earlier gensets don't have any registration number, it's very difficult to track. If we could implement it in EV, so do you think there are challenges to implement this, and if not, then how big this opportunity could be for you? I mean, like I said, everything helps, right? If you're using an older technology product

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Speaking time

Ashwath Ram

Moderator

Ravi Swaminathan

Sandeep Tulsiyan

Renu Vaid

Parikshit Kandpal

Nilesh Shetty

Aditya Mongia

Bhavin Vithlani

Charanjeet Singh

Opening remarks

Ashwath Ram

Good Morning, Ladies and Gentlemen. Hope you are all doing great and staying safe! On behalf of Cummins India Limited, I would like to welcome all of you to CIL Quarter 2, FY22 Financial Results Analyst Call. I would like to greet Mr. Ashwath Ram, MD Cummins India Limited, Mr. Ajay Patil, CFO Cummins India Limited and the Leadership Team. Over to you Mr. Ashwath Ram to present the Financial Results. Good Morning ladies and gentlemen. First of all, thank you for taking out your valuable time to attend this call. I am Ashwath Ram, Managing Director of Cummins India Limited. I hope you and your family are doing well and are staying safe and healthy. Also joining me on the call today is Ajay Patil, our CFO for Cummins India Limited and our Chairman - Steve Chapman. Before we get into the details of Q2 results, I'm happy to inform you that CIL witnessed a record quarter, well supported by the economic recovery, good demand, and improved supply chain. Our priority continues to be the safety

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