See 5-10% revenue growth in FY12: Cummins India

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See 5-10% revenue growth in FY12: Cummins India

In an interview to CNBC-TV18, Rajiv Batra, chief financial officer of Cummins India says, he sees 5-10% revenue growth in FY12. “We always talk about a cycle of say about three to five years, we would commit to our 20% growth rates,” he adds.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Cummins See previous management interviews See what other Experts & Brokerages are saying about Cummins Cummins BSE | NSE 29/05/12 Are Mutual Funds betting on Cummins?

In an interview to CNBC-TV18, Rajiv Batra, chief financial officer of Cummins India says, he sees 5-10% revenue growth in FY12. "We always talk about a cycle of say about three to five years, we would commit to our 20% growth rates," he adds.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Gautam Broker. Also watch the accompanying video.

Q: Can you take us through the industry scenario at the moment? Do you fear extra competition at this point? Is there actual slowdown visible in the industry? By when do you expect a revival?

A: This is actually a tough question to answer. In the current scenario, clearly the dear money policy or the extensive money policy where RBI has taken up the rates successively, even prime customers today would pay something like about 15%. That clearly has slowed down in the demand scenario.

Given the fact that we are looking at some form of demand recession caused by stagflation, people have become careful on their purchasing decision, especially by capital goods space. That impact is coming through very strongly.

Q: Your space is actually offering diesel engines based on natural gas for power generation. Isn't it a slightly more secular longer term story? Gas availability is perhaps a story of the last few years with shale gas also coming in. Do you see a slightly longer term story here?

A: I was talking to you about the short-term. Very clearly customers have become little more wary of going in with large spends. But we are clearly not holding back on any investments. Our investments continue to create capacities.

If you look at this space over the last three years and as you look out over the next three years, we have been growing around about 20% per annum. We still believe with a lag we will continue to grow at that pace.

Power shortage in India, domestic demand comprises the purchasing power and that is here to stay with us at least over the next foreseeable future. Scenario on shale gas or atleast the market is about three to four years away.

Q: The consensus view on the street right now is that the rate cycle has peaked out and you could have a correction rates going forward. Do you think the demand cooling off that we have seen is in the process of bottoming out from here or do you think it will play out with a lag effect and hence you could have further pain in the next few quarters?

A: Demand has settled on a stable level not what it used to be a year ago. But I think what we now have is sustainable demand based on actual consumption. However, if the RBI does not take measures to roll back interest rates or we don't see some very positive signals then the whole economy goes on a slide. That is a scenario which I would like to discount.