Cummins India expects 12-15% growth in FY13

Rajiv Batra, CFO of Cummins India, says that in the last few quarters we have seen a growth of 12-13%. There are sectors within the economy which are doing well. We expect a growth of 12-15% in FY13.

Cummins India will become worldwide hub for certain products in 3-4 years time and when the product matures, it will add Rs 1,000 crore to the topline. Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video. Q: There is delay in monsoon in some parts of the country, has this increased the demand for gensets and how would you size it up for FY13?
A: In the last few quarters we have seen a growth of 12-13%. There are sectors within the economy which are doing well. We expect a growth of 12-15% in FY13. Q: Do you see genset demand rising from current levels, the competition is growing and the company have not hiked the price significantly in last 1 1/5 year despite cost pressure. Do you think competition is a big factor right now?
A: Competition is always there and nothing drastic is seen in the last two years. Annually or bi-annually we have increases our prices between 2-3% depending upon rising commodity cost and inflation to preserve our margins. Q: How much was the recent price hike?
A: The recent hike was 2-3% and we do it frequently. Q: How will your foray into a low KVA genset segment impact your P&L?
A: Positively, as India is now setting up the export processing zone. Cummins India will become worldwide hub for certain products in 3-4 years time and when the product matures, it will add Rs 1000 crore to topline.
The percentage margin will be low as it is a commodity business and will not be same as in the higher end. But, the bottom line will improve positively. Q: Which sector will drive demand in the near-term?
A: Currently, we are bullish on construction, compressor and rail segment. However, we are not bullish on automotive. Q: Have you seen a pick up in demand from construction or is it that some of the orders were delayed and are coming through now? What is the status on from where the orders are coming?
A: Construction segment has been steady for us and is doing well for us from last couple of quarters. Q: There are reports from several investors about the new subsidiary that has been set up Cummins India, Cummins Technology, and exports are routed through that subsidiary. Also new technologies maybe induced through that subsidiary and therefore the investors in the main Cummins listed stock could loose out. What is your comment on that front?
A: Yes. The listed subsidiary will be a worldwide hub for low horse power exports which is positive. You are referring to export oriented operation, which is for categories of engines in which the domestic entity is not present today. Cummins has a choice of going anywhere in the world be it China, Brazil or Mexico but they have chosen to put an export oriented operation in India, which is invested and run independently. Putting it on the domestic side would have been detrimental to the domestic subsidiary’s dividend paying capacity.  Q: There was a charge that you are building a Fultan mega site, with the expenses being borne by Cummins India but that service will be used by the subsidiary, is that correct?
A: Absolutely not, each of the company is taking fair share of investment. And export processing zone is completely coming out of Cummins.