Cummins sees 15-20% price hike post new pollution norms

Cummins India reported strong third quarter earnings on the back of robust business growth. Rajiv Batra, CFO of the company spoke to CNBC-TV18 regarding the company's outlook for FY14. Batra says that not only the genset segment, but the industrial division of the company also performed well in the last one year.

Further, Batra confirms that there will be a price increase post notification from Central Pollution Control Board (CPCB). He expects a 15-20 percent rise in the cost of the engine post CPCB II norms. Below is the verbatim transcript of Rajiv Batra's interview on CNBC-TV18. Q: Good growth in revenues especially the domestic genset segment, can you tell us more about how things can improve from hereon for the genset business? Does fourth quarter look as exciting as the third quarter? Going into FY14, do you think you have at least a couple of quarters of good performance before the power sector starts improving in India?
A: We have seen power shortages in India. Now, the country will be heading into the summer season and is 10 percent deficit on peaking bases and 4 percent on base and this is likely to continue. This is our estimate for a sustainable period in the future, over the past several years.
Last year, the southern states were critically short of power, there we have been adding value to a lot of customers in helping them peak needs, in some cases the base power is needed as well. So, that has been the story for 21 percent gross on the domestic segment. Not only power genset, but the industrial business also came back strongly. Our guidance has always been over a three year cycle and we have never commented on quarter-on-quarter basis. Our domestic upper teens, export lower teens, we have been sustaining this and over performing on these numbers. Also Read: Budget may focus on reviving equity inflows: Kotak Mah Bank Q: A lot of analysts have been asking you about pricing and the pricing improvement that was expected to be about 10-15 percent for CPCB II. Do you think domestic business is going to be completely led by pricing? Will volume be largely flat?
A: So far the CPCB norms have not been notified and after notification there is a cooling period, which the law stipulates as one year,.Let the norms be announced. There could be a 15-20 percent price increase in the cost of the engine. Q: Once you get to the new office, the Kothrud facility, an analyst asked you about land value, what could be your potential unlocking of value if you monetise that land?
A: I don't have any estimate for you but we have strong plans to make this technical center, which is the Cummins Global Asset. We can leverage this to develop technologies for India as well as worldwide.