Domestic revenue to grow 10-15% in FY16: Cummins India

Second quarter earnings were impacted by slowdown in exports, Rajiv Batra, Chief Financial Officer (CFO) of Cummins India told CNBC-TV18. The company’s profit fell 1.9 percent year-on-year to Rs 198.6 crore and revenue rose 4.7 percent to Rs 1,197.72 crore. Operating profit improved 6 percent to Rs 201 crore in the quarter gone by. Export recovery is still tentative, he says adding that domestic revenue will be in range of 10-15 percent in FY16. Recovery in railways and infrastructure will aid growth in coming quarters, he says. Below is the transcript of Rajiv Batra’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18.Sonia: What is the sense looking like for the second half of the year both in the domestic and the export business?A: On the domestic side, we have done well. Our domestic revenues are up and the guidance of between 10 to 15 percent remains. So, while tentative, we do see some changes, positive changes from the domestic front. These are mainly in the areas of infrastructure. There are some sectors that are doing well and they are direct responses to the investments being made in those sectors by the government like railways and some sectors which has on the investor side revived further.Weakness we had this quarter was on a corresponding spot. Last quarter, we had some buoyant exports in some markets in the world, and that was more like a pre-buy. And telecom orders in those markets generally are lumpy. So, once some of those orders are executed, then we come into our railways business and that is exactly what happened in this quarter.So, our guidance on exports, given that we have a lot of exports to markets in the west, which are still recovering, our guidance on exports has always been 0-5 percent and on domestic between 10 to 15 percent range and that is exactly where we are.This is a quarter-on-quarter variation, but in general, we would like to say the recovery is still tentative.Latha: Had you not upped your guidance from that earlier 0-5 percent to 10-15 percent on exports?A: We had encountered headwinds. On some of the developing markets, the developed markets and that would be again, as I said, quarter-on-quarter variation. So, at this moment in time, we are saying 0-5 percent. And by the time, we hit the end of the fiscal, it could very well change, but this is how it is looking now.Latha: So, that is incorrect. I think we have kept the maintained domestic growth guidance, it is not 10-15 percent, it is 0-5 percent.A: 0-5 percent, that is what we have stated.Latha: You spoke about the domestic sales doing well and some of it because of investment in railways, so should we understand you got orders from railways? The impression was that the railway investments are still to pick up. You have seen them already picked up?A: On the contrary, we have seen them picked up, yes. And we are seeing some other sectors also which has posted signs of recovery. And domestically, our power generation business is also doing well, we have been picking up share.Sonia: I just want to reiterate some numbers. You said that in the domestic business, your guidance is 10-15 percent, correct?A: Correct.Sonia: So, you maintain that?A: We maintain that.Sonia: And in the export business your guidance is 0-5 percent?A: 0-5 percent.Sonia: Which are the export markets where you are seeing a slowdown now?A: The developed markets where high horse power products go, they have not recovered. In fact we are looking at further weaknesses in those markets. And our low horse power products, these go to the middle-east, the African markets and the rest of Asia. So, those markets are doing well subject to quarter-on-quarter variations.Latha: Which other domestic sectors you said are showing improvement other than railways?A: Our power generation market has been made as you compare that to last year. We clearly are picking up shares in those markets and we are seeing on the high horse power side some positive sights. And these are all markets which respond to investments. As capacities are created, there is a response which you see to react to high horse power buying in the domestic market, we are starting to see that.Sonia: Just wanted your view on your margins as well. This quarter, your margins are at 16.8 percent, but you had guided for earnings before interest, taxes, depreciation and amortisation (EBITDA) margins at more than 15 percent at the start of the year. It has held on to more than 15 percent up until now, but for the second half of the year, what is the expectation?A: We will maintain what we have. Now I do not see our margins slipping. We usually do not talk about margins, but we are well within where we want to be and clearly, the market is aggressive and we have responded which is why we are seeing increased share. So, we are where we want to be and this is where we will stay for the rest of the year.