Seeing increased demand from road construction sector: Cummins

Rajiv Batra, CFO of Cummins India expects the investments led by the government, in the infrastructure space, -- which has positively impacted industrial portfolio -- to relate to other parts of the company's product offerings."We have improved guidance on domestic space and we believe that we will deliver on that", he said.Batra spoke about the results and his outlook for the company.Enhanced demand is witnessed in the infrastructure space where road construction sector is at all time highs now, he said.Below is the verbatim transcript of Rajiv Batra's interview to Sonia Shenoy & Anuj Singhal on CNBC-TV18.Anuj: What led you to change that domestic guidance but not the export guidance? What are the key factors?A: Domestic has been doing well and we had made the guidance even as we closed last year. We have delivered on the guidance and this current guidance recognises the fact that there has been an improvement in the economy in the space in which we operate.The investments led by the government, in the infrastructure space, has positively impacted our industrial portfolio. We expect that to relate to other parts of our product offerings as well in due course. So, we clearly on the domestic space have an improved guidance and we believe that we will deliver on that.Sonia: Can you just breakdown that comment for us a little bit? Is the improved guidance because of better demand that you are noticing in the market or are you also taking some amount of price cuts in order to gain markets share?A: There have been no significant prices cuts -- price adjustments yes, which is an ongoing way that business is conducted. Where we are experiencing enhanced demand is clearly in the infrastructure space where road making machinery to which we are suppliers to -- Original Equipment Manufacturer (OEM), construction space, the compressor space these are almost at all time highs now.The railway investments that the government is making is positively impacting our business. We obviously are trying to improve our product offerings as well. So, this area, where we are supporting industry, is certainly of far more interest than what we have encountered over the last three years.Anuj: You upped the lower end of the guidance, your upper end is still 12 percent?A: Yes.Anuj: Do you see green shoots or enough green shoots to say that okay at some point may be even that upper end can be revised as well?A: That is a tough question. It depends on how we move forward. What is the buoyancy that we continue encountering and it will depend how things play out.At this stage we would certainly stay between our guidance and obviously as we see better developments, we can always talk about the guidance. However, at this stage this is what we want to stay with.Sonia: Can you throw some more colour on what is happening with exports because over their your guidance remains unchanged so you still expect a flat to negative growth there, are there still pressure points?A: This quarter we certainly had an improvement over the sequential quarter on exports. However, at this moment in time, it is not very clear whether this is sustainable or not. Exports is being impacted -- those economies have injected a certain degree of uncertainty today. One is of course what is happening in the European Union (EU), I don’t think we are entirely clear what may or may not happen as well as those economies are not resisting sustained growth.Apart from that for the moment the African markets have taken a pause and the Middle East is still struggling with the oil prices. So, in that scenario to give any better guidance -- despite an improvement in the first quarter -- is something which we would rather hold now.Anuj: Would even flat number be optimistic considering a year on year (YoY) Q1 numbers, Middle- East for example was down about 25 percent, Brazil is down quite a bit is there a chance or risk of de-growth in exports YoY?A: Last year as we looked at it -- it was Q1 which fired for us. After that things came down quite substantially. So, this year we will not see that. Of course when you compare with a year ago that was the quarter which did extremely well. However, I don’t see any issue now based on our current guidance of flat.