Back

Analyst Meet / AGM - Analyst Meet

Shifting of the entire manufacturing base of low HP engines of CTIL from USA to Indian facility of CTIL will not have any major impact on the company's exports

Cummins India

07-Apr-2016, 11:54
In interaction with Anant J Talaulicar, MD of the company as on 4^th April 2016

Key Highlights

Exports account for around 35% of total sales of Cummins India (CIL). The company exports around 75% of its exports to Parent directly and rest 25% through various channel partners of the Parent.

Broadly, based on Parent's strategy, CIL will export the low HP engines while for Mid HP engine sets generally its more of 50:50 between the CIL and Cummins Technologies (CTIL), a 100% subsidiary of the Parent and the high HP engines were manufactured and exported from CTIL.

CTIL also has a manufacturing base in USA along with Phalton plant in India. The Indian manufacturing unit in Phalton was for High HP while USA facility was more of low HP ie around 19 liter engine (K19).

The Parent has decided to shift the entire manufacturing base of low HP of CTIL from USA to Indian facility of CTIL in Phalton. The manufacturing facility will come upstream in next 12-15 months time frame.

However, as per the management of CIL, this does not bring any major change in the revenues or demand for low HP engines from the CIL. CIL was supplying some of the engine requirements of CTIL facility in USA. This shift, can result in lower export revenues by around 2-5% for the company. The management of CIL is confident of additional export revenues from other channel partners of the Parent.

CIL continues to believe that the export growth is a combination of addition of new export models and new opportunities of outsourcing from the Parent.

However the management is not able to justify, if outsourcing is the case, why not Parent close down the USA facility and provide the entire outsourcing order to CIL instead of CTIL going for a separate manufacturing base in India and reduce some revenues of CIL.

Internationally, the markets continued to shrink and there was hardly any growth worldwide except some places like Brazil, Latin America and that too due to lower base of last year.

In India, lot of green shoots were clearly seen in construction, roads, mining and power sector. Management foresees another around 6 months time by which the momentum will come back in India and a double digit growth forecast from 6 months from now could be easily projected.

Over past 5 years, around Rs 1700 crore has been capitalized in CIL's balance sheet, of which around Rs 1000 crore is towards the new office premise which is used jointly by CIL, Parent and Parent's subsidiaries. CIL has land parcel of around 12 acres near Pune, which it expects to monetize in next 12-18 months.