Conference Call      
          Cummins India
Margin improvement was led by favorable rupee and cost cutting measures


Cummins India held a conference call on 10th Feb'12 and was addressed by Anant J Talaulicar, CMD

Net sales for Cummins India were flat for Q3 FY'12 on y.o.y basis and were lower by about 9% on q.o.q basis.

Domestic and export sales both were lower by 10% and 9% respectively on q.o.q basis which was inline with the management's guidance.

Of the total sales, about 70% was from domestic market and rest from exports.

Of the domestic sales, about 25% is from power generation segment, 15% from industrial segment, 20% from distribution and the rest 5-6% from automotive
segment.

Power generation degrew by 9% on y.o.y and q.o.q basis, industrial business grew by 30% on q.o.q and was flat on y.o.y basis, automotive degrew by 37% on q.o.q basis , but was up by 24% on y.o.y basis and distribution was more or less grew by 3-4% on y.o.y and q.o.q basis.

According to the management, for all sectors including the power generation, the worst seems to be over. But it is difficult to determine the pace of growth from here.

Also what was expected about the softening of commodity prices, are yet to be seen as either the prices are rising or are steady. Also general inflation continues to prevail.

Margin for the quarter improved to 17.9% unlike the earlier guidance of management of around 16.5% margin which was for the Q2 FY'12. Adverse product mix and higher raw material prices (about 100 bps) continued to hurt the company. However, the margin improvement was primarily led by favorable rupee (about 190 bps) and cost cutting measures (about 150 bps).

During the quarter, the sale of High Horse power engines were down by 20% while the smaller range which is less than 160 KVA were higher by 35% y.o.y, thus hurting the overall product mix and margins.

On capex front, management is very much on track and for Calendar year (CY) 2011 has invested about Rs 275 crore.

Similarly for CY'12, CY'13 and for CY'14, overall capex plans stands at around Rs 400 crore, Rs 500 crore and Rs 300 crore respectively. Apart from capacity creation at Phalton site, ramping up distribution capacity, addition of small engine capacity; the capex also includes about Rs 175 crore to be spent on infrastructure linked to the overall capex like, office campus for employees, Khotrud clinical centre etc.

The company has cash and cash equivalent of about Rs 800 crore. During the quarter, higher other income was largely due to higher treasury income and dividend income of Rs 6 crore from subsidiary and there was no one offs.

Currently the low HP exports stands around Rs 200-220 crore which will double in next few years. Overall for exports, management does not see any worry at this moment.

Overall, for FY'13, management has given guidance of domestic sales to grow in higher teens and export at lower teens. Margin to remain same as FY'12 levels.