Are the gross margins achieved this year sustainable in FY '26?
That is our endeavor, Mohit. We continuously work on cost-related efforts so that we can improve on these - that is exactly the direction in which we are working.
How is the competition in the data center market and any color on market share? Do you also serve export markets for data centers?
We do see competition in the data center market but have been working in it for a long period of time and our product is very well accepted by data center players. We also provide specialized aftermarket support to the data center market. I won't be able to comment on the market share. From an export perspective, we provide components that get into gensets sold in the data center market.
Is it possible to quantify that number?
We won't be able to quantify that number. Sorry, Mohit.
On the double-digit guidance - is it 10% to 15% or 15% to 20%? Any color?
We are maintaining double-digit guidance. While we see demand in the local market, there are uncertainties in the global markets and the impact of tariffs is not completely baked in yet. So it will be very difficult to give you a very specific answer on that. Double digit is the guidance that I can give right now.
Can you share revenue and PAT numbers for Cummins Generator and Valvoline Cummins, and any outlook for the associate and JV?
The revenue for Cummins Generator Technologies was somewhere around INR1,980 crores. The same for Valvoline Cummins was somewhere around INR2,350 crores for the full year. We don't share specific PAT numbers.
On the CEV BS V transition in Industrial segment - how was product acceptance, any potential share gain or loss with OEMs and pricing impact?
Our presence in that segment is very limited. There is acceptance of the product, but our presence is very limited and as compared to remaining segments, it's a small portion of our overall sales.
Any color on the pricing impact of our solutions in this segment?
Nothing specific and no specific trend that we've observed. Just like any other emission change, pricing takes a while to settle down in every segment, and that's what's happening there. There's no specific trend or information that I can share at this stage.
On exports - this quarter was strong. Any color geography-wise on which geographies you expect to decline or improve over next 12-15 months and contribution of geographies in this year?
For the year that went by, Latin America and Europe did really well and have continuously been doing well for us. It is difficult to say which particular geography will continue to grow in the next financial year - there is uncertainty from tariff impact in the U.S., trade deals being worked out, and geopolitical situation. Our efforts to position the right products for every market continue, but very difficult to tell which segments we anticipate growth from.
On margins - is there further scope of improvement and can these margins sustain at current level since you are focusing on more value-added products? Color directionally for next 2 years?
We have been working on cost reduction efforts and providing value-add to customers - that endeavor continues. Other things impacting gross margin are product mix and pricing in the market. Our endeavor is definitely to sustain or better these margins and our cost optimization efforts are ongoing.
Any project revenue in this quarter and for the full year?
There's nothing specific to note there. It comes in certain quarters based on project execution. Overall, from a year perspective, there's nothing specific to share from the projects business perspective.
How to read into LHP exports growth and impact on margin - is LHP margin in export market also very high?
It's a blend. I won't be able to exactly say. Since we serve the entire world and these are priced differently in different markets, it won't be easy to say.
On Powergen current run rate at 80-85% of usual number - what is the full year number? Is this only applicable to CPCB IV portion?
I won't be able to give that number. That was my estimate that around 85% of CPCB II volumes and CPCB IV+ has reached. Given that the market is comprised of both CPCB II and CPCB IV+ plus, I won't be able to give that exact number.
On FY '26 - what is FY '25 CPCB IV+ market share for Cummins? How do you see the levers (pre-buy, distribution, data center) changing in FY '26 - can industry TAM and EBITDA grow in double digits?
I wouldn't be able to comment on the CPCB IV+ market share. From an outlook perspective on Powergen, we do see demand across segments coming in - some demand will be fulfilled in this quarter, some next quarter. We have not cited any trend as of now which would worry us. We are seeing decent inquiries and decent orders being generated across segments and have not cited any signs which would worry us.
On pricing - how should we think about pricing settling down over the next couple of quarters? Any range like 2-5% decline or more?
I won't be able to give you that kind of an assessment. We are analyzing the market, and we don't have that kind of number specific that I can give you.
In double-digit guidance, you would have some idea of pricing impact and volume growth - any color?
That's our endeavor across kind of penetration we want in distribution business, tenders we anticipate winning in Industrial, and Powergen across LHP, MHP, HHP. There is some amount of anticipation across the board on product mix, pricing built in, but how it plays out is very difficult to share or predict at this point in time.
On Powergen - decline of 7% Y-o-Y and 31% Q-on-Q. Was there any postponement or delay in decision-making towards end of Q4, especially March, given uncertainty of tariffs coming on 2nd April?
The 7% Y-o-Y decline is largely owing to the fact that the same quarter last year had pre-buy sales of CPCB II, so last year saw higher sales because of the pre-buy. From a quarter-on-quarter perspective, the December quarter usually has good sales velocity with inventory moving into GOEM and into the market, and now we are seeing full CPCB IV plus sales in the market. These are the factors comparing last year and last quarter Powergen sales.
On CPCB IV+ volumes versus CPCB II volumes - are volumes back to 100% and growing? Any initial trend?
The volumes in CPCB IV plus are not completely matching up to CPCB II. But every quarter, we are seeing increase in the volume trend. It will take another quarter or two to see volumes catching up with CPCB II numbers - not yet.
Are CPCB IV+ volumes still tracking around 85% to 90% or significantly lower? Early 80s? Any color?
Close to 80% to 85% is what the tracking would be.
Any color on pricing post CPCB IV implementation - is there any softness or are prices holding up?
Pricing is still settling down in the market. We have seen all competition products in the market now and pricing is still settling down. It will take another quarter or two for pricing to completely settle down. We have been largely able to hold on to our pricing in the market, but competitive intensity has increased and pricing will settle down in another three quarters.
Was there any one-off in this quarter on EBITDA or top line? Any impact of large data center orders or was that number missing?
No one-offs like that, Parikshit.
So no major data center order this quarter that could have helped slightly better growth?
No. Demand across sectors and all different segments have contributed to the growth. I won't be able to call out one particular one-off segment.
On gross margins - what has driven the strength in Q4? Is it largely linked to commodity?
From a gross margin perspective, for the whole year we have done better than last year. There has been a lot of effort on direct material cost and bringing the cost of products down. We are also watching pricing carefully and have been able to hold on to pricing. Product mix also plays a part - all three factors have worked, with significant work on improving direct material costs.
Could you share the breakup of domestic Powergen across low, medium, heavy and high HP?
For the financial year '24-'25, breaking up Powergen sales: low horsepower at INR272 crores, medium range at INR733 crores, heavy duty at INR376 crores and high horsepower at INR2,463 crores, leading to a total of INR3,844 crores for the year.
On data center linked genset demand - are you seeing any slowdown?
No, we are not seeing the slowdown there. We are actually seeing a lot of activity, inquiries and orders coming in. So we are not seeing a slowdown in the data centers in the India market yet.
On demand outlook for genset business by end-user market (residential, commercial realty, data center), and on export sequential recovery and stabilization?
We are seeing demand continuing across all segments we serve - residential realty, commercial realty, infra-related segments, and data centers, with no specific trend to call out. Emerging segments include quick commerce players like Zepto and Blinkit setting up warehouses. Powergen sees seasonality during summer months. On exports, we have been working on positioning products rightly in different markets - Europe and Latin America have been growing - but there is uncertainty from tariffs, geopolitical situation and trade deals being negotiated.
Cummins Inc. reported 11% decline in Power Generation sales for India while you reported 7% decline for the quarter - what explains the difference?
The only difference is foreign exchange. We are reporting our numbers in INR and they are reporting in US dollars. There is no other reconciliation between those two - it's only a dollar versus INR change.
On employee expense - it was lower this quarter compared to previous quarter and prior year. Is there any one-off?
From a quarter-to-quarter perspective, there is some actuarial benefit impact and also some reclassification done for better representation of results. On a Y-o-Y basis, the biggest factor is efficiency improvement and leverage benefit because of volumes. Also, last quarter Q3 had the true-up of variable pay one-time, which is not there this quarter.
What specific and measurable steps are you taking to keep the competition at bay, especially in the HHP segment?
We are working on segment-wise approach for Powergen - looking at what each segment needs from product perspective, value-add, aftermarket support, all tailored to the segment, supported by data and analysis. We continuously look at the product and use field data to drive product improvement on quality and cost across segments. We also keep in touch with customers to hear their voices on value-add needs and changing buying behaviors.
On capex - in FY '25 we invested around INR230 crores. How much capex are you looking at in FY '26 and what areas?
From a capex perspective, we will continue in the coming financial year in the same range. This is largely sustenance capex - we will continue to look at our lines and upgrade them as per requirement. Capex will continue almost in the same range as the current financial year.
Subsegment performance within industrial bucket and annualized revenue across construction, marine, mining, railways, compressors?
Industrial business unit Q4 breakup: Construction INR168 crores, rail INR114 crores, mining INR14 crores, compressor INR50 crores and others. Full year: construction INR624 crores, rail INR471 crores, mining INR131 crores, compressor INR203 crores and others.
Outlook across these segments including new product introductions?
Rail - positive outlook with orders across power car and diesel electric tower car, sustaining order velocity. Construction is at stable growth. Compressor business is cyclical and we anticipate a dip coming in based on past analysis, though not yet cited. Mining - we anticipated better outlook but it's not turning out that way as Coal India tenders are getting shifted, with more shift towards private miners. We are watchful and working with private miners.
On Vande Bharat and related new products for rail market - by when do we expect commercial orders to kick in?
We are done with field trials of the hotel load converter we launched a while ago and are on the anvil of getting regular orders. We are now getting into the production book for another rail application called the accident relief train, which will take a few years for production and trials before regular orders begin.
What's the current capacity utilization?
Current capacity utilization would be very close to 65%.
On CPCB IV pricing - it's been almost 6 months selling only CPCB IV. Don't you think it's a good outcome that you've been able to hold on to pricing?
Yes, that's what our endeavor is. It will take another quarter or two to settle down and we are watchful. Our focus is to go segment-wise in Powergen and provide the right product and services. We do not look at pricing across the board in one particular way - we go segment by segment to define our pricing based on what they need, buying behavior and value-adds. That is why we've been able to hold on and provide the right value for which customers are ready to pay.
On exports - are LATAM exports being helped by lower emission norm products like CPCB II, where Cummins India is one of few manufacturers?
That is right. We continue to be in the place from which we provide these products. It is also our efforts to position ourselves rightly in those markets - Europe is many markets, Italy behaves differently from France. We have done detailed assessment on placement, price points, competition. Similarly for Latin America - Chile, Peru, Colombia all behave differently. There are market-based efforts, and yes, these non-emissionized products are part of supplies in these markets.
On employee cost - clarification on reclassification (between employee and other expenses) and variable pay component - is FY24 the base?
Reclassification is between employee cost and other expenses. From a variable pay perspective, in Q3 of last financial year (FY '25), we had the impact of overall variable pay true-up, which is not there in Q4 of this financial year. That is the difference.
On Powergen pricing - on a blended basis for FY '25 on CPCB IV related products, what is the percentage of price increase or correction taken?
No price increase. We've just held on to our pricing that we had introduced when we introduced CPCB IV plus product, largely.
On double-digit growth guidance for next year - what is driving it, domestic vs export, and which Powergen segment?
We are expecting Power Generation segment to grow across the board in low and medium horsepower segments. Distribution business continues to grow. From industrial perspective, railways and construction segments hold growth. We are seeing demand in domestic market across Powergen, Industrial and Distribution. From exports perspective, it's a little uncertain - we are more certain about domestic demand than exports given tariff impact not fully evaluated.
Powergen base last year was very high due to pre-buying - will similar base effect impact Powergen in FY '26?
No. CPCB IV volumes are still not all the way up to what we had seen in CPCB II volumes. So there's no base effect - in fact, we anticipate the volumes to grow.
On the slowdown in distribution segment growth - it used to grow at much higher rate than 5% reported. Any light?
If you look at the whole year number, distribution business has grown 14%. Quarter-on-quarter different things can happen - the December quarter tends to be a high-volume quarter for distribution. Look at the year-on-year number - distribution business continues to grow at a very healthy rate of 14% full year growth as compared to last year.
But Y-o-Y for the quarter is also 5%. Adjusting for seasonality, why is this lower?
Yes, talking about Y-o-Y number - there can be shifting of demand between quarters. Large rebuild orders sometimes get executed in one quarter versus another and switch revenues. Nothing from overall market or demand perspective should be read into this - this is really based on some large order executions.
On UK end market - does the free trade agreement between UK and India help?
Europe overall is a large market for us, not specific UK. The trade agreement doesn't impact us as much - UK is not such a huge contributor to overall Europe. Mainland Europe contributes more to our revenues.
This should help grow Powergen portfolio well into next year, right?
Absolutely.
On scrappage policy chatter for 15+ year old gensets - any views and whether it can happen this year and what's the benefit?
Scrappage policy as a document has existed for a few years. Different states need to implement this - some have, but unlike automotive there is no central genset registration. While the policy might exist, in implementation different states struggle. Not all states have implemented the scrappage policy and even where implemented, it's not exactly as it could be. We continue to advocate for these scrappage policies to be implemented but it has not happened yet.
On distribution - given it has become a large segment, can you help us understand the breakup and key drivers?
Distribution serves Generation and Industrial segments - long-term contracts in industrial, contracts and services like extended warranty in Powergen. We have been putting a lot of effort on penetration in Powergen which has yielded results. Rebuild engine orders come from industrial market and Powergen, largely industrial. Distribution also focuses on new product launches like retrofit emission control devices, dual fuel kits, Cummins retrofit devices, all contributing to growth.
Your predecessor Ashwath used to talk about a 5-year runway to growth in distribution - is that still happening or should one have a lower time frame and reassess?
On distribution business growth outlook - we are very positive and it will also grow at double-digit or better. That is the growth path we have seen across all segments and the efforts are yielding results. So we are positive about the distribution business.
On data center demand - are we constrained by capacity? And on MHP/LHP market share - have we been able to gain share?
We are not capacity constrained on data centers - we have capacity and our product is well accepted. On growth in LHP and MHP - our endeavor is to grow across segments, not just LHP and MHP. There are different efforts that go into LHP, MHP and HHP, but we have gone beyond into customer segments to define growth and strategies. We are looking at growth across these segments.
But what about the specific comment in last few calls that we've increased share in LHP and MHP?
I don't think we have ever made a specific comment of such. We definitely want to grow in the low horsepower segment, but that goes without saying we also have aspirations to grow in MHP and HHP segment.
For Distribution - with new CPCB engines coming with higher warranty, should we expect growth in distribution to moderate?
With CPCB IV plus coming in, the warranty period is still the same. What we offer is extended warranty packaged in a product called Ashwasan, which the customer has the choice to buy. We actually anticipate our penetration to grow because the Ashwasan product is now available for the CPCB IV+ range as well.
How do we classify the Ashwasan extended warranty income - genset or distribution?
Distribution, this comes as distribution.