Engine maker Cummins India's domestic business is coasting on the investments in the infrastructure sector by the government while its exports are facing headwinds due to a slowdown in Africa and Middle Eastern countries.
HSBC Global Research in its latest report said the company management continues to be cautious on exports growth outlook as Africa and the Middle East continues to be weak while the rest of the regions are flat. The management believes overall exports have bottomed out, yet it continues to guide ‘-5% to flat’ revenue growth outlook for FY18, it said. "On the domestic front, the company is seeing good growth in its segments drive by the government’s infrastructure push. It retained its 5-10% growth outlook for the domestic business." the report said.
"We believe exports which constitute 30% of revenue will continue to face negative headwinds on account of weakness in Middle Eastern and African economies. Power generation and backup business will pick up only over the medium term as fresh capex on new buildings has just begun and end demand is still 3-4 years away. The industrial part of the business is the only segment which will show near-term strength but it is largely driven by government capital expenditure. Distribution business largely remains steady as economic growth shows signs of picking up."
Sandeep Sinha, chief operating officer (COO) of Cummins India said he had no knowledge about this specific report but in general the export business, like that of other companies, had slowed down due to way commodity pricing are playing out in these countries.
On the transformation of Indian automobile sector to BS-VI, Sinha said it is certainly not going to be easy and will be challenging. "Just imagine you are in a non-electronic era till March 28, and then about in 1,000 days, you are going to go in for the most advanced engines. We are doing something that most other countries (developed ones) took 10-15 years to transform," Sinha said.
Meanwhile, the technical centre which is being set up by Cummins in Pune at an investment of Rs 1,000- 1,500 crore is expected to get ready by the end of this year. It will be the second-largest such facility of the firm outside the US market.
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