Cummins India Limited — Q3 FY26 earnings call

Call held 5 Feb 2026

Management summary

Cummins India reported a mixed Q3 FY26, with sales marginally down but PBT before exceptional items showing growth. Gross margins reached historic highs, while the distribution business delivered strong performance. However, Power Gen and Industrial segments faced headwinds, and a one-time expense impacted reported PBT. Management remains optimistic about domestic growth and the data center pipeline.

Highlights

  • PBT before exceptional items grew 7% YoY to ₹719 crores, indicating strong operational performance.

  • Gross margin reached an almost 20-quarter high, close to 38%, driven by material cost efforts, one-time supplier benefits, and sales mix.

  • Distribution business sales showed robust growth of 26% YoY and 18% QoQ, reaching ₹939 crores, attributed to increased asset base and customer focus.

  • Management expects double-digit revenue growth for FY26 and FY27 for the domestic market, supported by strong Indian economy and infrastructure investments.

  • Data center pipeline is building out well, with positive movement anticipated for the next 3-4 years, driven by tax incentives and new announcements from hyperscalers.

Concerns

  • Sales marginally lower by 1% YoY and 4% QoQ, with domestic sales down 2% YoY and exports down 14% QoQ.

  • PBT after exceptional items decreased 12% YoY and 29% QoQ to ₹593 crores, impacted by a one-time true-up in expenses of approximately ₹50 crores.

  • Power Gen domestic sales declined 16% YoY and 20% QoQ to ₹1,069 crores, primarily due to the lumpy nature of data center execution, which occurred in the previous quarter.

  • Industrial business sales decreased 9% YoY, attributed to slowdown in construction activity (road construction pace, delayed monsoons) and lack of mining tenders.

  • Rising copper prices (₹1,320 per kg) pose a challenge for passing on costs, particularly for the alternator business of associate companies.

Key financials

  1. Revenue ₹3,006 Cr -1%YoY
  2. Domestic Sales ₹2,535 Cr -2%YoY
  3. Exports ₹471 Cr +2%YoY
  4. PBT before exceptional items ₹719 Cr +7%YoY
  5. PBT after exceptional items ₹593 Cr -12%YoY
  6. Gross Margin 38%

What they filed

Q1 FY27: revenue up 17.9%, net profit down 7.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,492 3,086 2,457 2,907 3,170 +27%3,055 −1%3,011 +23%3,426 +18%
EBITDA481 600 520 624 695 +44%634 +6%642 +23%616 −1%
Net profit451 514 521 589 638 +41%453 −12%650 +25%543 −8%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹2,890 Cr Total
  • Power Gen Domestic Sales ₹1,069 Cr 37.0%
  • Distribution Business Sales ₹939 Cr 32.5%
  • Industrial Business Sales ₹464 Cr 16.1%
  • High Horsepower Exports ₹232 Cr 8.0%
  • Low Horsepower Exports ₹186 Cr 6.4%

Order book

medium confidence

Pipeline

qualified rfp

Data center pipeline building out well, with more new announcements coming in from hyperscalers.

The company sees positive movement in the data center segment for the next 3-4 years, with a strong pipeline and increasing activity from hyperscalers. However, there are no specific data center inquiries from the Gulf region yet. The overall demand for data centers is growing hugely in the US and China, which Cummins serves locally. The company is pushing for CPCB product pickup in the US market.

Source: Prepared remarks

Guidance & targets

Segment Growth

  • Data Center Segment Growth Segment Growth · next 3 to 4 years · Medium confidence positive movement
    But nevertheless, a lot of movement in the data center market in India, some announcements. So, for the next 3 to 4 years, we do anticipate positive movement in the data center segment in India.

    — Shveta Arya

  • Domestic Power Gen (ex-Data Center) Growth Segment Growth · ongoing · Medium confidence growth
    So, while data centers will grow, given the economic activity and the infra spend, if that continues to happen and if this budget outlay really kicks in quickly, then we will continue to see growth in, as I mentioned, residential and commercial realty and infra and manufacturing.

    — Shveta Arya

Segment Outlook

  • Industrial Segment (Construction) Segment Outlook · going forward · Medium confidence better
    So, we are waiting to see how construction plays out. We think it will be better, going forward.

    — Shveta Arya

Market context

  • FY26 Revenue Growth Revenue · FY26 · High confidence double-digit
    Regarding the sales outlook for the financial year '26, we expect to have double-digit revenue growth over the previous fiscal year, which is supported by demand across all our key segments.

    — Shveta Arya

  • FY27 Domestic Growth Revenue · FY27 · High confidence double-digit
    For the domestic growth, I can say that for financial year '27, we will target double-digit growth.

    — Shveta Arya

  • Core Power Gen Business Growth Segment Growth · ongoing · High confidence double-digit
    Other than that, our core Power Gen business has grown at a steady rate, just as it has been growing in the past few quarters. There's no change in that.

    — Shveta Arya

  • Industrial Segment (Railway) Segment Outlook · going forward · High confidence positive
    Overall, our outlook on rail is very positive. And the new capex announcements in the budget also show outlay towards railways. Hopefully, that will get converted towards some projects where we get orders, but positive on rail.

    — Shveta Arya

What to watch in Q4 FY26

FY26 Revenue Growth Achievement

Next quarter (Q4 FY26 results)
Current Double-digit growth expected
Target Confirmation of double-digit growth

Why it matters

Verifies management's full-year revenue guidance for FY26.

Regarding the sales outlook for the financial year '26, we expect to have double-digit revenue growth over the previous fiscal year, which is supported by demand across all our key segments.

Risks & concerns

  • Geopolitical Instability impacting Exports

    medium

    Geopolitical conditions and tariff-related equations make export outlook difficult to predict.

    Management acknowledged

  • Commodity Price Volatility (Copper)

    medium

    Rising copper prices (₹1,320/kg) impact associate companies, and passing on costs is challenging.

    Management acknowledged

  • Aggressive Competitive Pricing

    medium

    Very aggressive pricing and positioning by competitors, especially in the power generation space, impacts margins.

    Management acknowledged

  • Data Center Project Execution Timeline

    low

    Conversion from data center announcements to actual sales and installation can take 2-3 years.

    Management acknowledged

Q&A highlights

7 direct
Power Gen Core Growth (excluding Data Center) Direct
So, I had mentioned in my commentary for the last quarter that we had extremely good data center execution, and that business is lumpy business. That because we had done the execution last quarter, that did not come in the quarter 3 of financial year FY '25-'26. That is the only difference. Other than that, our core Power Gen business has grown at a steady rate, just as it has been growing in the past few quarters. There's no change in that.

Clarified that the decline in Power Gen was due to the lumpy nature of data center orders, which were executed in the prior quarter, and that the core business is growing steadily.

Asked by Parikshit Kandpal

Data Center Pipeline and Future Outlook Direct
Yes. Data center pipeline is building out very well. As you rightly said, the tax incentives have been announced recently. We are yet to see the impact of that. But nevertheless, a lot of movement in the data center market in India, some announcements. So, for the next 3 to 4 years, we do anticipate positive movement in the data center segment in India.

Provided a positive outlook for the data center segment for the next 3-4 years, citing tax incentives and new announcements, indicating future growth potential.

Asked by Parikshit Kandpal

Gross Margin Drivers and One-time Expenses Direct
So, the gross margins, there's been a lot of effort that we have been putting to improve our gross margins over the years, working with our suppliers on our material costs, and that is what you are seeing in the numbers. There are also some onetime supplier benefits taken over there. Then there is the sales mix, which is not controlled by us. It is defined by the market demand. So, there is impact of sales mix as well, which is not repeatable every time. So those are the 3 factors impacting gross margins. Now for the one-timer that you asked, this is a true-up of the management cost charges. Like I said, in some quarters earlier, I had mentioned a true-down. So, we had gained benefit at that point in time. This time, it's a true-up. Over the year, it will even out.

Explained the drivers behind the strong gross margin performance and clarified the nature of the one-time expense (₹50 crores true-up) impacting PBT after exceptional items.

Asked by Parikshit Kandpal

Distribution Business Growth Drivers Direct
So, for the last few quarters, Distribution business has been focusing a lot on a few things. One, our asset base, of course, has been increasing over the last 2 years. So, distribution business gets more opportunity to service our customers. They have been working to get as many customers in the fold as possible. That gives peace of mind to our customers, helps us deliver brand promise of reliability and, of course, generates revenue for the Distribution business.

Detailed the strategic initiatives driving the strong growth in the distribution business, including asset base expansion and customer service focus.

Asked by Umesh Raut

Battery Energy Storage Systems (BESS) Market Potential Partial
So, from an addressable market perspective, I think anywhere that you need power is a possible addressable market, because one can use battery energy storage system for different reasons. One can use it to move towards cleaner power. One can use it to fulfill backup power needs. One can use it to fulfill excess power needs. One can use it to store excess power in case they are generating power through solar, wind and other means in their premises. So, all of these possibilities, the market anywhere there's economic activity and there's use of power and backup power is the addressable market. So, it's a huge addressable market. Now how are we seeing this? We have been generating a lot of inquiries on the products that we launched, and we started generating it right when we launched. Sales in this space are still very, very slow, because most customers are evaluating how does a battery energy storage system fit into their overall energy solution.

Management acknowledged a huge addressable market for BESS and significant inquiries, but noted that sales are currently very slow as customers are still evaluating the technology's fit.

Asked by Devesh Kasliwal

Industrial Segment Weakness and Outlook Direct
Industrial business, largely construction activity is down. So, construction activity in the quarter 3, there were 2 reasons. One, the road construction is not at the pace at which it was the same quarter year before. That is one. And then there was delayed monsoons in October. So, excavator sales did not pick up as much as they should have. So, these were the reasons for the construction segment being a little lower, and that is actually the largest contributor. Everything else is more tender-driven, so keeps changing quarter to quarter.

Provided specific reasons for the weakness in the industrial segment, particularly construction, and indicated that other parts are tender-driven and variable.

Asked by Sandesh Shetty

Competitive Intensity in Power Generation Direct
No, competitive pressures seem to be the same. Very, very aggressive pricing and positioning by our competitors. So extremely aggressive, especially in the power generation space.

Confirmed that competitive pressures remain high, especially in the power generation space, implying continued margin vigilance.

Asked by Renu Pugalia

Impact of CPCB IV+ on Aftermarket/Distribution Business Direct
CPCB IV+ completely is not out of warranty yet. 1st July '23 is when you would remember both CPCB II and CPCB IV+ were allowed to operate. 1st July 2024 is when we fully shifted to CPCB IV, 2 years of warranty. So, we are still in the warranty phase for a large set of CPCB IV+. So that phase that I spoke about has yet not fully come. It will likely come '27 onwards.

Clarified the timeline for CPCB IV+ engines to move out of warranty, indicating that the full aftermarket service revenue potential from these advanced engines will materialize from FY27 onwards.

Asked by Umesh Raut

3 min read 7 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

Cummins India reported sales of ₹3,006 crores for Q3 FY26, a marginal decrease of 1% year-on-year and 4% quarter-on-quarter. Domestic sales stood at ₹2,535 crores, down 2% YoY, while exports increased by 2% YoY to ₹471 crores. Profit before tax before exceptional items grew 7% YoY to ₹719 crores. However, PBT after exceptional items declined 12% YoY and 29% QoQ to ₹593 crores, primarily due to a one-time true-up in expenses amounting to approximately ₹50 crores.

Gross Margin Expansion and Cost Management

The company achieved an impressive gross margin, reaching an almost 20-quarter high, close to 38%. This expansion was attributed to sustained efforts in material cost reduction, one-time supplier benefits, and a favorable sales mix. Management acknowledged the challenge of rising commodity prices, particularly copper at ₹1,320 per kg, which impacts associate companies and makes cost pass-through difficult, but noted that iron and steel prices have been more stable.

Segmental Performance: Power Generation & Distribution

Power Generation domestic sales decreased 16% YoY and 20% QoQ to ₹1,069 crores. This decline was largely due to the lumpy nature of data center execution, with significant orders fulfilled in the previous quarter. The core Power Gen business, excluding data centers, continued to grow at a steady, double-digit rate. The Distribution business demonstrated strong performance, with sales increasing 26% YoY and 18% QoQ to ₹939 crores, driven by an expanding asset base and a focus on customer service across various segments like power gen, railways, defense, and mining.

Industrial Segment Challenges and Outlook

The Industrial business sales saw a 9% YoY decrease, primarily due to a slowdown in construction activity. This was attributed to a slower pace of road construction compared to the previous year and delayed monsoons impacting excavator sales. Mining activity, while showing some improvement in the last six months, has not yet translated into significant tenders. Despite these challenges, management expressed a positive outlook for the railway segment, supported by new government capex announcements.

Data Center Business: Strong Pipeline and Long-term Potential

The data center pipeline is robust and building out well, with management anticipating positive movement in this segment for the next 3-4 years. This is supported by recent tax incentives and new announcements from hyperscalers. While sales are currently slow as customers evaluate the fit of new solutions like Battery Energy Storage Systems (BESS), the company sees a huge addressable market. However, the conversion from announcements to actual sales and installation can take 2-3 years.

Battery Energy Storage Systems (BESS) Introduction

Cummins India has launched 10-feet and 20-feet containerized Battery Energy Storage Systems (BESS). Management views the entire power market as addressable for BESS, which can be used for cleaner power, backup, or excess power storage. While there is significant interest and many inquiries, sales are currently very slow as customers are still evaluating how BESS integrates into their overall energy solutions and capital expenditure plans. The company believes BESS will become a part of the overall energy solution, but diesel gensets will remain critical for reliability.

CPCB IV+ Engines and Aftermarket Opportunity

The company clarified that CPCB IV+ engines, which are technologically advanced with after-treatment systems and telematics, are still largely under warranty. The full aftermarket service revenue potential from these engines is expected to materialize from FY27 onwards, as they move out of their 2-year warranty period. This presents a significant future growth opportunity for the distribution business, as the company focuses on maintaining and servicing these advanced products.

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