Cummins India Limited — Q4 FY25 earnings call

Call held 29 May 2025

Management summary

Cummins India reported a strong FY25 with 15% revenue growth and 16% PBT growth, driven by robust domestic demand and improved gross margins. While Q4 FY25 saw some domestic Powergen slowdown due to prior year's pre-buy and CPCB IV+ transition, the company anticipates double-digit revenue growth in FY26, supported by broad-based demand across segments and ongoing cost optimization efforts. Global uncertainties and competitive pricing in the new emission standard market remain areas of focus.

Highlights

  • FY25 sales grew 15% YoY to INR 10,166 crores, driven by 18% domestic sales growth and 6% export growth.

  • FY25 Profit Before Tax (PBT) increased 16% YoY to INR 2,496 crores.

  • Q4 FY25 exports surged 39% YoY to INR 479 crores, with low horsepower exports up 51% YoY.

  • Management expects double-digit revenue growth in FY26, supported by broad-based demand across Powergen, Distribution, and Industrial segments.

  • Gross margins improved due to cost reduction efforts and favorable product mix, with management aiming for sustainability.

Concerns

  • Q4 FY25 domestic Powergen sales were 7% lower YoY and 31% lower QoQ, partly due to high pre-buy sales in the prior year.

  • CPCB IV+ volumes are currently tracking at 80-85% of CPCB II levels, not yet fully matching.

  • Pricing in the CPCB IV+ market is still settling down, with increased competitive intensity.

  • Uncertainty from changes in global tax and trade policies, and geopolitical issues, impacting export outlook.

  • Anticipated cyclical dip in the compressor segment.

Key financials

3 periods

Headline

  • Capacity Utilization
    65%

Q4 FY25

  • Sales
    ₹2,414 Cr
    YoY +6% QoQ -21%
  • Domestic Sales
    ₹1,935 Cr
    YoY +1% QoQ -25%
  • Exports
    ₹479 Cr
    YoY +39% QoQ +3%
  • Profit Before Tax
    ₹681 Cr
    YoY -3% QoQ +2%

FY25

  • Sales
    ₹10,166 Cr
    YoY +15%
  • Domestic Sales
    ₹8,395 Cr
    YoY +18%
  • Exports
    ₹1,771 Cr
    YoY +6%
  • Profit Before Tax
    ₹2,496 Cr
    YoY +16%

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

  • FY25 Powergen Domestic Sales
    ₹3,844 Cr Revenue₹272 Cr Low Horsepower₹733 Cr Medium Range₹376 Cr Heavy Duty₹2,463 Cr High Horsepower
  • FY25 Distribution Business Sales
    ₹2,687 Cr Revenue
  • FY25 Industrial Business Domestic Sales
    ₹1,668 Cr Revenue
  • FY25 High Horsepower Exports
    ₹821 Cr Revenue
  • FY25 Low Horsepower Exports
    ₹784 Cr Revenue
  • Q4 FY25 Powergen Domestic Sales
    ₹874 Cr Revenue
  • Q4 FY25 Distribution Business Sales
    ₹631 Cr Revenue
  • Q4 FY25 Industrial Domestic Business Sales
    ₹379 Cr Revenue
  • Q4 FY25 High Horsepower Exports
    ₹218 Cr Revenue
  • Q4 FY25 Low Horsepower Exports
    ₹215 Cr Revenue
  • Q4 FY25 Industrial Business Unit
    ₹168 Cr Construction₹114 Cr Rail₹14 Cr Mining₹50 Cr Compressor
  • FY25 Industrial Business Unit
    ₹624 Cr Construction₹471 Cr Rail₹131 Cr Mining₹203 Cr Compressor

Order book

low confidence

Pipeline

other

Seeing a lot of activity inquiries and orders coming in for data centers; seeing demand across segments for Powergen; some order and inquiries coming from quick commerce segments (Zepto, Blinkit); order velocity for rail has been sustaining.

Management noted strong inquiry and order generation across various segments, particularly in data centers and rail, but did not quantify the total order book or new inflow.

Source: Q&A

Capital allocation

high confidence
  • Capex ₹230 Cr
    • Sustenance capex and upgrading lines as per requirement
    Shveta Arya: Yes, Jason, if you could go on mute and I'll then answer you. So from a capex perspective, we will continue in the coming financial year in the same range. And this is largely sustenance capex. We will continue to look at our lines and upgrading them as per the requirement. So this is what our capex will go towards. It will continue almost in the same range as you saw in the current financial year. (Page 7)

Guidance & targets

Profitability

  • Gross Margin Profitability · Ongoing · High confidence sustain or better
    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.

    — Shveta Arya

Volume

  • Powergen Segment Growth Volume · FY26 · Medium confidence growing
    Powergen continues to grow in the country at that pace, Subramaniam. So there's nothing different that we are seeing this year.

    — Shveta Arya

Revenue

  • Distribution Business Growth Revenue · FY26 · High confidence double-digit or better
    If you're asking me very specifically the question on distribution business and its growth outlook, so we are very positive on the growth outlook and it will also grow at double-digit or better, and that is the growth path we have seen.

    — Shveta Arya

Market context

  • Revenue Growth Revenue · FY26 · Medium confidence double-digit
    Going forward, we anticipate double-digit revenue growth in financial year 2025, '26, while remaining cautiously optimistic, given the uncertainty from changes in global tax and trade policies, along with the geopolitical issues, which we continue to monitor very closely.

    — Shveta Arya

What to watch in Q1 FY26

CPCB IV+ volumes vs CPCB II levels

another quarter or 2
Current 80-85% of CPCB II volumes
Target Matching CPCB II numbers

Why it matters

Indicates the pace of market adoption and recovery for new emission standard products, crucial for Powergen segment growth.

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. I think another quarter or 2 to see the volumes causing CPCB II numbers, not yet.

Risks & concerns

  • Global economic uncertainties (tax, trade policies, geopolitical issues)

    medium

    Impacting export outlook and overall revenue growth confidence for FY26.

    Management acknowledged

  • Increased competitive intensity and pricing pressure in CPCB IV+ market

    medium

    Pricing is still settling down and may take another 2-3 quarters to stabilize.

    Management acknowledged

  • Delays in Coal India tenders and shift to private miners in the mining segment

    medium

    Impacting anticipated growth in the mining segment, with tenders not released as expected.

    Management acknowledged

  • Cyclical dip in the compressor business

    low

    Based on historical analysis, a dip is expected in the compressor segment.

    Management anticipated

Q&A highlights

6 direct
Powergen Q4 decline (YoY and QoQ) and CPCB IV+ volumes Direct
This is largely owing to the fact that the same quarter last year had pre-buy sales of CPCB II. So this is not with respect to just this year. Last year saw higher sales because of the pre-buy. ... 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. I think another quarter or 2 to see the volumes causing CPCB II numbers, not yet.

Explains the Powergen segment's underperformance in Q4 and provides an update on the transition to new emission norms, indicating volumes are still below previous levels.

Asked by Parikshit Kandpal

Pricing in CPCB IV+ market Partial
Pricing is still settling down in the market, Parikshit. We have seen all competition products in the market now. We are still seeing pricing settle down. We do think that it will take another quarter or 2 for the pricing to completely settle down. That being said, we have been largely able to hold on to our pricing in the market. But I would say that competitive intensity has increased and pricing will settle down in another three quarters.

Highlights ongoing pricing pressure and increased competitive intensity in the new emission standard market, suggesting potential margin implications.

Asked by Parikshit Kandpal

Gross Margin drivers and sustainability Direct
So from a gross margin perspective, if you look at the whole year, we have done better as compared to last year. And what I would say is there's a lot of effort put in terms of our work on the direct material cost and bringing the cost of our products down. Also, as I mentioned, we are watching pricing carefully, and we have been able to hold on to pricing as well. ... 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.

Explains the factors contributing to gross margin improvement (cost control, pricing, product mix) and management's commitment to sustaining/improving them.

Asked by Mohit Pandey

Data center market slowdown Direct
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.

Reassures investors about continued strong demand from the data center segment, a key growth driver.

Asked by Mohit Pandey

Export market outlook and geographies Partial
So from an exports perspective, for this year, the year went by, I can share with you that Latin America and Europe did really well for us, have continuously been doing well for us. We provide our products around the world. And it is difficult to say that in the next financial year, which particular geography will continue to grow for us. ... Our efforts are definitely continuing in the direction of positioning our products rightly based on specific market requirements.

Provides color on past export performance and acknowledges global uncertainties, indicating a cautious but proactive approach to export growth.

Asked by Amit Anwani

Employee expense fluctuations Direct
From a quarter-to-quarter perspective, yes, there is some actuarial benefit impact that is there from a quarter perspective. There is also some reclassification done for better representing the results. So there is that in the quarter-on-quarter numbers. But if you compare year-on-year numbers from an employee cost perspective, the biggest thing over there is the efficiency improvement that we have been able to do and the leverage benefit because of the volumes that we're getting.

Clarifies the reasons behind the lower employee expenses, distinguishing between one-off items and structural improvements.

Asked by Mohit Kumar

Mining segment outlook Direct
Mining, we were anticipating mining order board to start building up, what we are seeing is a shift, and we have been seeing this for the last few quarters, more shift towards private miners and Coal India tenders are getting shifted out. The tenders, which were supposed to be released in these quarters have not been released.

Highlights a shift in the mining segment with delays in Coal India tenders, impacting the anticipated growth.

Asked by Renu Baid Pugalia

Scrappage policy for gensets Direct
So return of scrappage policy as a policy document has existed for a few years. Different states need to implement this. There are certain states which have actually put this into effect. You will probably understand that unlike the automotive segment, there is no registration of gensets centrally happening anywhere. So in order -- while the policy might exist, in order to implement that policy, that is where different states struggle. As of now, all states have not implemented the scrappage policy, some have. But even there, the implementation is not exactly the way it could be.

Clarifies the limited impact and slow implementation of the genset scrappage policy, indicating it's not a significant near-term growth driver.

Asked by Aditya Mongia

2 min read 7 chapters

Detailed narrative

FY25 Performance Overview

Cummins India delivered strong financial results for FY25, with sales reaching INR 10,166 crores, marking a 15% year-on-year increase. This growth was primarily fueled by an 18% rise in domestic sales to INR 8,395 crores, while exports also contributed with a 6% increase to INR 1,771 crores. Profit Before Tax (PBT) for the full year saw a 16% jump, totaling INR 2,496 crores, reflecting overall business strength.

Q4 FY25 Performance and Segment Dynamics

For the quarter ended March 31, 2025, sales stood at INR 2,414 crores, a 6% increase compared to the same quarter last year, but a 21% decline sequentially. Domestic sales grew by 1% YoY to INR 1,935 crores, while exports surged by 39% YoY to INR 479 crores, notably driven by a 51% increase in low horsepower exports. The Powergen domestic segment experienced a 7% YoY decline and a 31% QoQ decline, largely attributed to high pre-buy sales in the prior year's CPCB II transition.

CPCB IV+ Transition and Market Pricing

The transition to CPCB IV+ emission norms is ongoing, with volumes currently tracking at 80-85% of previous CPCB II levels, and full recovery is expected in another one to two quarters. Management noted that pricing in the CPCB IV+ market is still settling down amidst increased competitive intensity, and full stabilization may take up to three quarters. Despite this, the company has largely maintained its pricing.

Gross Margin and Cost Optimization

The company reported improved gross margins for the year, a result of significant efforts in direct material cost reduction and careful pricing strategies. Management emphasized its continuous endeavor to sustain and further improve these margins through ongoing cost optimization and a favorable product mix. Capacity utilization is currently close to 65%.

Capital Expenditure and Future Outlook

Cummins India invested approximately INR 230 crores in capital expenditure during FY25. For FY26, the company anticipates a similar level of capex, primarily focused on sustenance and upgrading existing lines. Management projects double-digit revenue growth for FY26, driven by broad-based demand across Powergen, Distribution, and Industrial segments, while remaining cautiously optimistic due to global uncertainties.

Export Market and Global Uncertainties

While exports showed strong growth in Q4 FY25, particularly in Latin America and Europe, the outlook for FY26 remains uncertain due to global tax and trade policies, as well as geopolitical issues. The company is actively working to position its products effectively in different international markets to mitigate these external risks.

Segment-Specific Trends

The data center market continues to show strong demand with no signs of slowdown. The rail segment maintains positive order velocity. However, the mining segment is experiencing a shift towards private miners, with delays in anticipated Coal India tenders. The compressor business is expected to enter a cyclical dip based on historical analysis.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Capital Goods earnings calls