Cummins India Limited — Q4 FY26 earnings call

So that is not a challenge for us. And the content that we put beyond what we buy from related parties as a percentage is also very high. So we do not see these impacting our margins as much. They have not. In fact, in the last few quarters, you have already seen how the growth has been and how our margins have been. So these transactions have not impacted our margins dramatically.

Analyst questioned potential margin dilution from high-growth segments (data centers, CPCB IV+) due to lower localization or higher imports. Management clarified that localization content is already high and margins have not been dramatically impacted.

Asked by Parikshit Kandpal

Two ways to think about this, Atul. So from a demand perspective for our segments, power generation, industrial, distribution, across our segments for now, we are seeing robust demand from the domestic market. Exports, I have always been mentioning that it is difficult to completely put our fingers down on the export demand given the geopolitical situation. From a domestic demand perspective, for now, we still see robust demand. We are watching what's happening largely to the economy and everybody else in the country. Commodity prices are increasing, inflation is likely to hit. So we are watching all of that. And that is why that brings us a little bit of caution despite the fact that our demand, inquiries and order book are robust today.

Analyst sought clarification on the data center's contribution to revenue and the meaning of 'moderate growth'. Management provided specific contribution percentages and detailed the factors (geopolitical, commodity prices, supply constraints) influencing the cautious outlook despite robust demand.

Asked by Atul Tiwari

Yes, I will do that. From an industrial segment perspective, last quarter, you might probably see the railway coming in as much for us. But this quarter, railway has performed very well and we continue to see robust demand on the railway side. That is the segment where we have a good order book and it continues to be so. Mining, for the last 2 years, we were not seeing good tenders coming in. The order velocity and the tender velocity was lower. But in the last 6 months, mining has picked up, and so our order book has started building up. Compressor segment will now undergo its low cycle, as it always does after a few years. So that may not see the kind of robust demand that we have seen in the last year or so. Construction, largely stable road construction.

Analyst inquired about the revival of the industrial segment. Management provided a detailed breakdown, highlighting strong demand in railways and mining, but noted a low cycle for compressors and stable road construction.

Asked by Mohit Kumar

Renu, the way we look at it, it is not just about the cost and the pricing of these engines and sensors. It is the whole value proposition that we provide to the customers. So, from our perspective, even before the tenders come in, we engage with our customers to really understand what are the kind of sites they are planning, how are they really thinking of setting up their site? How can we help them from that stage onwards to think of our impact of power.

Analyst questioned the impact of data centers moving to larger engine sizes (imported QSK95) on Cummins' competitive position and margins, given their localized 60L strength. Management emphasized their comprehensive value proposition and customer engagement beyond just pricing.

Asked by Renu Baid

Your first hypothesis that this will crunch in both timelines for us is correct because we are adding capacity as our parent has mentioned, and this largely goes towards engines that go into data center market. It is likely to crunch in post timelines. I will not be able to give you the exact numbers on what our lead times are and what they're likely to go to. ... It has definitely increased. The lead times has increased because we need to appreciate that the data center demand through the world at this point in time is very high. So, the lead times have in the last few years increased.

Analyst asked about the impact of Cummins' parent's $450M investment on reducing import timelines for larger engines. Management confirmed it would help but could not provide specific numbers, noting that global demand has generally increased lead times.

Asked by Rahul Gajare

I'll split this answer into two. Let me first talk about commodity inflation overall. Yes, we have been seeing commodities increase. As far as possible, we try and pass them on. There is always a challenge because we would have generated orders this prior to the period of commodity increase. So, with a little bit of lag and a little bit of challenge, we pass it on to the market. And we continue to see that challenge across various commodities. Specifically, from a diesel exhaust perspective, DEF is a very small proportion of our distribution business. So, it is not that impactful.

Analyst questioned the company's response to significant commodity inflation and rising DEF prices. Management stated they pass on costs with a lag and that DEF's impact on the distribution business is minimal.

Asked by Priyankar Biswas

Sure, I'll answer your second question first. CPCB IV+ as it comes out of warranty, absolutely, our endeavor is to encircle our customers so that, this is integrated technology products, are more sophisticated technology, than prior in Tec-product engines after treatment systems. So, we do want to provide the services to our customers for the entire CPCB IV+ range as it comes out of warranty. We have service packages available for extended warranty as well for our customers, which gives them a lot of peace of mind. And we do anticipate our distribution business to be able to cater to these customers, as they get out of warranty. In fact, we are already working on that through our extended warranty schemes.

Analyst asked about the strategy for CPCB IV+ products coming out of warranty and its impact on the distribution business. Management outlined plans to provide comprehensive services and extended warranty schemes, expecting the distribution business to cater effectively to this demand.

Asked by Mohit Pandey

Puneet. We don't see product gaps. What we always endeavour to do is pack more power into each of our products. And we continuously work on that. So we didn't have product gaps, we have lots of opportunities to pack in more power into existing products so that they become more value for money for our customers. ... Thanks for the question. We have generated a lot of interest and a lot of inquiries. We have to see some good sales coming in. For now, there's a lot of interest and a lot of inquiries for battery energy storage systems coming out.

Analyst asked about potential product gaps and the company's view on Battery Energy Storage Systems (BESS). Management stated no product gaps, focusing on enhancing existing products, and noted significant interest and inquiries for BESS, awaiting sales conversion.

Asked by Puneet Gulati