Cummins India Limited (500480) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. This is Ashwath Ram, the Managing Director of Cummins India Limited. These are very difficult and complicated times, and I hope you and your family are all doing well and are staying safe and healthy. Also joining me on today's call is Mr. Ajay Patil, who is our CFO for Cummins India Limited. Thank you for joining us on this call. I would like to share the financial results of the quarter and year ending March 31, 2020, through this call. I'll now talk about our financial results. For the quarter ended March 31, 2020, with respect to the sequential quarter, our total net sales stood at INR 1,032 crores, which declined by 28% compared to the INR 1,428 crores recorded in the preceding quarter. Net of COVID-19 revenue declined by 14%. Domestic sales stood at INR 775 crores, declined by 27%. Exports stood at INR 257 crores and declined by 31%. Net of COVID-19, domestic revenue declined by 12% and exports declined by 21%. Profit before tax and exceptional items at INR 121 crores, declined by 52% compared to INR 254 crores recorded in the preceding quarter. For the quarter ended May 31, 2020, with respect to the quarter ending March 31, 2019, year-on-year, our total net sales stood at INR 1,032 crores, which declined by 21% compared to the same quarter last year. Domestic sales stood at INR 775 crores, which declined by 22%. Exports at INR 257 crores declined by 20%. Net of COVID-19, domestic revenue declined by 6% and exports declined by 9%. Profit before tax and exceptional items at INR 121 crores is 42% lower as compared to INR 209 crores recorded in the same quarter last year. Segment-wise breakup for quarter ended March 31, 2020. To give you a sense of the sales breakup segment-wise, domestic -- industrial domestic business sales were at INR 245 crores, 9% drop over last year. Power Generation domestic sales were INR 267 crores, 32% drop over last year. Distribution business sales were INR 254 crores, 22% drop over last year. Exports, high horsepower sales export sales were INR 141 crores, 15% drop over last year. LHP export sales were INR 97 crores, 25% drop over last year. For the year ended March 31, 2020, with respect to the previous year, our total net sales stood at INR 5,062 crores, declined by 8% compared to INR 5,526 crores recorded in the previous year. Domestic sales stood at INR 3,771 crores, which declined by 3%. Exports at INR 1,291 crores declined by 22%. Net of COVID-19 domestic revenue grew by 2% and export showed a decline of 20%. Profit before tax and exceptional items at INR 779 crores is 24% lower as compared to INR 1,030 crores recorded last year. As far as Cummins India financial guidance is concerned, as the company's operational gradually scale up post relaxation of lockdown and continue to fight the threat of COVID, we remain focused on the safety of our employees, serving our customers and supporting all stakeholders. Considering the economic uncertainty associated with COVID-19, the company is not providing revenue guidance for the next year at this time. While customers have resumed operations partially, the company expects a significant impact to its next quarter results due to the nationwide lockdown and consequential impact on the economy. With this, I'd like to throw the session open for questions. Thank you.

[Operator Instructions] First question today, we have from Renjith Sivaram from ICICI Securities.

Sir, this other expenditure has increased despite a decline in sales. So is there any one-off in that other expenditure, INR 161 crores?

I think the other expenditure has gone up compared to the previous quarter by about INR 10 crores. And a little bit of this is due to the FX impact, but there are no onetime kind of charges. And we are working on figuring out how to move that lower.

How much will be the ForEx impact on that?

I would say about INR 2 crores to INR 2.5 crores.

Okay. And sir, what kind of gross margin, which we should be looking at next year? Because we have seen commodity prices have come down. So will you be able to gain some benefit out of that in terms of gross margin?

I won't be able to give you a guidance on gross margin, but all I can tell you right now is that we are slowly ramping up and scaling up. And it's very difficult to predict because different customers, different segments are coming back at different varying rates. So it's better we will keep you posted every quarter on how things are going and how we are recovering, and we'll get more clarity as we go on.

And sir, lastly, on the revenue breakup, both the revenue and the Powergen segment growth?

You're talking about for this quarter?

For this quarter and the full year?

Right. So I will start off with the full year. The -- as far as breakup is concerned, domestic, as I mentioned earlier, was INR 3,771 crores, and exports was INR 1,291 crores. In that, let me first talk about domestic. Powergen was roughly INR 1,435 crores, the industrial business was INR 975 crores, the auto segment was nearly INR 20 crores, and the distribution business was about INR 1,340 crores. As far as exports is concerned, high horsepower was roughly INR 727 crores, low horsepower was INR 482 crores and spare parts was about INR 80 crores.

And the Powergen breakup in terms of HHP, heavy-duty, MHP, LHP?

Yes. So if you look at the breakup, this is -- the domestic breakup is roughly -- high horsepower is roughly INR 645 crores, medium horsepower is about INR 415 crores, low horsepower is about INR 370 crores.

And heavy-duty?

Yes. So if you break up medium horsepower into mid-range and heavy-duty, I would say, mid-range is roughly about INR 400 crores and heavy-duty is about INR 230 crores.

Next we have Sandeep Tulsiyan from JM Financial.

My first question is pertaining to the cost savings that we had guided for that including BRP and RIS. What is the annual savings that you can accrue in FY '21? The earlier guidance was INR 40 crores to INR 45 crores only for BRP. In addition to this, what other cost-saving measures are implemented in form of reducing the fixed expenses? So by what quantum can we bring down the fixed expenses in FY '21?

Right. So I won't give you exact numbers. All I can tell you is, we impacted roughly about 15% of the workforce in the actions we took between December and January. The true positive benefit of that, we will start seeing starting from April, which is this quarter. We have also taken payroll actions as far as wages of all the employees are concerned, and we have also deferred the merit. And this is for all employees of the company. We are further looking at what we call our rings of defense, which I mentioned in my earlier call, where we are looking at every aspect of fixed and variable cost of the company. And we are also looking at utilization. We are looking at facilities costs. We are looking at the impact of remote working of employees. We're looking at optimizing the space. Pretty much every line item is being looked at from a new perspective based on how we see things coming back and how we think we need the cost structure to be based on the demand scenarios that turn out. So I think you'll start seeing these numbers flow into the balance sheet from the next quarter.

Sure. And second question is regarding the rental income at Cummins, it's a fairly high number of INR 120 crores a year. So has there been any renegotiation or waiver that is being discussed currently for that?

Not so far, but we are aware that other such real estate properties around the country are impacted, and we are looking out to the risk for that. But we see minimal risk because most of our real estate is rented out internally and a little bit to some large external parties.

Sure. And last question is on this INR 190 crores amount that we have assessed, how has that been calculated? Because we can't see any significant buildup in the inventory in the balance sheet number that we have disclosed. So where exactly does this INR 190 crores number come from?

You are referring to which item now, sorry, it wasn't clear to me?

This -- we have mentioned in our press release that revenues were lower by INR 190 crores on account of COVID-19 impact. So how have we arrived at calculating this number is what we want to understand.

Right. Okay. Right. I think it was calculated from the number of days of the March month where we could not ship, where we already had orders in hand, we had material ready and then we abruptly shut down the factory. So this is the impact of not being able to ship anything in the last roughly 15 days of the month.

But we cannot see any buildup in inventory is what my query was to that extent?

I think this balances out. I don't think you'll see it in the inventory buildup numbers because anyway, we were cutting down inventory. If you look at the trend of inventory, typically, towards the year-end, you try to clear out all the inventory and reduce it. So if you look at our inventory as compared to the -- as compared to September of 2019 versus March of 2020, you look -- you'll see almost over INR 100 crores reduction in the inventory itself. So that won't give you an indication of what the breakup of that inventory is.

Next, we have Abhishek Puri from Axis Capital.

Sir, 2 questions from my side. First, in terms of the balance sheet, how have we been able to reduce the receivables in the current quarter? Most of the companies have actually seen increase given that they could not collect during the last week of March due to the COVID impact. So one is that. And secondly, your payables have also increased by an equivalent amount and the cash flow has been better. So if you can comment on that? And secondly, in terms of some of the industries, if you can just broadly pick up the outlook for the segments in the Powergen segment, and then the industry segment, if it is possible?

Sure. So I think receivables management is just an ongoing process. So we continue to work very, very closely with our customers and even during the down period, we have been pretty much interacting with them on a daily basis to collect the money. But when you look at overall past dues, they have gone up, even though we have collected some amount of money, maybe better than others, but past dues have certainly gone up because some of the big customers, especially the government was not able to release any money during that period. And I would say the past dues have gone up. I would say, it has gone up by about 25%, 30%. As far as -- we'll continue to, of course -- working capital management is very critical to the company, and our people understand that well. And so we are looking at every aspect of working capital management. Our teams are working very closely with customers to get receivables better to get that under control, and we are pretty confident that we will get that well under control. So it's not a real worry for us in any manner. As far as how we think business will come back, it's going to be -- it will be different for different market segments. So in Powergen, we think some aspects of the export side of the business are coming back a little bit faster than the domestic. Within the domestic Power Generation business that will come back a little bit faster in certain segments. So certain segments, such as hospitals, certain segments such as the data centers, certain segments, such as critical power applications, those will come back at a much, much faster rate. But certain areas like commercial, real estate, residential real estate, Powergen they will come back at a much lower rate, depending on the appetite of customers who want to do large CapEx spends in this time of uncertainty. As far as the industrial segments are concerned, we think that compressor is going to remain weak because cyclically we are entering a weaker period in compressor because we've had 2 reasonably decent years going there. As far as construction is concerned, it's actually very -- it has dropped off pretty significantly but we think if all the government plans to spend money on building roads. and some MGNREGA schemes kick in and you start building canals and other work, then construction actually has the ability to bounce back though at this stage it's still an unknown. The areas like rail, we have seen that once the people have come back into work, those people are ramping up pretty quickly, and we think they will bounce back quite well, and we have a market share in that area. So we think those areas will recover quickly. Mining levels are down. So even though it slowed a bit because people were not available, so we think mining will actually bounce back quite quickly. And marine, which is again, dependent on a lot of government spend will have like a medium recovery kind of period. And then areas like defense, et cetera, currently its a wait-and-watch, it could come back quickly or it could take some time as the government takes some time to spend money in those areas, so that could take time. Distribution will come back faster than anything else because when people don't buy new equipment, they rebuild old equipment, they service equipment, they buy spare parts. So we think distribution will come back faster than all other segments.

If you can quickly highlight on the export market also if any of the markets have come back to you or expected to come back?

The market -- in exports, which has come back the fastest has been China and the U.S. all other markets continue to lag. And because many of them are just getting out of the quarantine period now. And so we should get more clarity of bits of those markets will now start to recover faster in the next couple of months. But out of the gate, the fastest to recover has been China and some of the Southeast Asian countries, like Vietnam and Indonesia, et cetera.

Next we have Lavina from Jefferies.

Sir, just wanted to understand if you can comment on the industry pricing trends last 3 months, 6 months because what we understand is competition has intensified. I just wanted some comments from you on that? And secondly, the tax rate, there's been no tax payment in this quarter. So should we work with the 17%, 18% tax rate on a sustainable basis?

Right. As far as competition is concerned, all I can see at this stage is that everyone has been down for almost 2.5 months. And so when we all get back into production, yes, competition is likely to intensify as people try to get their utilization, et cetera, up. We are in good shape as far as our supply chain is concerned, as far as approvals and our factory, our investment, et cetera, is concerned. So we should be able to spike well in the market and improve our market position. That's our strategy. As far as the taxation is concerned, I'm going to hand it over to our CFO, Ajay, and have him comment on what the long-term projections on tax are likely to be.

Hi. Good morning to all of you. Can you hear me all well? Yes, there are 2 things on the -- yes, thank you. So on tax rate 2 things: One is that we have transitioned from the previous tax rate regime to the new beneficial tax rate regime. So that has given us a beneficial impact on our tax rate to the extent of about 10%. And besides that there have been some tax-related planning activities, whether it is the R&D investment and how those -- higher rate of depreciation that has given us the impact on tax rate. And number two has been the impact of these deferred taxes. Post the abolition of DDT some of the undistributed profits that we anticipate from our subsidiaries or joint ventures, a consequence of that is what is reflected in the deferred taxes for both stand-alone as well as for the consolidated cost.

And sir, longer-term tax is a sustainable one? Should we work with 17%, 18% or 22% more towards that?

I think as you can imagine from a -- as we transitioned from the previous tax regime to the newer one, there is a transitionary onetime impact that we have as you see it in this current quarter. Going forward, I would expect our ETR to hover around 24%, 25% on a sustainable basis.

We have Renu from IIFL.

Sir my first question is to understand a bit more on the export side. You did give some comment on China, Vietnam and U.S. market picking up. If you can give a little more qualitative assessment in terms of how was the demand outlook in some of these end markets split across HHP and LHP portfolio? And overall, what was the shrinkage in terms of revenues across some of these key markets in our portfolio for the last financial year?

Right. So like I mentioned, the reason some of those markets are picking up at different rates is based on how those economies are opening up. Since the China market opened up the earliest, they have recovered the fastest and their economy is doing well. And so the demand for high horsepower is more from that market. We think high horsepower markets will recover faster because the Cummins products are very well accepted, respected and perform very well for data center and other critical applications. So where the application is more critical and more intensive that's where Cummins products perform better. So those markets are actually reviving faster. And so we have seen more exports there. The low horsepower and the medium horsepower are used in the industry and in consumer applications more. Those are certainly taking longer to recover. When we looked at how last year many of those markets have performed, America, for example, dropped by only 1% as compared to the previous year. Africa dropped by about 40%. Europe dropped by 41%. Middle East dropped by 42%. Rest of Asia dropped by 46%. Mexico dropped by 23%. And others actually went up by about 21%. So pretty significant drop across the board, I would say, especially in...

And how is the mix of some of these markets look in our export portfolio? Again, the top 5 markets, what would be the revenue contribution for us?

I think nothing changes as far as the top 5 markets for the company. It continues to be Europe, Middle East, Africa, Southeast Asia and China. I think they -- those continue to be the top 5 kind of markets for the exports products from India. And as those markets start recovering, as they start opening up more I think we will start seeing a more positive trend there.

Right. And just I want to understand, broadly, even if I leave aside the April to June quarter, which has been severely impacted because of the lockdown, thereafter, for the rest 9 months, based on whatever qualitative judgment and indication you have, how should one look at the broad range? Do you think export market -- as you mentioned, exports are starting to pick up. So probably the decline in exports incrementally in '21 may not be as severe for the rest of the 9 months, because you've already seen this portfolio being certainly weak for the last 3 to 4 years. Do you think we will be close to the bottom now? Or there could be further headwinds on the broad export market trend?

See, the overall Cummins strategy as far as using India as the base for all of the exports for these products has not changed. So it's very difficult to predict based on the impact these setbacks has on the global economy. So if the global economy bounces back because we are the only source there, we will also bounce back. But if it continues to remain weak and the global economy itself is impacted in terms of the GDP of all of those countries and those nations, then it is unlikely that we will not be impacted. So it's very difficult to say that is this now the new bottom? We think so. But can I just say it's absolutely that it is the case? I'm not so sure yet till the countries actually start recovering and get their economy going again. But if the trend one is to see, all countries are pumping in a lot of money and liquidity into their economies to try to bounce back, China, if you take that as an example, is the only country we have seen, which has really bounced back in a very, very short period. So one can remain optimistic and positive that other people will also bounce back, if that happens, we will also bounce back to that extent.

Sure. And my last question is, sir, on the broad ramp up, I mean, given that it's a manufacturing setup and supply chain is extremely constrained, in your view, how much time or how many months would one require to come back to pre-COVID levels of 80%, 90% -- 80%, 90% of the pre-COVID levels? So would it be more of a quarter phenomenon weakness? Or it could take up to 6 months to that extent? Just a broad assessment based on the current ramp-up.

See, we are already -- already more than 50% of our factories are open in terms of capacities and in some parts they're open up to 50%, some parts are even opened at 80% already, the factories we have in remote locations. But it is little difficult to predict because the entire supply chain in India is spread in different parts of the country. And we have 3 main clusters of suppliers in India, one being in the Chennai region in Tamil Nadu, wouldn't say just Chennai region; one in Maharashtra; and the third in the National Capital Region. So these are -- these areas are also hotbeds for COVID. And since ours is a very complicated supply chain, when in any one of those areas get impacted, it starts impacting our supply chain. So as of today, we are operating their -- we are operating smoothly. We are scaling up. We are trying to ramp up and meet all the demand. But I can't be bold enough to really predict exactly when we'll be back to 80% operations because COVID as a problem is not going away in a short span. And it's -- at least in my view that this is a problem spread over 3 to 6 months, at least. And so we will continue to keep expanding our capacities and come up. But we are well prepared, we have so much capacity, and we have made all those investments in early years that that's not really a problem for us right now.

Next is Bhavin from SBI Mutual Fund.

So I have 3 questions. So the first one is, you gave a sectoral outlook of the Power Generation segment. What it would help us, Ashwath, is, if you can give a breakup of what is the share of data centers, the pharmaceuticals, the hospitals, hotels, residential realty, commercial reality and the manufacturing? You gave directional outlook of that, but if you -- if we know the contribution of these sectors, it will help us understand better. So that's first question. Second is, if I'm looking at the cash flow statement where we see the share of profits from the joint venture it has actually moved up pretty significantly in this financial year. So if you can give some color on -- then that will be useful? And third, is more of a question, is -- when I look at the last year's annual report, other expenditure, broadly 55% was variable and 45% was fixed. And when we look at the current quarter, we saw a 20% drop in the top line, but other expenditure actually increased from INR 150 crores to INR 160 crores. So if you can throw more light on that, it will be useful?

Right. So for the first question on the Powergen segment, and -- unfortunately I don't have access to that data right now, and we are still trying to work out how those shares are going to be changing over a period of time. What I am able to give you is just some directional indicators of which portions of those segments we see coming back faster. And that's what I did earlier, where I said areas of critical care and applications like data centers, power generation for technology, infrastructure, IT, those areas are the ones which are coming back faster, and Cummins has a very strong presence in those markets. So we are seeing a pull from those segments. Segments such as commercial realty et cetera are still -- and residential realty are subdued at this stage. But it's only been 15, 16 days since our distribution channels, et cetera, have really started trying to go in the field and trying to sell products. So it's very, very early stages to try to estimate which ones will come back quickly and which ones will not. So I will leave it there for now and at a later stage in a couple of months, we'll be able to give you much better information on that.

Sorry to interrupt. Actually, if you can -- I was actually looking at the share of the revenues within these subsegments, I mean broadly, as you said residential, commercial may take time. And some of these others where you believe maybe directionally are from the external world. So if you can help us with what is the share of commercial and residential for fiscal year '20? And maybe -- so -- or if you can break up between the fast-moving...

So I don't have access to that data at this time. I will -- we will work that out and then we'll try to get back to you in the future, yes. So the second question was on the joint venture profitability, and let me transfer you to Ajay and let him answer that and the question about other income -- other expenses.

Bhavin, I think if I got your question right, the first question was, what is driving the joint venture share of profit on a full year financial. Correct?

Correct. Correct. Correct.

So we have seen year-on-year, as you can notice, it's about approximately INR 30 crores higher profit and primarily coming from our joint venture with Valvoline, we call it Valvoline Cummins, that's the primary driver for change as well as some uptick in profit from our Cummins Generator Technology, the other associate company that we have. So 2 of them have contributed to that increase. The other question that we had was on the other expense. When you see on a full year basis, the other income -- sorry, other expense, we do see -- from a quarter point of view, it shows a modest increase of about INR 10 crores. I think, Ashwath covered that earlier in terms of the FX and other impacts. I mean it seems on a full year context. I think what we have seen while we're having volume-related some impact that we have seen because our volumes have been down. So some of the volume-related expense has been positive for us. What has been really impacting the quarter is primarily some of the other aspects coupled with the expenses, which are operational and more fixed in nature. And therefore, those really don't have that sort of a elasticity with volume. And from a timing perspective that's what's kind of weighing on the numbers as we close the year.

Sir, actually, sorry to -- just a follow-up. I mean, if I look at -- I mean, 45% of the other expenses, which are variable and in the quarter where revenues are down 20%, even they should be down 20% because they are volume linked. But when we actually look at on an absolute basis, there is an increase in the total other expenses. So some -- is there some lag impact that because we would have already spent on freight and et cetera? And that is the reason why -- and because we had a sudden shutdown, it's not showing up. And we will actually see normalization in the subsequent quarters. Would that be the case?

I won't be able to really address the numbers that you quoted, Bhavin. But all that I can say is that, yes, there is an impact of some semi-variable and fixed costs, which are really not that linear with respect to the volume changes. And that's what is kind of weighing on right now.

But we are looking at all of those items, Bhavin. We are -- and we have clear targets internally to try to cut that because as you rightly said, they are moving reverse to cost and volumes, which is not acceptable to us. So we are focused on trying to reduce those.

Next we have Ankush Sharma from HDFC Bank.

This is Ankush from HDFC Life. I just have one question on the domestic Powergen business. And specifically on the commercial real estate and the industrial end markets, which are significant for us. So if you could just talk about based on your interactions once the lockdown moved out and once customers are willing to kind of take delivery. Sir, so one thing I am trying to understand is, are you seeing deferrals from the customer side? Or are customers canceling already placed orders with you before the lockdown? So if you could just help us understand what exactly are you seeing, especially on these end markets, which appear to us to be relatively more stressed?

So the first thing is we are not seeing cancellations. We are seeing customers starts now that things have opened up, we are seeing customers start to pick up that material and complete those projects. What is yet to be seen is, if there is growth and if people are going to start more projects. So existing projects continue, they are moving forward, and we are fulfilling all the orders, which we could not fulfill because things were shutdown. But we are yet to see because it's just been 15 days in which our people have started interacting, and that too not 100% being able to go and meet people and close deals and those kinds of things. But I don't have a good indication of what that will mean for future growth in some of those markets. It's a wait-and-watch as people come back.

Okay. Okay. And there was not an issue on payments either. So customers are willing to pick up on existing orders and also willing to pay as per the original schedules which are agreed upon, so is that the way we should...

Yes. Yes, pretty much. I mean we do get -- we do see from the sales side, we do see some request to say, can I pay a little bit later or defer payments a little bit or ask to throw in some installation complementary or some such help, it is sometimes requested. But by and large, I would say that it's nothing which is phenomenal changed in terms of customer behavior.

Next, we have Nilesh Shetty from Quantum Mutual Fund.

Just a couple of questions. I just wanted some clarification. So I mean, you -- in your comments earlier, you suggested that the capacity is open 50%. So what is the production run rate that you're doing right now compared to a normalized pre-COVID levels?

I would say, as of today, since we've -- since some of our plants have only started operations from 1st of June, I would say, overall, we would be at roughly about 35% or 40% utilization. I would say that's where we are when I just calculate and average out all the utilization at...

Okay. So I'm just trying to understand earlier when you would suggest utilization of the plants, even in a normal environment, you would be somewhere in the range of 60% or 70%. Are you saying compared to that, you were at 35%? Or compared to the production rate of earlier you're at 35%, 40%?

I would say compared to 100% capacity, even at a normal production, if we were at 65% to 70%, now we would be at about 35%.

Okay. Okay. So essentially 50% of the normalized pre-COVID kind of production...

Yes. Yes. Yes. And like I said, every week, it is increasing. So it's a dynamic situation. And every week, we get more and more approvals and more and more people, they're able to bring back into work. So the situation is just improving.

Okay. Okay. And just a clarification on the export side. If I remember correctly, you had an agreement with Cummins on the rupee. So if the rupee goes beyond a certain band, then you share the benefit. Can you just clarify what is the band beyond which you start? Is there a 2% or 3% depreciation? Do you want to share the benefit of rupee depreciation?

No. I don't think we can share that at this time. But it's a very well documented arms length kind of practice, which has been in place for more than 15 years. So nothing has changed as far as those policies are concerned.

Okay. And then just a clarification on -- so -- I think FY '21 will be sort of very tough. I think your sense of a slightly longer term '22 onwards, I remember you've given earlier a domestic guidance of 9% to 11%, domestic growth and expense was 0% to 5%. Do we get back to those kind of levels? Or do you think given the environment perhaps structurally we will be growing slightly slower than that?

See this business is pretty diversified. So it has the ability to -- in the longer term, to bounce back quite well and be quite strong. And as far as the company is concerned, almost all critical investments are already made. We have a complete technology leadership as far as the areas in which we serve in this country and in other markets. So I'm very bullish on our ability to bounce back and come back pretty strongly. And I think the situation other companies find themselves in, I think it opens up more opportunities for a company like Cummins.

Okay. Just on the export side, you listed sort of top line markets. Can you just share what is your share, how much is Europe, Middle East, Africa in terms of percentages?

I'm afraid, we don't share that kind of information on what our share in those markets is. But all I can say is Cummins is one of the leading players in power generation in the world. And so it is our ambition to continue to grow that business and continue to be the major player in those markets as well.

And just in your revenue -- exports revenue share, how much is these countries in terms of market share in those markets?

You mean exports as a percentage of Powergen business?

What I mean is, within the exports which would these countries be? So how much would Europe be? Is it 30%...

Okay. Okay. I think we gave you the top 5 markets. The top 5 markets probably contribute to almost, I would say, 75% -- 60% to 75% of our market share -- so -- of our sales. So you can draw the conclusions from that.

Next we have Atul from Citigroup.

Sir, just wanted to find out a couple of data points. For FY '20, for the industrial segment, what will be the breakup between different subsegments compared to construction, mining, railway, marine, et cetera? And what would be the market share for FY '20 in terms of Powergen, high horsepower, MHP, LHP?

Right. I think if you look at -- yes, if you look at -- let me first answer your question about the industrial market and its breakup in our overall -- breakup as a percentage of revenue. So that segment had a revenue of about INR 1,935 crores, out of which compressors makes up about 15%. Construction makes up about 30%. Mining makes up about 8%. Rail makes up 40%, and Marine and others make up another 7%. So that's the rough breakup, but will keep fluctuating based on which segment is doing better. As far as -- to your second question on Powergen. I think I have already answered that -- okay. As far as market share is concerned, we are holding to market share in those areas and in some areas, we have gained a little bit of market share. So our LHP, as we call it, has roughly about 15% market share. Our MHP has about 33% market share. Our medium horsepower products has about 53% market share. And high horsepower was about 64% market share.

And sir just last one, I could not get the data when you shared it. In FY '20 exports revenue, how much was the LHP and MHP number?

Yes. So in exports, we just -- yes, exports, we pretty much break it up into high horsepower and low horsepower. So we don't classify it into 3 or 4 ways we do it for domestic. And I'd say, it is roughly, I would say, 60% is high horsepower and 40% is low horsepower.

Next we have Sujit from ASK Investments.

Sir, the export top 5 markets that you've given, how much they contribute to the total export sales, Europe, Middle East, Africa, Southeast Asia and China? Not as a total, each individual market?

Yes. Usually, we don't provide that kind of detailed information. But those 5, like I mentioned, contribute to almost 70% of our market share. So pretty significant. So you can...

In the previous call, just understanding -- yes, yes. So is it fair to understand that Middle East, Africa, roughly 1/3; Europe, roughly 1/3; and the rest of the world, roughly 1/3?

No. I won't make any of those assumptions. It is pretty different in different geographies. I think there are many, many variables, including how those currencies are doing, how those markets are doing. So there are lots of variables. So it's not a simple 1/3, 1/3, 1/3 kind of calculation. But I can tell you that we have a long-term presence there. We have physical locations. We have people out in the field selling. So these are all strong geographic presence Cummins has in those markets and we intend to keep enhancing its share in those markets. So there is complete focus on trying to grow share over here.

And if hypothetically, China were to impose duties on imports, then we need to know at least what is the China number in the export pipe, percentage?

Yes. I won't tell you the exact percentage, but these products are only manufactured in India. So Cummins doesn't have multiple locations to make the same product. So if duties are applied, then all it means is that the product becomes more expensive in China, and that could result in lower sales, but it doesn't change the nature of what Cummins does with the product.

But what is that number that it contributes in exports?

I can't give you that exact contribution. I think that it is becoming more and more important as a market for us. And that's not because they like us, it's because the product is very good.

Will it be sub-10?

Sorry?

Will it be sub-10%?

I cannot answer that. I'm sorry Sujit, but -- all I can tell you is that it is -- it's a decent market for us, and it is unlikely to have a significant impact even in the current situation.

And one last question is on margins. I'm not asking for a guidance. But even before COVID, our normative margins had fallen to 11%, 12% band from about 16%. So when situation normalizes, would that be the new normal, which is what it was before COVID?

I wouldn't say so. We are always trying to improve margin. And there are certain inflection points in the market, which allows you to improve margin. And some of them are based on technology changes. And we are continuously working to try to improve margins as we introduce new products and new technologies, which keep improving our margins. So no, we don't accept any normative levels of margin. We are always trying to improve it and do better or do better than even what we've done in the past.

So at this time, there are no further questions in the queue. I would like to now hand over the floor back to Mr. Ashwath Ram for the final remarks. Over to you, sir.

So thank you, everyone. Really good amazing questions. If I were in your shoes I'd be asking similar kinds of questions and it's -- I'm also sorry that I'm not able to give you total clarity because that's the way the situation is, there is a little bit of -- quite a bit of ambiguity out there based on the overall situation in the country, globally, et cetera. All I can tell you is Cummins is a very, very strong company. 2 years ago -- last year, we celebrated our 100th anniversary as a company. This year, our Power Generation business is celebrating 100 years in the Powergen business. So we are not in any business to just take it trivially and not care about the long term. We are in India now for close to 60 years. So we consider ourselves an integral part of India and more than 90% of all the products that we produce in India are all localized. So the Atmanirbhar Bharat, I think we have a critical role to play here. Significant amount of our sales comes from exports with very minimal imports. So we are going to benefit from -- as India becomes a better base for exporting products. While we are in the middle of a deep crisis as a nation because of this pandemic, I can tell you, as a company, we feel very optimistic about the future that we will recover better and faster than competition, and we will continue to grow this company in an aggressive manner. Thank you.