Cummins India Limited (500480) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to Cummins India Limited analyst call for quarter 3 2020/'21. Today, on this call, we have with us our leadership team, Mr. Ashwath Ram, Managing Director, Cummins India; Mr. Ajay Patil, Chief Finance Officer, Cummins India; and Mr. Anubhav Kapoor, Legal and Secretarial Head, Cummins India. I would like to hand over the call to Mr. Ashwath Ram. Mr. Ram, welcome to the program. You're now ready to begin.

Good morning, ladies and gentlemen. This is Ashwath Ram, Managing Director, Cummins India Limited. We wish all of you a very happy new year. I hope you and your family are doing well and are healthy. Also joining me on today's call is Mr. Ajay Patil, our CFO. Thank you for joining us on this call. I would like to share the financial results of quarter and 9 months ended December 31, 2020, through this call. I'm now going to talk about our results for the quarter ended December 31, 2020. With respect to the quarter ended December 31, 2019, our sales at INR 1,400 crore declined by 2% compared to INR 1,428 crore recorded in the same quarter last year. Domestic sales at INR 1,026 crore declined by 3%. Exports at INR 374 crore increased by 1%. Profit before tax and exceptional items at INR 304 crore is 20% higher as compared to INR 254 crore recorded in the same quarter last year. For the quarter ended December 31, 2020, with respect to sequential quarter, our sales stood at INR 1,400 crore increased by 23% compared to INR 1,141 crore recorded in the preceding quarter. Domestic sales at INR 1,026 crore increased by 38%. Exports at INR 374 crore declined by 6%. Profit before tax and exceptional items at INR 304 crore increased by 61% compared to INR 189 crore recorded in the preceding quarter. Segment-wise breakup for the quarter ended December 31, 2020. To give you a sense of the sales breakup segment-wise, in our domestic business, the Industrial domestic business sales were at INR 256 crore, a 4% drop over last year. The Power Generation domestic sales were INR 422 crores, 11% increase over last year. The distribution business sales were INR 365 crores, which is a 12% drop over last year. As far as the exports is concerned, High Horsepower export sales were INR 201 crore, a 4% drop over last year. And the Low Horsepower export sales were INR 146 crore, a 1% increase over last year. For the 9 months ending -- or ended December 31, 2020, with respect to 9 months ended December 31, 2019, our sales at INR 3,025 crores declined by 25% compared to INR 4,029 crores recorded in the same period last year. Domestic sales at INR 2,127 crores declined by 29%. Exports at INR 898 crores declined by 13%. Profit before tax and exceptional items at INR 563 crores is 14% lower as compared to INR 658 crores recorded during the same period last year. When we look at the segment-wise breakup for 9 months ended December 31, 2020, the Industrial domestic business sales were at INR 506 crores or a 31% drop over last year. The Power Generation domestic sales were INR 775 crores or a 34% drop over last year. The Distribution business sales were INR 865 crores or a 21% drop over last year. Exports. High Horsepower export sales were INR 470 crores or a 20% drop over last year. And the Low Horsepower exports were -- sales were INR 356 crores or a 7% drop over last year. You have to keep in mind that the 9 months ended December 31, 2020, have 100 days of impairment due to lockdown in this session. As far as the Cummins India financial guidance is concerned, the company expects gradual recovery of demand in upcoming months. However, market conditions continue to remain uncertain and visibility of end market recovery is still somewhat limited. Thus, the company is not providing a full year guidance for FY 2021. With this, I would like to open the session for questions. Thank you.

[Operator Instructions] The first question is coming up from Sandeep Tulsiyan from JM Financials.

First question is pertaining to the Power Gen segment. We've reported a strong recovery, and we've grown by about 11% in the third quarter. If you could throw some more color on this. Exactly what is it driven by? Is it more driven by market share gains? Because we're hearing about reduced competitive intensity in the market. Or if you could highlight some of the key end market segments which have shown a strong pickup in the quarter, which was higher than our expectations? That's my first question.

Right. So Power Generation has recovered quite nicely, as a matter of fact, a little bit faster than what we were expecting. And this is fueled by stronger recovery in the areas of data centers, in the areas concerning Industrial business, infrastructure and the -- also rentals. The areas which are recovering a lot slower is more related to the medium horsepower kind of business and related to hospitality. Some portions of the retail segment and commercial realty are recovering a little bit slower. We also faced -- in this quarter, we faced some supply chain concerns because of the overall flow of parts from imports and, otherwise, we actually had an opportunity to do even better than what we did.

Understood. Second question was, sir, on this hydrogen day that -- presentation our parent company presented and also the large installation they've completed yesterday in kind of 20 megawatts, just want to understand what is the thought process of introducing or any timelines of introducing this technology in India? And probably in which entity would it decide? Will it decide in the listed entity? Or will it be part of CTIL? If you could help us understand the trajectory on that?

Yes. At present, the listed entity is bidding on many vendors, and it actually depends on the end applications. [ If the ] end applications are in areas like rail and in infrastructure, they will remain in the listed entity. And we are making good progress. We are participating in most of the major tender bids in the country. And we have great confidence that this will prove to be -- in the future, this will prove to be a strong business for us. I do see the incubation taking a little bit of time. So it's not a short-term market for us. But certainly, in the long term, this will -- this should prove to be a great product line for the listed entity.

Understood. The manufacturing part would reside at least in the listed entity. That's what you're saying, right?

Yes. At this time, depends on the scale of demand in the country. That's the thinking as of today.

The next question is coming from Mr. Ankur Sharma, HDFC Life Insurance.

A couple of questions. One, there's bounce that we're seeing sequentially across segments. I'm just trying to understand, is this more of pent-up orders which were there pre-COVID and those getting supplied now with supply teams kind of back and utilization is improving in your factories? Or is it that you're seeing a broad-based revival also in some of your key end markets, which, therefore, means that we should continue to see better days in the next couple of quarters?

Right. And I would say that if you had asked this, and I think a few folks had asked the same question last quarter, last quarter, I would have said that we think it's more of just a pent-up demand and things will take some time to recover. And at that time, I had indicated that it will take 12 to 18 months for this market to recover completely. When we look at it now, we feel that more segments are coming back up at a faster rate than what we had anticipated. So it looks like the economy is slowly beginning to bounce back, but we have still not been hit by a second wave or third wave of COVID, while some of our other end markets around the world have been hit by multiple waves, and that has caused quite a bit of disruption. So it's difficult to predict whether every few months we should start seeing the demand come back to pre-COVID levels. But now all signs are positive, so that's something to be optimistic about.

Okay. Perfect. And if I had to just dig a little deeper on the Power Gen side, you did talk of a recovery in data centers, I think, also on infra. But how about the real estate piece, the big one? Because we've seen real estate completions have picked up in the quarter gone by as projects are handed over, which I would assume would also mean some pickup in demand for DG sets. Is that also something you're seeing both on residential and commercial?

Yes. So what's happening is those commercial projects, which have already gotten kicked off before lockdown, I think people are just completing those and finishing those up, so we are seeing that portion of the demand come back in. But we are not seeing new start to commercial activity. We are not seeing it that aggressively. Now on the other hand, residential realty, we are seeing a lot of green shoots to say that because more people are working from home and more people are stuck with the whole family for 24/7, people are wanting more space, et cetera. So we are seeing that residential realty kind of demand is slowly starting to get stronger. And yes, that is helping drive back gen sets. We should probably see the stronger impact when the summer months kick in, and the need for air conditioning and those kinds of things also become stronger, we should probably see a much stronger revival of these segments by then.

Fair. Sir, on the margin side, I'm just switching gears, given the kind of commodity pressures we've seen, right, across steel and a lot of other raw material, how are we managing it? Are we looking at some kind of price hikes which we've already taken or that we intend to take to kind of sustain margin?

Yes. So until the last quarter, we had no impact due to commodities. We are slowly starting to see commodity impact hit us, and it will hit us much more strongly in the next quarter as we feel the full brunt of all the impact on copper, steel, all of which we are major consumers of. And certainly, we would be -- we are indicating that we would be increasing prices in the next year to compensate for some of these commodity costs that we are taking. But it will depend on the segment and on the products. And so it won't be some kind of peanut butter kind of approach. It will be more tactical in the sense it depends on -- depending on the impact of the product, we will take an increase to compensate for that.

And just one last question, if I may. So sir, when I look at CTIL, Cummins Technologies, and that's been a concern for investors last couple of years because of various reasons, right, I mean, which are well known. So anything from the management side in terms of either merging that business into the listed Cummins India entity? Or is that still something which is some time ago [indiscernible]?

Yes. So we are constantly looking at all of those options. None are on the table right now, but none are off the table also right now. So we are certainly always looking at what makes the best sense from all our stakeholders, whether it be the company owners, the shareholders, the employees and our community, what makes the best sense. We are looking at it from all those perspectives. Yes, so all I can say at this time is nothing is planned in the short term, but certainly, we are looking at all of these ideas for the long term.

The next question is coming up from Mr. Renjith Sivaram, ICICI Securities.

Congrats on a good set of numbers given the scenario. Sir, if you can just highlight the other expenditure and other income. Other expenditure has been lower and other income has been a bit higher sequentially. So is there any exceptional in that, something which you feel that [indiscernible]?

Yes. No, certainly, other income this quarter was much stronger because we had very good performance from one of our subsidiaries, Valvoline Cummins, and we were able to get strong dividend from there. And that is one of the strong factors, and we have also had some exchange gains as compared to the previous quarter. So that's what is driving strong other income. As far as other expenses are concerned, last quarter, as you may recall, we had an impairment charge we took for writing off some old test cells, which were proven to be a safety hazard. And that is a positive this quarter that we have seen because of that.

How much was that? If you can give some granularity on that.

I could not hear your question very clearly.

How much was that amount in the other expenditure, which led to the -- if you can give some quantitating color on that.

Yes. Yes. So INR 23 crores is the exact amount.

Okay. Because of which the other expenditure was lower.

Yes, that's correct.

And in terms of dividends, sir, how much was that?

The dividend received?

Yes.

Yes. That amount was INR 38 crores.

Okay. Okay. And compared to last year, it will be much lower, right?

You mean when we look at it from a 9-month period, yes, it is more as compared to the -- it's pretty much in line, if not slightly lower as compared to the previous year. But when you look at it quarter-to-quarter comparison, it is higher.

Okay. And sir, can you give the breakup of your Power Gen in terms of HHP, MHP, heavy-duty MHP which you [indiscernible]?

Yes. So in this quarter, High Horsepower sales were 189 -- sorry, the High Horsepower sales were INR 234 crores, the MHP sales were INR 94 crores and the LHP sales were INR 93 crores.

Heavy duty?

Heavy duty were INR 59 crores.

Okay. And sir, just similarly to the Industrial, you give compressor, construction…

Sure. So compressor sales were INR 25 crores. Construction was INR 102 crores. Mining was INR 47 crores. Rail was INR 48 crores. And others, which was many miscellaneous things put together, were about INR 35 crores.

And sir, lastly, any outlook regarding the Industrial market, how do you see -- because we see a lot more optimism in the infrastructure. So do you see this construction segment coming back to the older days? How is the overall outlook in the Industrial segment?

Yes, we believe the construction segment will continue to be strong at least for the next year or so. And we do think demand there will keep increasing.

The next question is coming up from Apoorva Bahadur, individual investor.

This is Apoorva from Jefferies. So I wanted to understand basically, there was some chatter around CPCB upgrade being delayed. What's your view on that?

Yes. I think there's going to be about a 6-month delay. It was originally to be launched in the July, August time frame in 2021. It's most likely going to be pushed out to early 2022. And that's mainly because some parts of the industry have been asking for a little bit of relief because of the significant impact of COVID. So that's the general direction in which the -- now the new target dates are looking like.

Okay. Sir, there was also -- there's a likeliness of a onetime margin reset given that the costs will like -- will most probably be 20-odd percent higher with the upgraded CPCB. So I wanted some color on this.

Again, could you repeat your question?

So sir, post the CPCB upgrade, the costs are expected to be higher, if I'm not wrong. So will that lead to a onetime margin reset in the industry? And if yes, then how much?

Certainly, costs will be higher and so selling prices will also be higher. So yes, as you rightly said, the entire structure of the product is going to be reset. Exactly how much we cannot say at this time. But when you compare it with other industries, it's pretty significant.

Okay. Sir, we'll get some clarity on that, say, by end of this year or sometime sooner?

Yes. As we get closer to launch, you'll have a lot more clarity on that.

Before proceeding further, sir, requesting to please give me a confirmation about going forward with the question-and-answer session.

Yes, please. Go ahead.

The next question is coming up from Parikshit Kandpal, HDFC Securities.

Congratulation on a good set of numbers. So my question was pertaining to the launches, new product launches for the next year. So if you can quantify how many new launches you're looking at. And also, if you can give some sense on both domestic and export markets.

Right. So we continue to constantly keep upgrading products and launch them. And what we are focused on right now is more customized products for multiple market segments. So for example, for data centers, the requirement of power in a data center is completely different from that of power in a rental market segment or in a retail market segment. So a lot of products are being fine-tuned to be more market centers -- market -- segment-specific rather than generic products, which we used to have, which was serving all markets. And that's what has been done both in the domestic product as well as for global products. And the other thing which Cummins is doing and we have been quite successful is, increasing the power density of our products. So quite a few products have already been launched, and you will see official launches of some of those coming up, where we increased the output capacity out of the same engine that gives better fuel economy as well as better power density. So those are the kinds of changes that we are doing. As far as the global export markets are concerned, they had begun reviving, but with the second and third wave hitting in Europe, mainly -- and in Latin America, we are seeing a little bit of sluggishness in those markets. The Asian markets continue to keep recovering in a pretty robust manner. And Middle East and Africa is somewhat in the middle. So it's kind of lukewarm at this stage, but we are confident that things will start picking up.

Sir, second question was on the export market. So how do you allocate business between CTIL and CIL? So how do you do that?

So for example, 100% of the Power Generation products all are sold by CIL. So there isn't differentiation. Only those products which -- in which the parent has made new investments are separated into CTIPL. Everything else is maintained at CIL.

Okay. Just last question, sir, if I may, on the hydrogen part. So you did mention that we are going to do this to the listed entity. So at your level, so how do you -- when a new technology is coming in, so what role you have to play to convince that it should come back to the listed entity? So how does it typically happen when a new technology is coming into India and your role there to get it into the listed entity?

It -- one is, it depends on what products the -- or what market segments the -- are being played at. So in the case of hydrogen technologies, for example, in segments such as rail or construction or marine or all of the businesses where CIL is already in play, those -- all those end market segments continue to -- will continue to remain at -- in CIL. So if that is where the biggest play of hydrogen is, then automatically, that business gets routed through the listed entity. And once one makes the investment in the listed entity, then all the products arising out of the investment continue in the listed entity. So that's the way we are thinking about it.

The next question is coming up from Renu Baid, IIFL.

And congratulations for the strong performance. Sir, my first question is regarding the CEV-BS-VI norms -- BS-IV norms, where they are due for implementation next year, so any update in terms of the pre-buy impact that we saw this quarter and the likely implications for the next 2 quarters on the business?

Yes. Pre-buy demand is strong. We saw some of it, and we are going to see more of it in the coming quarter. And then we are already ready with products to do the transition come April. So this is a good story for us to [ help us ] enable top line and bottom line growth.

And what would be the average price increase in price realization that we're expecting for this segment?

No, I cannot comment on that at this moment, but I can tell you that if you compare it with similar transitions in other markets, it's quite substantial.

Sure. Sir, secondly, on the exports side, we did mention that with some of our product ranges improving, both on the emission as well as global compliance, we are working on new applications in global markets. So any update in terms of upgrade of the India portfolio for various regions or global applications? Any developments on that side?

No, nothing significant to report between last quarter and this quarter, but work does continue and the products are making progress. So the CPCB-4+ is the most advanced range. So there will be no leading markets which have tighter emissions than CPCB-4+ in terms of those products. So good progress has already been made in the development of those products. But they're not yet in a relieved and get new business from other markets stage as of today. But we will update everyone and keep you posted the moment we have something to report.

Right. And sir, the last 2 questions, a, on the data center side, until now, the size of data centers has been pretty much average. But if you see larger data centers of IT sizes of almost 10 to 15 megawatts coming into the market in the next 3 to 4 years, would our DG set sizes be compatible with those kind of power backup requirements? Or do you think we will have to upgrade our portfolio? Also, on the sidelines, would one see increased competition from players like Wärtsilä if the IT sizes of these data centers are close to the range of 10 megawatts?

Yes. So Cummins already is the largest player in the world as far as data centers is concerned, and we already have products which we are supplying to most of the data centers around the world. So if you look at the big players in the world, whether they be Microsoft or Google or Amazon, pretty much most of those data centers are powered by Cummins. And even in India, their applications are powered by Cummins' gen sets. So we already have a portfolio. The reason folks like Wärtsilä and other products are not really a competition in this area is because they don't have the high-speed diesel, which is required for these kinds of applications to maintain the quality of power as well as the efficiency in terms of fuel economy. So we [ too ] play a major part in this market segment, and we see good opportunities moving forward into the future. We have the right technology already ready in India to grow with that segment.

Right. And lastly, sir, if you can just share some input in terms of the subsegment-wise outlook for various Industrial segments, compressors, construction? You did mention something, Railway and marine, because railway has been a bit muted. So can we expect some growth coming in the next 1 or 2 quarters? Or it could take longer? So some input can be appreciated on that side.

Yes. So if you look at [indiscernible] country even now, it's not even up to 50% of the pre-COVID levels. And it was the last to get started. So [indiscernible] all the rail services for passengers were completely shut. So we are seeing it gradually start to come up. And so it will take -- I would -- I think it will take at least a couple of quarters to get back to its former level. So that's the segment which is lagging as compared to compressors, which is cyclical and is dependent on rain and spending by governments on farming, et cetera. So there are some ups and downs. For example, the AP government canceled some tenders. So -- but it's a cyclical business, and we think that, that will keep growing as agriculture becomes more powerful. Construction, as I was telling a gentleman earlier, we are extremely bullish and optimistic that, that will keep growing in a strong manner. Mining has come back very strongly because of the demand for coal and also the demand for iron ore and many other metals. With those commodities going up, the demand is going up. So mining has come back pretty strongly and is likely to sustain. And we have introduced some new products in the marine segment, by which we hope to capture some market share from some global players. And with that, we think marine will also grow quite well.

The next question is coming up from Nitin Arora, Axis Mutual Funds.

Just had a few questions. So one is Power Generation, as you rightly said. But if you look at your base, which was down 12% -- 11%, 12%, and the growth is about 10%, 11% in this quarter. When we look at the engine sales of, let's say, Ashok Leyland or Kirloskar, they have grown way higher than double digit. Is it -- just wanted to understand, is it some market share loss because of some supply chain issue you witnessed in this quarter? Because the way other engine sales have happened, even, let's say, for your CTIL, not sell so much -- too much in domestic, it's quite high than compared to us, what we've shown in the Power Gen segment. So just need your take on that.

Yes. I think you are comparing pineapples to oranges because they are completely different market segments. So if you look at the bounce back in the automotive segment, those bounce backs are double- and triple-digit kind of bounce backs because we started off from a very, very low base, whereas we -- so when you compare that and as you mentioned another company, we also have a play in the agriculture space. And so those segments have a different [indiscernible] of growth as compared to just the Power Generation kind of segment. So we don't see any market share loss. As a matter of fact, we are seeing -- we are optimistic that we're going to see some market share gain in the coming quarters. But when you compare companies like Ashok Leyland, they have grown primarily because the medium and heavy commercial vehicle demand has almost doubled as compared to the previous quarter.

Sir, I was comparing because Leyland also sells -- a lot of contribution to the real estate. So I was comparing their -- not their auto segment. I was not comparing apples with oranges. Even for Kirloskar, I was looking from their segment from the engine sales to the [ end ] power generation. Leyland only -- doesn't sell only to the auto. So -- but I got your answer. That's very helpful. Now coming to the -- sir, gross margin side, we saw a decline on a quarter-on-quarter basis. I'm assuming your costs would have hit you in this quarter. Is it largely done? Or you think from Jan onwards also, if you can guide us for the next quarter, how much increase in the cost element is there? Is it to the tune of 200, 300 basis points and that much price hike you should eventually take to offset it? That's my second question.

Yes. This quarter, the biggest reason is because of mix. And the main contributors to that were we had lower exports and we had some onetime very large orders that were executed in this quarter at a different margin level. So I don't see that long-term -- the mix should turn out in a more balanced manner. But as far as cost is concerned, I can tell you that certainly, some portion of costs will start to come back. As we corrected, we had taken some very stringent wage cuts, et cetera. Some of those got -- did get restored back in October. And we are also expecting the new merit cycle, which we had held for last year, we expect some of those costs related to people also to come back starting from January. So certainly, we do expect a little bit of cost to come back. We've already taken a lot of offsetting actions, and we are trying to minimize the impact of some of those costs coming back with better productivity and more sales.

All right. And sir, just lastly, on the other cost side, has there been some reversal in the warranty provisions or in the royalty? Why I'm asking this because parent Cummins Inc., what we thought, in some of the commentary, he said that he will bear some of the cost for his global subsidiaries because of COVID. So I just thought I will ask you. Has there been some reversal in the other cost part, which will eventually come?

No, I think all of those were taken in the last quarter. The other expenses are a little better this quarter primarily because of -- we didn't have the large impairment charges we took last quarter on the test cells.

The next question is coming up from Sujit Jain from ASK Investments.

Yes, Sujit Jain from ASK. I have a few quick questions on the market share. If you can define the data center size of the market and what are the growth rates and what is the market share there. You have typically said is that Cummins India listed entity, wherever there is scale, the products actually come through Cummins India Limited, the listed entity. Then in hydrogen, you clarified today, some of the segments like rail, et cetera, definitely, yes; others may not. But if scale is the parameter, others should. So where is the disconnect? And one last question is on employee cost. Is this in this quarter what we've achieved after VRS and the other program of workforce reduction? Is this a sustainable cost?

Okay. So [indiscernible] on the hydrogen, what I said is based on where the demand is coming from, which are the segments I spoke about, it is likely that the investment will be made by the entity where the demand is coming from. And once we make an investment in this kind of technology, it is difficult to move the investment around into other entities. So if the investment is made in the listed entity, it will continue to remain in the listed entity. So there is no question of them moving it around into a different entity. So that's as far as hydrogen is concerned. As far as sustaining costs is concerned, certainly, we are trying to hold the line and not increase costs. As you know, we did the workforce reduction. We did the VRPs. We did [indiscernible]. And so we saw the positive impact of that in the last few quarters, and we'll continue to see a little bit of that even in subsequent quarters. But there is continuous focus on costs. Both our CFO, Ajay, and I am completely focused to make sure that we don't lose the advantages we got with all the work we've put in to reduce cost the moment things start to pick up. So we hope to continue to keep pressure on our company and on the system to maintain costs or maintain relative costs as compared to when sales start to kick in.

And on data centers, size of the market [indiscernible] our market share?

I don't have the data with me as of now. But what we will do is we will try to send you -- we'll try to get your details and send you an e-mail with some of this information.

Sure. And the VRS and the workforce reduction, the people who opted for that and people who actually were moved out because of that, what cadre and what functions they were from?

It was all across. So it was from pretty much at all levels in the organization and all functions, all business units. So there was no targeted approach there. It was across the board.

Question came because if the business comes back sharply eventually with the recovery, do we have enough sales force marketing guys? Have we cut costs where, when business comes back, [ we'll have probably found ] them back?

We are not feeling that at the moment. But certainly, we are constantly on the lookout for good and better talent and trying to make sure we have the right kind of resources to get the growth we need. But yes, that's a fair point. We constantly watch out to make sure that when we are cutting, we never cut so deep that it impairs our growth opportunities.

The MEIS withdrawal -- you had made a provision of INR 13 crores last quarter, and you were saying similar provision is expected in Q3. What was the number for MEIS in Q3, if there is a provision that is made on that.

There is no provision in this quarter.

Okay. And one last question is, I missed the date that you think would be there for CPCB4.

Yes. We think it will be in early '22. As of now, the -- all indicators -- all indications are that and all discussions with the government are also that.

That is calendar '22?

Calendar '22, most likely the April time frame.

And the new emission products, such as the filtration products, will be sourced from CTIL is the understanding that you have given.

Whatever products are -- the understanding is -- yes, it's mainly correct. Whichever entities are making those products which are under CTIPL where Cummins holds the technology, certainly, products are bought from those companies.

The next question is coming up from Bhavin Vithlani from SBI Mutual Fund.

I'd like to congratulate the management for great performance on the margins despite difficult environment. So my question is, your comment regarding supply chain bottlenecks, and globally, we understand this has become a major issue about electronics within the engines. Would appreciate if you could throw more light how is Cummins India dealing with it and what level it is impacted?

Right. So this has [indiscernible] what are called the electronics or semiconductors used in components such as ECMs and sensors and those kinds of applications. And what has happened is that, globally, the entire semiconductor market or the entire automotive market under-forecasted the bounce back in demand. And there are only 2 or 3 major manufacturers of these semiconductors around the world. And so those folks diverted most of their capacity towards telephones and other consumer goods, which also use this exact same kind of microprocessors. And so this industry -- automotive industry around the world is struggling quite a bit on availability of ECMs and other electronic parts. As far as Cummins India is concerned, luckily for us, we are still in CPCB-2, and we don't use as many electronic products as some segments such as the automotive segment. And so we are impacted to a smaller extent. So a smaller portfolio of our products is impacted by these supply chain issues. And the company is working on mitigating these issues through its various suppliers.

The second question that I had was, if you could speak about competitive intensity within the Power Generation segment. What we understand from our checks is some of the competitors who had the primary applications as automotive, and given the considerable requirement of investments in CPCB are pulling back. So over a 2-, 3-year perspective, if you could give color on how you are seeing the competitive intensity. And this is especially coming from your comments that you expect a very strong improvement in your market share moving ahead?

So we continue to stand by that belief as we have seen it in multiple markets around the world, be it North America, be it China, be it Europe, that when emissions get tighter, you need much more sophisticated engine technology as well as after-treatment technology, and Cummins is the major technology provider in the world for these kinds of systems. And that then opens the door for us to many OEMs and relationships, which currently are met by their own internal consumption. So we continue to remain optimistic and bullish about our opportunities and our ability to grow the share of our -- our share in the overall market.

Sure. Just the last question is on the exports. If you could highlight about the progress. And this is referring from your presentation in the AGM, where you highlighted that Cummins has gone through cycles, and whenever the cycle turns, we surpass it by a reasonable margin. How are you seeing the progress on that front? Are you believing that the recovery that we have seen, not just in India, in global, would you believe that you are now very close to surpassing the INR 1,600 crore mark pretty quickly than what you had anticipated?

We are certainly bullish and optimistic that this will happen. But like I said, many, many variables are playing out at the moment, especially in the Power Gen side of things. Like I mentioned with Phase II and Phase III hitting U.K. and many of the European countries hard and also Latin America, they were beginning to recover at a very fast pace, but now they have slowed down again. So we remain optimistic that when vaccines are more prevalent and things are moving a little more smoothly that the bounce back will take us to much greater levels. We are seeing it in certain market segments like in the automotive side, where the bounce back is really, really severe and significant, but in the Power Generation side, we remain optimistic that the similar kind of scenario should happen.

Sir, we have the last 3 minutes left out to the call. Should we go ahead with the questions and answers?

Yes, please.

The next question is coming up from Mr. Jonas, PhillipCapital.

Congratulations on a great set of numbers. A couple of questions, sir. Firstly, just trying to understand now that there is increasing visibility that the CPCB4 norms could be postponed by about 6 months, is it fair to assume that the export portfolio for the CPCB4 norms will only be launched post the domestic market going live or there is potential that you can get certification ahead of time and actually the exports for CPCB4 products can start well ahead of the domestic launch? That's the first question.

Yes. So yes, we are not waiting for the new dates to continue developing the products. As a matter of fact, there has been significant progress in the development of these products. And yes, our internal goals are to try to get products ready, get them certified and then look for opportunities outside India, even if India is going to take some time to -- take a few months later to launch the product. So certainly, those options are open and available to us, and we are going to push aggressively to see if we can do that.

Sure. That's helpful. Sir, my second question, I'm deriving it from one of the earlier comments, where increasingly new product launches or fine-tuning of products is happening on an application-based need. So just was curious to know, again, in exports, Industrial segment is not such a big contributor due to our exports, given that the -- it's, again, very application-led and customized products. So is it fair to assume that with this, you are also looking to increase those end -- supplied to those end markets? Or is that a change in strategy? Are we supposed to take home that takeaway?

Certainly, we are looking into that. Certainly, we are looking at all options to -- our exports use India as a greater base. As I've mentioned before, Cummins has 3 main manufacturing hubs in the world: North America, China and India. And certainly, India is the most cost-effective hub as far as manufacturing is concerned. So we are continuously rebalancing, looking at where the demand is, what the demand is, what is the product portfolio being produced in each of those 3 major manufacturing hubs and trying to increase what we can produce here. So it represents a good opportunity, and we are looking into that as well.

Sir, apologies to inform that the person's line has got disconnected. And there are no further questions at this point of time. Turning the program back to you for your closing comments, sir.

Thank you. Again, I want to thank all of you for taking the time to spend with us and listen to us talk about how this quarter went and what our outlook is for our business. I continue to remain extremely optimistic and bullish about our long-term prospects as a company. There are always uncertainties and headwinds in the very short term, which this company has proven time and time again that it is well [ equipped ] to come through. And we have come out of every cycle stronger. And with the introduction of many, many new technologies, we are positive that we will keep growing in a very strong manner. So thank you all of you and hope you all are staying safe and taking care of yourself and your families. I look forward to talk to all of you soon. Thank you.

Thank you, respected speakers. Thank you, participants, for joining the call. Wish you all have a great day ahead and request you to please stay safe. Thank you once again.