Ashwath Ram, Managing Director, Cummins India Ltd, talks about September quarter numbers, In the future, it seems that as more segments open, the order board will be filled more during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

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Q: Your numbers for the September quarter have been good especially on the margin front. What is your view on the numbers and what led to this growth and do you think that the momentum will continue further?
A: In Previous quarter things are looking better. But we are positive that things are bouncing back in the sense that while the numbers are a little better than what we had anticipated because more markets are reviving a little bit faster than what we originally thought. If you compare it with 2019 as a comparative year that we are just about recovering, i.e. we are still about 80-90% of the levels we were in 2019 and even before that. So, while we are bullish and optimistic that things are coming back up. I would say this is a recovery quarter and so the numbers look better than what they were looking previously.

Q: A bulk of business is related to exports so tell us the kind of trends you have seen there? We have also seen a jump in exports in this quarter. So do you think that the momentum will continue and from where you expect good growth in exports? 
A: Some part of the demand was a pent-up demand because we did not supply anything for two months and everything was caught up in the previous quarter. In future, it seems that certain markets will sustain, like parts of China, part of South America, maybe even parts of the US and Europe, but uncertainty is present there because you would have heard that there is a flair-up of COVID in Europe and America. There is a lot of uncertainty, yet. So, we are not able to predict very well how good things will be in the future quarters but, I think, it may sustain at these levels.

Q: Revenue has been under pressure in the domestic market. So, what kind of outlook do you have on improving domestic business overall and do you have any ray of hope there?
A: Domestic business is gradually improving in every segment, so, we are very optimistic that over the next two-three quarters, the domestic business will get better.

Q: Margin was a positive element in your numbers. Do you think that this number is sustainable as you have posted a margin of 14% and a healthy expansion has been seen there in Q2FY21? What is going to be the target range on margins?
A: The company has demonstrated even better margins than this in the past ad we have the confidence that we can come back to that margin-level. To do that there are multiple things and we are doing:
1. We are working on what is the best pricing in the market and it is under little pressure right now considering the market is slightly weak. But over long-term prices will have to go up in line with some other commodities.
2. We have paid utmost attention to the cost and the focus will continue in the coming quarters as well as the years. The big CapEx cycle that we had in the last years but in the coming years we will have a focus on products only and it will be less on infrastructure. So, the combination of these things and our focus on export, new products, new technology, I am confident that we will be able to expand our margins.

Q: How is your current order book and what kind of revenue visibility do you have from there? Do you expect some new orders by the end of the year and in the coming few quarters?
A: We had orders in the pipeline but we were not able to fulfil them. We have a catch-up with it in this quarter. In the future, it seems that order book will be filled more as more segments will open. As of now, I would say that we are between 70-80% kinds of utilization level, which means our order books, are enough to keep our plant running between 70-80% of pre-COVID levels. And, I think we have to do quite a bit of work to bring it back to the 2019 and 2018 levels which were record levels for the company. There are some segments like the ones I mentioned earlier where things are recovering faster but certain segments are lagging. So as those segments also start to come up, I think the order book will improve further.

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Q: Tell us about the kind of activity you are seeing in the electric vehicle segment, where you have a focus and you are working a lot as the acceptance of electric vehicle is increasing now? What are your revenue projections from the segment, what is your CapEx there and what is lined-up including are you looking forward to entering into some new product?
A: As far as Cummins is concerned than for the last 100 years Cummins has been a diesel focused company but in the last 20 years Cummins has made many investments in many forms of alternate fuels and we honestly believe that the journey is not a quick switch between a diesel to 100% electric. It is going to be a migratory path and Cummins consider itself as the fuel agnostic company, which means, we can work with multiple fuels, we can work with diesel, LNG, CNG, ethanol, methane, propane… you name it and we can work with it. But in the space of electrification there are multiple combinations as well, what most of the people are familiar is with battery-electric and our view is that battery electric will be most popular only in small two-wheelers and three-wheelers and intercity buses and those kinds of applications.