Cummins India Ltd., despite the challenges posed by a recent surge in commodity prices, expects to see an expansion in margins following the implementation of new pollution regulations. Managing Director Ashwath Ram stated that the company has successfully managed costs and improved efficiency to achieve better margins, even as commodity costs fluctuate. Cummins India raised product prices in response to rising commodity costs and maintained them when prices fell, demonstrating resilience and strategic pricing.
The company reported a significant 54.4% increase in net profit for the fourth quarter of fiscal 2024, leading to upgraded ratings from brokers Nomura and Citi, who remain cautiously optimistic about the sustainability of the company’s margins.
Starting July 1, Cummins India must comply with new Central Pollution Control Board (CPCB) IV+ regulations, which require a 90% reduction in particulate matter and nitrogen oxide concentrations in generator exhaust, a substantial improvement over the existing CPCB II standards. Cummins India has been ready with CPCB IV compliant products since last June and has already been supplying to a niche market.
Ram emphasized that with the commencement of bulk production of CPCB IV products, the company will gain a clearer understanding of the exact margins. “We expect the margins of CPCB IV products to be incremental to those of CPCB II,” he said. This readiness positions Cummins India to not only meet stringent environmental standards but also to potentially improve its financial performance through enhanced product margins.
