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Sowmya Sundar

FRESH exposures can be considered in Cummins India at the current market price of Rs 53. The stock has been hovering around Rs 50 despite the sluggish domestic environment and a steep fall in exports. Since the negatives are already factored in the stock price, any upturn in the business prospects would translate into an upward correction.

The upswing in the economy and the growth potential for its services business and new businesses such as branded automobile service stations would provide the impetus for its growth in future. It has a large presence in the power and construction segment. It offers total power solutions and consultancy services for setting up and management of captive power plants. The pick-up in the industry would generate higher demand for engines used in equipments.

The need for quality uninterrupted power supply would give impetus to its power solutions business. Also, the ongoing boom in the construction activity would boost demand for engines used in construction equipments such as excavators, loader and earthmovers. The domestic business environment for its core business appears upbeat.

The primary growth driver would be its services business. Cummins India has brought in a transformation in its business portfolio in the last two years in order to combat the slowdown. It has shifted its attention to servicing and maintenance of its existing engines and new businesses such as auto service centres. This business was the preserve of the unorganised sector and Cummins India forayed this market to offer branded services. Recently, it has entered into a tie up with IBP for opening service truck shops to provide complete solutions for commercial vehicles on highways. Its foray into new untapped areas would be its growth driver in future.

The strategic thrust on services paid off quite well. Its service subsidiary Cummins Diesel Sales and Services contributed close to 13 per cent of the bottomline in the form of interim dividends alone for the nine months ended December 2002.

It also merged its two profitable subsidiaries Power Systems and Cummins Power Solutions with itself. This would give the company the size of operations in the power segment.

The growth in the new businesses and services business is expected to make up for the fall in exports. Export prospects for the current year is expected to be dull. However, the company's efforts to push up component export to the parent company would nullify the dip in engine exports to some extent.

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