Cummins India demand surges, but supply chain a constraint

In the Indian market, the road construction sector saw a drop in activity because of the monsoon, but is expected to recover next quarter. The company is hoping that the railway segment bounces back from Covid-19 disruptions soon, Ram said.

Cummins India demand surges, but supply chain a constraint
Managing director Ashwath Ram said there had been double-digit growth in demand from the real estate, pharma, biotech and data centre businesses.

Cummins India has seen unprecedented demand across most business segments, but has been severely constrained by supply chain challenges to meet this demand.

Managing director Ashwath Ram said there had been double-digit growth in demand from the real estate, pharma, biotech and data centre businesses.

At the same time, supply chain constraints have gone beyond the silicon shortage to sensors, wiring elements, electrical subsystems and specialist forging and casting material, as many SME suppliers went bankrupt during the pandemic, Ram said during an investor call after the Q1FY23 results.

Cummins India is working on creating alternative sources, moving from single to multiple sources and increasing the suppliers’ capacities. The challenges will not be resolved completely, and improvement will be quarter-on-quarter, he said.

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In the exports business, the company has seen strong demand from West Asia, Latin America and Asia Pacific. Spurred by the rise in oil prices, there was strong capital inflow in the construction space in West Asia, Ram said. Global demand was expected to remain strong for the entire year, barring unforeseen events causing disruption.

In the Indian market, the road construction sector saw a drop in activity because of the monsoon, but is expected to recover next quarter. The company is hoping that the railway segment bounces back from Covid-19 disruptions soon, Ram said.

The company posted a 20% drop in profit after tax to Rs 198 crore, while revenue rose 41.47% to Rs 1,666.11 crore in the June quarter. Domestic sales increased 36% to Rs 1,172 crore, while export sales went up 58% to Rs 485 crore.

The company had passed on cost increases to customers, but since there is always a couple of quarters’ lag between cost rise and price increases, margins were affected, Ram said.

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