Good morning, ladies and gentlemen. Welcome to Cummins India Limited Q1 FY 2024/2025 earnings conference call. We hope you are all keeping safe and healthy. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the commentary concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touch-tone phone. I will now hand the conference over to Mr. Ashwath Ram, Managing Director, Cummins India Limited. Thank you, and over to you, Mr. Ram. Good morning, ladies and gentlemen. Hope all of you are doing well and staying safe and healthy. Welcome to the Cummins India Limited Q1 2024-25 earnings conference call. My name is Ashwath Ram, and I'm the Managing Director of Cummins India Limited. Joining me on the call today is Ajay Patil, Chief Financial Officer of Cummins India Limited. Thank you all for joining us today. We are happy to announce that CIL reported strong results for the quarter, driven by stable domestic demand, while export revenue is at similar levels as the prior quarter. I would now like to share the financial results of Q1 FY 2025. Financial results for the quarter ended June 30, 2024, with respect to the same quarter last year, our sales at INR 2,262 crore were higher by 4% compared to INR 2,125 crore recorded in the same quarter last year. Domestic sales at INR 1,873 crore were higher by 12%. Exports at INR 389 crore were lower by 22%. Profit before tax at INR 551 crore was higher by 33% compared to the same quarter last year. For the quarter ended June 30, 2024, with respect to the last quarter, our sales at INR 2,262 crore were almost flat compared to INR 2,269 crore recorded in the last quarter. Domestic sales at INR 1,873 crore were lower by 3%. Exports at INR 389 crore were higher by 13%. Profit before tax at INR 551 crore was lower compared to the previous quarter by 21%. I would now like to share the segment-wide sales breakup for the quarter ended June 30, 2024. Domestic. Power generation domestic sales were INR 803 crore, 8% decrease over last year and 15% decrease over last quarter. Distribution business sales were INR 651 crore, 22% increase over last year and 8% increase over last quarter. Industrial domestic business sales were INR 372 crore, 57% increase over last year and 7% increase over last quarter. Exports. High horsepower exports were INR 202 crores, 17% decrease over last year, and 18% increase over last quarter. LHP exports were INR 155 crores, 23% decrease over last year and 9% increase over last quarter. As far as the Cummins India financial guidance is concerned, regarding the sales outlook for the full year 2024-25, we are looking to continue to have a double-digit growth over the fiscal year 2023-24, in line with our ambition to grow at two-thirds of the GDP. I now open the session for questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you would wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Mohit Pandey from Macquarie Group. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. Sir, my first question is on industrial segment. So if you could give color on what is driving strength for this business, I think second or third quarter of strong numbers there. That would be question number one. I think, for the quarter, I think it was a perfect storm of all portions of the industrial business firing. So whether it is construction, which was INR 134 crore, or whether it was rail, which was INR 107 crore, or mining, which was INR 19 crore, or compressor, which was INR 44 crore, marine was INR 33 crore, and everything else, when you added all of that and the total of INR 373 crore, you saw that pretty much all of the segments were, are doing well. And I think that's very broadly correlated to the fact that infrastructure continues to do well in India and is likely to continue to do well for the next few years. So, sir, do you sense an element of market share gain there? Because, one would have expected, during the election quarter, softer numbers there, so any color there? It's not apparent as of now. If there's been real market share gain, we would, we would get that kind of analysis in the near future, but the demand has continued to be strong for our products. ... Sir, and secondly, if you could share the breakup of domestic power gen, as you usually do, today. So, the low horsepower was INR 49 crores, mid-range was INR 153 crores, heavy duty was INR 93 crores, and high horsepower was INR 508 crores. You have to keep in mind that this was a transition quarter when the transition happened between CPCB II and CPCB IV finally. Right, sir. Sir, and CPCB IV+ would have contributed how much during the quarter broadly? Close to 5,000 sets were sold during the last two quarters. So roughly, I would say that somewhere about 30%-40% of the sales in the quarter were with CPCB IV+. Understood, sir. Last question, if I look at the P&L, the proportion of traded goods has come down sharply, the purchase of traded goods. So anything specific to retail? So that would be my last question. No, nothing, no trend that I can at least see, which is more than just probably a slower, different quarter. Understood, sir. Yeah. Thank you so much, and wish you all the best. Thank you. Next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead. Yeah. Hi, Ashwath. Congratulations on a great quarter, sir. So my first question is on gross margins. So this time you've recorded, I would say, almost five-year kind of high gross margins of 37.8%. So, my question was on, is it largely attributable to the increasing mix of CPCB IV+ power gen in the mix? And do you think with the law of July kicking in from Q2, there could be further tailwinds on margins as, we see the mix, increasing on CPCB IV+? I think we have had for the last few quarters almost a perfect storm of capitalizing on the pricing increases that we have done. The mix, of course, with CPCB IV+, and the fact that we've been able to commodities have helped us, and we've been able to continue the cost reduction gain. So the combination of all of those are what is ensuring that gross margins material margins are at record levels. I think as the cycle changes and as commodities start getting more expensive and as competitive pricing intensifies, I think there will be some pressure, and I don't think this kind of material margin is sustainable indefinitely, though it is our attempt to continue to you know try to get as much out of it as we can. Okay. My second question on CPCB II and CPCB IV+. So in the channel right now, do you think is there still any inventory in the CPCB II? And going in the coming quarters, do you think that... What kind of mix will now in the power gen move towards CPCB IV+, say, more stabilized quarters, like two quarters down the line? How do you think will that shape up? So the channel inventory is zero. So that, this is what accounts for as we were draining the inventory throughout the previous quarter, so the transition has happened, and we ended up with depleting all the inventory. So, starting from this quarter, it will only be CPCB IV+ sets that are sold in the market. Okay. And just one question on this, GAIL project, which was again, you had won about 10 MW on hydrogen sites. My understanding was that a part of that will be executed by the rest entity in India. So any update there? So, how's the progress on that project? I think the progress is that this is a global project for the GAIL application. The project is in the process of being executed, and the distribution business of Cummins India has been awarded the contract to service and support that. So it's still in the process of being installed. Some portions of it are already commissioned and introduced. This is the largest working hydrogen installation in the country. This is being done in the distribution part, which is the part of the Indian state entity, right? Which is executing this project. Yeah, that's correct. Okay, and just last thing, sir. I think now you're leaving February ninth, so, I wish you all the best on, for your future endeavors and, look forward to interact with Shveta, from Cummins India. Thank you, Mr. Dass. Thank you. Thank you. Next question is from the line of Amit Anwani from PL Capital. Please go ahead. Hi, sir. Thanks for taking my question. First question is on exports. If you could, highlight on how the export is panning out, the geographies which we are kind of seeing, slow down. What is the trend there and, the mix of, the products? Yeah. So, I think last time I'd indicated that the markets have been slowing for quite a few quarters, and we think we had, we thought we had bottomed out... and that statement appears to have held true. So, we did exports did grow in this quarter. And we have mainly seen that increase come from two areas. Middle East has recovered quite well and Africa is starting to recover. The rest of them are either, you know, flat to where they were bottomed out, and Europe actually also is pretty flat to where it was in the previous quarter. Sure, sir. Second is, are we largely sticking to the guidance of 2x of GDP top line growth? On the, you know, any incremental thing, you would like to highlight on the outlook on the growing sectors, that would help? Yeah. So, we continue to maintain the guidance of our ambition to grow at a minimum of 2x of the GDP, which in this year at a 6.5-7, is somewhere between 13%-14%, is what we think we should be able to grow. Our internal aspirations, of course, are to do much better than that. So we, so that's what we are all working on. We have also had this ambition of growing profitably, so we continue to focus on all aspects relating to profitability. So not have growth just for the sake of growth, but continue to do it with healthy profits. We have been ahead of the curve as far as profits is concerned, so we could, you know, we could see some pressure over there. But overall, all the plans are linked to the growth of the GDP of the country. Because most of the products that Cummins sells go into the infrastructure segment, and as the country continues to grow and infrastructure spending continues to happen, we will see strong growth, especially out of India. And as far as the global markets are concerned, they are undergoing some level of slowdowns in different segments because of all these different crises, currency issues, so many other big nations like China slowing down pretty significantly and not recovering. We think that could take some time to recover, and we continue to focus on making we are in a strong position to grow there once those markets start to recover. So lastly, if I may, the data center contribution in power gen and growth, and second, any supply chain issues which you feel pose any risk currently in meeting deliveries or logistical issues in that aspect? Yeah. Yeah. So, data center, you know, globally, when you look at data centers, data centers contributes to roughly around 10% of Cummins' power generation business. And that similar kind of trend holds true in India as well. We have very strong order books there. The heavy data center applications are fully booked and are completely supply chain capacity constrained, which means that the very largest of sets, which are made by Cummins Inc. globally and are not made in India, we are pretty much on allocation basis. On all the products which is made in India, we have enough capacity, order book, order boards, board. There are some spikes in certain kinds of products where we run into some challenges, but overall, I would say, you know, supply chain is well geared up to be able to meet all the demand that we are seeing. Thank you very much, sir, and all the best. Thank you. Next question is from the line of Raja Kumar Vaidyanathan, who is an individual investor. Please go ahead. Yeah, good afternoon. Thanks for the opportunity, sir. So, I have two questions. The first question is: do you see any sharp impact on the unrest in Bangladesh? Nothing that we can see right away. But you know, certainly when there are problems, whatever we are exporting out into those regions could see a small setback, but nothing significant because the volume of exports that we do into that country is quite minimal. Okay. And sir, the second question is, compared to the last quarter, the commodity markets have kind of softened. So do you still see that as a challenge in terms of maintaining or improving the margins go forward? I think they're doing favorable, that's why we continue to have much better material margins. The concern is that some commodities like copper and aluminum, which get used in big parts in our gensets, those have continued to increase in price, and so that portion of commodities is impacting us negatively. So we are trying to, you know, we would have gotten even more gains out of material margin had the softness in iron, et cetera, also continued in the other commodities, but it's sort of, you know, eating away at each other. ... Okay. So if I can just squeeze in one more question. So this is with reference to the guidance given by your parent. So they have kind of said that this time the India sales are kind of dropped by 10%, and they also reduced the sales outlook for the India business from the previous quarter. They gave 9% growth to now they reduced it to 8%, so 100 basis points reduction. So just want to know, is that coming out of the non-Cummins India substitutes of Cummins Inc., or is it to do with the Cummins India also? Yeah, it doesn't have anything to do with Cummins India. At Cummins India, we continue to guide a growth rate of twice GDP. So we continue to aspire to grow at somewhere between 12%-14%. So, some of those comments were also made looking at corrections in other markets, including automotive markets and some global slowdowns as well. Okay. Okay, sir. Thank you, and congrats for your elevations. Thank you. Thank you. Next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead. Good morning, sir. Thank you so much for the opportunity. Sir, if I look at the last 12 months, whatever revenue we generate in power genset, which are the user industries, have contributed that? I mean, any industries-wise breakup- Sure. Would be a help, broad. So I would say it's the data center, manufacturing, infrastructure, and commercial realty. Okay, okay. And so we have been seeing real estate is cyclical has turned around for the last two years. So I mean, that is also the requirement for genset is huge. So that has not actually started contributing yet, right? Could you repeat your question? Sorry. Real estate, I mean, even you said commercial real estate, but even residential real estate is also picking up. So that will also generate volume growth for us, going forward. Absolutely. We have already started to see that happen and that will continue. Okay, okay. And sir, so in the best of the time, what was the contribution from that, this segment to the overall sales, maybe previous years? You're talking about realty? Realty, yes, sir. It's very difficult to you know say that we because the segments grow you know very relatively and proportional to each other, and sometimes it's difficult to calculate and just say which segment contributes. Because some segments contribute in terms of horsepower, some segments contribute in terms of volume. So data centers, for example, the volume may be very low, but it contributes a lot in terms of value. Whereas realty sometimes is a mixed bag, and there have been years when that's done very well, but you sell a lot of gensets, but a lot of low kVA gensets. Sometimes it's higher kVA. So it's very difficult to get a segment-wide share of what that is when compared to the history. Okay. And sir, last question, from my end. You mentioned that the channel inventory is zero. It means CPCB II engines are not there in the system, right? That's correct. CPCB two inventory has gone to 0, and because CPCB four is overlapping and ramping up, the overall stock inventory at all our OEMs and dealers is also pretty low, among the lowest it's been in a couple years. Okay. We will try to fill this in next 2, 3 quarters, right? That's correct. Okay, sure. Thank you so much, sir. Thank you. Next question is from the line of Nitin Arora from Axis Mutual Fund. Please go ahead. Hi. Thank you, Ashwath, and congratulations on great set of numbers. And thank you for all the guidance you gave us over the last two years and the way company performed. The basic question here is, there was a lot of fear, and, you know, I kept you asking every quarter that once this price hike comes in, of the CPCB IV+, do you see a cliff fall happening in the demand? You started in the opening remarks stating that, you know, the demand remains pretty strong. Can you throw some light that how you look at this market? Because the price hike is quite, you know, it's quite immense, and we understand in your opening remarks in the previous calls, that few sectors are firing, like data centers and real estate as well. How do you think this price would be taken by channel? I'm asking a little near-term question of July and August when you will be filling up the inventory. Is still the volume of the end market is still strong, taking into that? Yeah. Let me try to answer that question, you know, by giving you some examples from some other markets. Yeah. India was a power-deficient market and has kind of sorted itself out to this is not such a power-deficient market. And during all of this period, we have continued to grow, and the demand continues to increase. Now, what happens as a country becomes more affluent and we get used to having power working for us 24 by 7, the lack of power becomes almost unbearable. And so even though you have more reliable grid power, you still need the backup power. And a big chunk of what we sell are all backup gensets. Yeah. When you need power, you need power. Then you don't ask yourself that, you know, did I pay 15% more or 20% more when I bought the genset. You know, you don't ask us all those questions. You need power, you need power. And so that is the way it's been around the world, that, you know, the regulations are driving the cost up because of tighter emissions, et cetera. End customers really don't care about emissions. They care about overall value. We are trying to deliver more value to them by making the products more fuel efficient and more dense, et cetera. So, you know, in an overall scheme of things, the cost of a genset, et cetera, is a pretty small percentage of, you know, capital costs to run infrastructure. It doesn't significantly impact the, you know, purchasing power. Got it. That's very helpful. That's why the demand is not dropping, the demand is strong. Overall, since the infrastructure of the country is growing, the power demand in the country is growing, the uploads of the country is growing, everybody wants more power, and so, demand continues to remain strong despite price increase. This is very helpful, Ashwin. Second question, just on the export side, you touched base on that, that few green shoots are seen. But generally, in your sense, what kind of inventory levels globally are at this point in time? You used to, you know, map on inventory at the channel globally. Is that something you can talk about? And on the demand side- Well, it's well stocked. It is a pure demand issue as of now. Mm-hmm. We are seeing increased dumping from, you know, other countries where local demand has fallen off. Mm-hmm. So to keep their utilization of factories high, their products are being dumped in export markets, in South Asia, in Latin America, in Africa. So, there is bound to be more pressure at this time. But it's a pure demand constraint, not any other- Mm ... channel inventory or any of those kind of constraints. Mm-hmm. So in your view, it might take one or two quarters more to stabilize that part, and then you start seeing growth because your base is quite weak over the next, over the last three quarters, when I look at last year base. Right. You expect some growth to start kicking in, or you think still it's 2, 3 quarters away? Yeah, like, we expected, we already saw that it seems to have bottomed out, and we're starting to see some growth. How much of it will sustain is difficult, and how long it will take, because we seem to be going from one crisis to another crisis. Mm-hmm, mm-hmm. We're already seeing now that, you know, now that, you know, Ukraine kind of thing seems to have calmed down a little bit, but the Middle East has heated up, and now with all of this new stuff happening, there's even more crises. Mm-hmm, mm. So, you know, when such things happen, you know, all kinds of slightly discretionary spending all comes to a- Mm-hmm ... a halt, and then you only start buying, you know, emergency kind of things. So it's very difficult to predict, you know, how the cycle is gonna turn. Mm. We are just trying to be ready with more products, more availability, you know, keep continuing to work on our cost base so that we can be even more competitive in those markets, so that when they do bounce back, we are ready. Just last comment of yours on the distribution business. That is something, you know, growing very well, and also contributing to the margins as well. How you are, you know, going forward, how are you looking at this business? Does that, the growth eventually comes down now? Because the way you are highlighting the things on the power side, highly, then it should be continuing with the growth, what it is doing. So just your one comment on that. See, the distribution has multiple segments where it gets revenue. It gets revenue from service, it gets revenue from parts, it gets revenue from selling into certain market segments where the big, the big, business units don't do. So we are seeing growth in all of those areas. So we are seeing, as the population of, products in the field continues and as the infrastructure development continues, so if you use the equipment more, you need more service, you need more parts. So, and the second portion of that is we have always had very low penetration from a market, market perspective, and we continue to focus on better service, better availability of parts, you know, better quality of parts. All of those are leading to growth in that, and we think this is not a three-year, five-year kind of cycle. We think we can sustain this kind of growth for, you know, at least a decade. Very helpful, Ashwin. All the best for your future. Thank you so much. Thank you. Thank you. Next question is from the line of Umesh Raut from Nomura India. Please go ahead. Hi, sir. Congratulations for the good set of numbers, and wish you all the best for your new role as well. Thank you. My first question is pertaining to industrial segment. I think even though we have seen a contraction in railway business, largely because of Indian Railways initiative towards railway electrification, but I think we have surprised on three lines of business within industrial, especially on the marine side, defense side, and on construction side. During the annual report as well, you are mentioning about some of these larger defense projects, greater in terms of defense business, for example, Zorawar Tank and shipbuilding businesses as well. So can you please qualitatively give us a trajectory in terms of outlook for these three segments within industrial? ... Yeah, so construction is directly related to infrastructure. This is where you supply engines into all the earthmoving equipment which are on the road, typically. And that is, I think, is in a multi-year boom cycle, especially if the country is gonna grow at the rate at which the government wants it to grow. So anywhere you build a road, you build a building, you build a dam, you build a port, you build an airport, any infrastructure activity requires earthmoving equipment, and all of those a big chunk of those use our product, and so that's why that's doing so well, and it will continue to do well. The next segment is rail. Like I said, the big chunk of slowdown for Cummins in that business was the migration of a big chunk of the diesel-driven locomotives, et cetera, going into electrification. And as I have said in the past, we continue to invest in the electrification cycle also. We think it's a tremendous growth opportunity coming up. We have now got product which is now certified and approved, and it is now doing trial runs in rail. And we also saw a lot of demand for DETC full scope kind of orders, even with existing diesel, so that's why this quarter was so good with rail. And we think the future for rail is also very optimistic because we are, we are, we have such small presence in the electrification, that as our products become successful, I think, the opportunity is significant for us. The third, of course, is mining. You know, you can't, as the economy continues to grow, we need more steel, we need more coal, we need more aluminum, we need everything. And mining will continue to boom, and, we, we, that's doing reasonably well. And, marine, compressors is a cyclical market, but compressors also as the, as the economy does well and the infrastructure does well, you need more compressors, so we do well there. Marine is a lot related to fishing trawlers and defense and, those kinds of products, and, there is record spending happening there. Of course, it's a very lumpy business because, the gestation time for building ships, et cetera, is long, so it's not as predictable as, some of the other businesses, and the same goes for, defense. We have great products, great partners, great customers, but the gestation period of those products is anywhere from three years to 10 years. And so, you know, it's very difficult to predict, you know, when exactly those will get translated into revenue and profitability. So that's what... But overall, when you add all of those things together, there is no bad news that we have to share, because the ambitions of the government are pretty well tied into the products that we are producing. Got it, sir. My second question is pertaining to distribution segment, where you are continuously launching new range of service products. So just wanted to understand how much of contribution you are receiving from new range of these launches of products, and how you look at this distribution business in export markets as well? If you look at the last couple of years, we've been, we have been growing that business at greater than 20% CAGR. And, like I mentioned, in each of the sub-areas, whether it be parts or service or, rebuilding, rebuilding engines, new engines, overhauls, each of those areas we are seeing growth happening, and we continue to focus on that, and, that is, we think that, there is lot more growth available there. I think we are entitled to lot more growth available there, and that's where the focus is. Got it, sir. Sir, last question, more on the bookkeeping side. You said, HHP power generation on domestic side was closer to INR 500 crore+, but how much of that was related to less than 800 kVA, where CPCB IV+ products are getting applicable? We track it as greater than 500 kVA, but less than in the CPCB IV+. Actually, I don't have that information in front of me, so I don't have a good answer. But, you know, we, we, we'll see it very soon. CPCB IV+ is starting to ramp up very, very strongly. So, you know, it will, it'll start getting much clearer in the next couple of quarters. But is it fair to assume that LHP, MHP, MHP plus heavy duty on the domestic power generation side would be forming closer to 90% of CPCB four plus products? Yeah, that's a very good, good logical assumption, and I think, yeah, that, that, that is likely to be true. Got it, sir. Thank you so much. I'll join back with you. Thank you. Next question is from the line of Mayur Patel from 360 ONE Asset Management. Please go ahead. Hi, thanks for the opportunity. My question is related to the one asked by Nitin. So, Ashok, in the past we have seen, like in CPCB II transition, first we saw a, you know, good amount of pre-buying happening before the transition, and then, the price hike had some dampening impact on the volumes, post implementation, and we did see some weakening in volumes. But this time around, you know, you are guiding for, no such major, drawdown on volumes despite a 35-40% rise because of change in norms. So just confirming this, confidence is coming from the current, investment cycle in the country, and, do you have some decent color on your pipeline of inquiries? I'm not asking for any specific numbers, but some qualitative comments on that, please. Yeah. One is we had a whole year to absorb the pre-buys and all the of CPCB 2 and 4. So the market is now already, it's, this is, you know, it's not new news that CPCB 4 is happening and the prices are changing. So the market has had time to absorb, time to use up as many CPCB 2s as they could. And we now find the channel inventory to be very, very low, which means that there aren't any CPCB 2 sets to sell, and the order books are scaling up, and the order books are pretty strong. So we are tending to, you know, align to the hypothesis that that the demand is now agnostic of the price increase that the CPCB 4 calls for. Got it. This is what gives you the confidence, despite, you know, exports yet to pick up about 14, 12 point, 12 to 14% growth, which would mean a slightly higher ask rate for the remaining nine months. So I think the demand resilience is what is giving you that comfort. So understood that. Yeah. Thanks a lot and, The order book, the order books are strong, and there is no inventory in the pipeline. So, you know, so it, that's what is giving me the confidence right now that, there is, there is no, there's no real nothing to be concerned about. Got it. Good luck for your new role, Ashwin. Thank you very much. Thank you. Thank you. Next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead. So thank you for taking my question. I think first one was similar to what Mayur asked. So my second question is on competition. What we understand is that we were one of the first ones to actually release nodes of CPCB in the market, and that time our pricing power was significantly better than anybody else, simply because there was nobody else. I understand some of your competition has launched, you know, quite a lot of nodes in the last couple of quarters. So can you just talk about whether we are seeing some sort of price discovery for the CPCB four plus, i.e., is that also going to be a factor in the margin number you are saying, which cannot sustain at these high levels? Is it just commodity, or is it also that price discovery now amid more supply could drive margins lower? Certainly, always, you know, you, once you start to see what competition is pricing at, we do need, we will need to take some adjustment action based on our own, we command a certain premium as compared to competition based on the product quality and the robustness and the features that we offer to our customers. But one has to look at where the competition comes in, in bulk production, and then, there is bound to be some level of readjustment. It doesn't typically happen all across. It happens in certain nodes where somebody else has a competitive advantage in terms of scale or economies and somebody else doesn't. And so the only way to maintain that relative positioning is with pricing. But overall, I don't see too much of an impact due to pricing. We are very happy with the one year of experience we've had with the products. We think we are absolutely super competitive and we have some relative positioning advantages, and I think we should be able to capitalize on that and hold on to the current pricing structure. So, since I have one more question, maybe I'll just use that. Ashwath, you know, all that you've said on the domestic market in terms of your commentary is extremely positive, and particularly in light of, you know, CPCB 4 being fully implemented, et cetera. I'm just trying to reconcile this with what you have put out in your release, where you say you remain cautiously optimistic about the demand only in the near term and optimistic about the longer term. So how come there's a disconnect between cautiously optimistic in your commentary in the press release, but your commentary in general is pretty optimistic about the domestic market? So is my understanding a little different on interpreting that? No, not at all. It's like, you know, our, you know, in Tamil, we have a saying that no good deed goes unpunished. So our own relative, good performance in the last couple of years, makes us slightly cautious about the rate of growth that we have been able to achieve in the past versus what we can continue to do in the near future. We continue to be extremely optimistic about the growth opportunities when I look at a two-year, five-year, ten-year kind of window. What we remain cautious about is the short-term cyclicality, like the transitions happen in Q1. The Q2, there's time for the pipeline to fill up and then, for people to get moving, et cetera. So all of those are very difficult to predict, whether you go from a, from a steady state of 100% on one series of products to a steady state 100% on the second series of products. There's turbulence during the transition, and that is what leads us to be slightly cautious about that. Sure. Thank you. Thank you. Next question is from the line of Jonas Bhutta from Birla Mutual Fund. Please go ahead. Thank you for the opportunity, and at the outset, congratulations and all the best, Ashwath, for your new role. You know, I have a couple of questions pulled out primarily from the annual report. You know, I'll sort of try and be brief. Firstly, on the power gen side, so you spoke about, you know, increasing dealer count. How much of a role did that play in the FY 2024 sales growth, beyond the pre-buy? Was it a material thing? And similarly, you spoke about one ICF contract on the distribution side. So how much of a sort of contribution on FY 2025 basis can that one single order sort of move? So that's the first question. We're continuously adding more dealers, and certainly that contributes. It's very difficult to say exactly how much that, but yeah, it is important, which is why we keep adding more to get better penetration and better positioning in the market. So we will continue to keep doing that. We continue to monitor all the dealers. We continue to look at who is performing well and who is not, and then you know, appropriate actions are taken of either finding better people or looking at different ways by which those dealers can be more successful. As far as some of these orders are concerned, you know, they are good orders, so I wouldn't say any one order very significantly changes all the, you know, all the results for the company, but it all adds up. It's, you know, it's all, like, you know, big chunks in a bucket, which then keeps expanding. So I would say this, yeah, it's positive. Understood. Understood. So the second question was, you know, in megawatt terms, your sales last year grew almost 40%, but in unit terms, you know, the increase was just 4%. Which sort of implies a, you know, greater share of higher HP nodes that sort of got sold. Was that largely a pre-buy impact, or, you know, this kind of deviation between the megawatts sold versus units is here to stay? And given that within that 26,000, only 10% were, you know, 2,000 units were roughly CPCB IV+, could you sort of now talk about, as this contribution sort of increases, the impact on warranty expenses, royalty, and purchase of traded goods? Just wanted to fold that into another question or sub-question was, now that you've had some time, what is the average price increase in the CPCB IV+ regime? If you have to just put a very simple average or a weighted average number, you know, what is the price increase versus the CPCB 2 regime? That's the final question. Thank you. So I'll answer the last question first. It's anywhere in the range between 15%-25% is what the pricing increases have been. To answer the other question, there is a—if you see historically, we have always been the weakest at the lower horsepower ranges, and that's because they had over the last 15 years or 20 years, they had turned into commodities. They had become pure mechanical products with not real great differentiation that we could show as compared to competition. And certainly, I would say that competition had gained share in some of those segments, and we continued to where there was technology, where there was higher durability, reliability requirements, those were the high horsepower modes where we continued to gain share. The... Where, why we think CPCB IV+ is a game changer for us is because it forces the market into changing from a commodity player to having to invest in technology and then having to, service and support a greater technology, higher warranty cost kind of product, which we have done around the world for many, many years. So it's a sweet spot for us. So in this transition to CPCB IV+ class and higher technology, we hope to, not only gain, in horsepower, but to change the cycle in, from a volume perspective also. So we are trying to, pursue our ambition to, you know, be stronger in the areas where we've been weak in the past and to hold on to or improve our position even in the modes where we've been strong. Got it. But what does it do on the, as the share of this increases, so on the warranty and royalty? Because we've seen a very sharp decline in, you know, royalty or, you know, service fees to the parent over the last five years. Also the R&D expenditure of just INR 10 crore, you know, versus a peak of almost INR 190 crore in FY 2020. You know, is the R&D expenditure, while a large part of that is housed in the parent, but, you know, how does that impact R&D expenditure over the next two, three years? We have we are done with the peak R&D expenditure, so now it's only going to be sustenance and improvement kind of expenditure as far as that is concerned. I don't see anything very significant from from a royalty. It's well in line with with what we have you know publicly stated for quite some time. So I don't see any concerns with that. I actually see this as a great opportunity to improve our market position and also to leverage all those investments to to export some more. Because we now have a higher emissions product than what what emissions are needed in the rest of the world. So it actually brings us to a level playing field as far as the rest of the world is concerned. It brings us to a more competitive position as far as low power is concerned in the local market. So overall, I see more positives than negatives from this transition. Understood. Great and all the very best. Thank you. Thank you. Ladies and gentlemen, we will take last two questions now from the participants. So the next question is from the line of Aditya Mongia from Kotak Securities. Please go ahead. Hello, everyone, and thank you for the opportunity. As for the first question, it is a little bit more broad-based. As you've been there with the company for the last five years, wanted to check with you, as in, like five years back, what were the key areas of improvement or concern that you saw in the comments, which have now kind of become better? And as you leave the company, at this point of time, which are the key areas of improvement that you see here as everything up from here on? Yeah. So when I took on the role, five years ago, my biggest focus area was to try to align everybody that, what we had been used to in the past, a growth rate that we had been used to was something or the cycle we could break, and we could set a very clear vision for the company. And then if we all work together, focused on the execution of that vision, we could, we could, we could achieve bigger and better things than what had been achieved in the past. With the support of a very, very strong team, we not only created the vision, we were able to execute on that vision of getting growth in multiple areas, focusing more on the product, focusing more on execution, focusing on a long-term strategy, and then sticking to a plan. I think the last five years has enabled us to create a very, very strong platform where this process methodology and this focus has yielded good results. We have used the time to also build a lot of capabilities within the company, bring in some very, very smart people who can then take this strategy and drive it into the future. So I feel very good about having had enough time to, you know, work with the team, come up with a strategy, be able to execute it, and then transition it into a mode which can be sustainable in the future. Got that. Now, from that 36,000 feet level, more near-term, wanted to understand, Ashok, maybe someone also kind of pointed it out, that, about, 7 gigawatts of, capacity were added by Cummins. You know, this appears to be a fairly large number, at a country level as compared to whatever capacity utility would be adding at this point of time. And typically, the ratio of, what the sector was adding, from a power gen perspective to what the country was adding from a utility perspective was more like 40%-50% has become 80%-90%. Wanted to check from you whether, it's a, it's a, it's a sign of maybe power deficit demand, it's a sign of something else. But just want to get your sense whether this is starting to become a very, very high base to kind of grow on from a volumes perspective. I understand realization can boost revenues for the company, but from a megawatt volume perspective, are we getting inside, kind of a high, high base at this point of time? No, I think we are at an inflection point where I think this kind of growth can sustain for many, many years. Especially if you see, we are just not even a $4 trillion economy. If it is the ambition of our country to become a $7 trillion economy by 2030 and by the you know, the hundredth anniversary of our country to become a $12-$15 trillion dollar kind of economy, I don't see any other option than for us to have to grow the requirement of power significantly, have significant more infrastructure in the country. And all of that, in my view, is going to lead to significant more demand. So I actually am, I'm not at all concerned about the high base. It actually is significantly smaller than where I think we will all be in 10 or 15 years. Understood. Sir, last question from my side, this is on margins. I think you've seen enough of for the competitive intensity in the CPCB, CPCB IV+ transition. Are you getting a sense that when things settle, given the higher value addition from the company, the CPCB IV+ in sense it can be margin accretive for the company over and above whatever it is happens there? That's correct. That we believe that, and nothing which so far in the last, you know, 12 months is telling us any different. Great. Those are my questions, and all the very best, Ashwath, and to the company. Thank you. Thank you. Ladies and gentlemen, we will take this as the last question for the day. I would now like to hand the conference over to Mr. Ashwath Ram for his closing remarks. Over to you, Mr. Ram. So thank you. Thank you for your active participation and engagement during the call. Cummins India believes that domestic demand in various end markets may sustain, while for the export segment, growth may gradually recover given, given the geopolitical uncertainty. We do see quite a few challenges, some in supply chain, some in the whole geopolitical situation, et cetera, which we continue to work through. We remain cautiously optimistic about the short term, but quite optimistic about medium and long-term outlook. With a strong balance sheet, world-class infrastructure on the ground for manufacturing and product development, best-in-class talent, an amazing team, we are very confident of sustaining our growth trajectory. I want to thank all of you for asking these amazing questions and all the support that you've given this company. With this, I close the call. Thank you for your continued trust and confidence in the Cummins. Thank you. On behalf of Cummins India Limited and the leadership team, we would like to thank you for joining us and making it an engaging session. We are ending the conference call now. You may now disconnect your lines. Thank you.