Cummins plans $150m outsourcing

Cummins Inc is planning to export more than $150 million in components and engines from India and more than 50 per cent ($80 million) is related to auto components during this fiscal year.

Cummins India Ltd (CIL), is eyeing a topline of $1 billion by calendar 2007. The company had reported $600 million 2003 of which exports constituted 20 per cent.

CIL managing director, Anant J Talaulicar, said while growth in exports would be 20-25 per cent this year, growth of domestic sales would be in the 'teens.'

CIL has now become the sole source for three of high capacity engines - V28, K38 and K58 - for Cummins Inc. These high capacity engines are meant for power generation applications. Talaulicar said the company had also recently increased the production capacity of V28 and K38 by 30 per cent.

Until recently, the V28 engines were made in the US and the K38 and K58 engines were made in the UK. Talaulicar said this was only a re-balancing of manufacturing portfolio within the group and no plants were shut down in the US or the UK.

Talaulicar added that more investments were in the pipeline and decision on this would be taken before the close of this calendar year. He said the company has cash position of Rs 300 crore and no decision was taken on the quantum of investments in the pipeline.

The company had also started its own BPO unit this year to take up finance and HR related work for the Cummins Group.

"We do not plan to sell this service," he said. An IT company KPIT that was started earlier is selling 50 per cent of its service outside the group is focussing on the manufacturing sector. "KPIT is hiring close to 100 people each quarter," he said.

Cummins Inc, vice-president-engine business-global purchasing, Ignacio Garcia, reiterated the company's commitment to continue its long tradition of doing business in India.

He said, "The opportunities to grow with Cummins domestically and globally are very significant. Cummins has been and will continue to be focused on developing suppliers in India as Cummins has been doing in the last three decades."

Cummins India reported a 15.9 per cent rise in net profit in the past business year to March to Rs 109 crore as net sales jumped 12.1 per cent to Rs 932 crore.

The company expects its domestic business to expand 12-15 per cent a year over the next three to five years and exports to jump 20 per cent annually over the same period, he said.

Cummins India reported a 30.5 per cent rise in net profit in the first fiscal quarter to June to Rs 28.90 crore on a 32.5 per cent jump in net sales to Rs 282 crore because of surging engine sales for power applications and robust exports.

Talaulicar said Cummins had cash reserves of about Rs 300 crore and would take a decision by December on how to use the cash pile "" by either investing it in new assets or returning it to shareholders.