Motilal Oswal Financial Services

31 January 2021

3QFY21 Results Update | Sector: Capital Goods

Cummins India

Estimate change

TP change

Rating change

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Financials & Valuations (INR b)

Y/E Mar

2020 2021E

Sales

51.6

43.9

EBITDA

5.9

5.8

PAT

6.4

5.3

EBITDA (%)

11.4

13.2

EPS (INR)

23.3

19.0

EPS Gr. (%)

(10.8) (18.2)

BV/Sh. (INR)

150.6

160.4

Ratios

Net D/E

0.0

(0.1)

RoE (%)

15.4

11.9

RoCE (%)

14.0

10.8

Payout (%)

90.3

53.8

Valuations

P/E (x)

28.6

35.0

P/BV (x)

4.4

4.2

EV/EBITDA (x)

31.6

31.4

Div Yield (%)

2.5

1.4

FCF Yield (%)

2.0

1.9

KKC IN

184.8 / 2.4

689 / 282

20/45/-1

711



2022E

52.9

6.8

6.2

12.9

22.5

18.3

166.7

(0.0)

13.5

12.3

72.0

29.6

4.0

26.8

1.9

0.6

CMP: INR667

TP: INR515 (-23%)

Sell

Weak revenue (in-line); cost measures likely to persist

Promise of future technologies / corporate development may keep

valuations buoyant in near term, overlooking fundamentals

Cummins India (KKC)’s revenue growth was weak, in line with expectations.

It declined 2% YoY on a weak base (3QFY20: -3%) and could have been even

weaker if not for a large order in the Powergen segment. However,

persistent cost-cutting measures (employee cost and other expenses) led to

EBITDA margins of 17%. Adj. PAT was flat YoY at INR2b and was 8% ahead of

our expectation.

Revenue normalization is taking longer than expected (in line with our bearish

thesis), especially as exports also failed to cheer. Also, the coming quarters

would bear the brunt of commodity price inflation on gross margins. Notably,

the EBITDA margin surprise came from employee cost cuts and sharp decline

in other expenses (such as lower warranty provisions and royalty payments) –

not sustainable beyond the next 2–3 quarters, in our view.

(a) Management commentary/indications on likely future opportunities in

hydrogen fuel cell technologies for the listed entity and (b) no decline or

affirmation from management towards corporate development involving a

listed and unlisted entity merger may keep investors guessing on the

optionality. While we maintain our long-term thesis of structural issues in

the current business, valuations could remain buoyant in the medium term

on account of option value, especially as capex spending picks up hereafter.

We largely maintain our FY22/FY23E estimate, but increase the target

multiple to 20x (in line with the re-rating for the entire sector) and TP to

INR515. Maintain Sell.

Revenue declined 2% YoY to INR14.2b, in line with our expectation. Gross

profit was flat YoY at INR5.1bn, a minor miss of 3% against our expectation.

EBITDA increased 12% YoY to INR2.4b and was 13% ahead of our

expectation. The EBITDA margin came in at 17.0% (+220bp YoY) v/s our

expectation of 14.7%. This is attributable to 11.6% YoY decline in employee

cost and 6% decline YoY in other expenses.

Other income included an income tax refund of INR356m. Adjusted for the

same, other income declined 13% YoY to INR629m. Adj. PAT was flat at

INR2.0b and 8% ahead of our expectation.

Domestic sales declined 3% YoY to INR10.3b. The Powergen segment posted

11% growth on the back of a large order. Industrials and Distribution revenue

was down 4% YoY and 12% YoY, respectively. Exports grew 1% to INR3.7b.

KKC was not impacted by commodity price inflation in 3Q; however, strong

headwinds are expected in the coming quarter. It aims to mitigate input cost

risks by taking price hikes. However, end market demand remains uncertain;

hence, the company is still in the wait-and-watch mode and unable to

provide guidance.

277



Weak revenue growth (in-line), lower other expenses lead to surprise



Shareholding pattern (%)

As On

Promoter

DII

FII

Others

Dec-20 Sep-20 Dec-19

51.0

27.5

29.3

31.8

9.0

8.2

6.3

12.5

11.5

10.9

FII Includes depository receipts



Key management call highlights



Nilesh Bhaiya – Research Analyst

(Nilesh.Bhaiya@MotilalOswal.com)

Pratik Singh – Research Analyst

(Pratik.Singh@MotilalOswal.com)

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Cummins India



Employee costs (-12% YoY) are yet to normalize as price hikes / bonuses, etc. are

yet to be implemented. As demand normalizes, employee salary cuts, etc. would

be restored. Overall employee costs were down 15% YoY for 9MFY21 – fairly

sharp and the function of a cut in headcount and salaries.

Other expenses were down 6% YoY and stood at just 10% of sales, driving a

surprise on the EBITDA margin. This was attributable to strong cost-cutting

measures. While many components in which cost-cutting was implemented

would return, the exact timing and extent of normalization remain uncertain. In

our view, as the business is slower to recover v/s other sectors, KKC’s cost-

cutting measures may be implemented for longer. Also, cost items such as

royalties, warranty provisions, etc. may continue to be lower in the current year,

but this may not be sustainable over the longer term.

Hydrogen fuel cell technology related opportunities can be exciting –

Depending on the scale of demand, the listed entity is participating in many

tenders in Rail, Construction, and Marine. As things stand today, the

management expects these opportunities in the listed entity, along with

investments.

No confirmation or denial on any corporate development between listed and

unlisted entities:

A key concern on the KKC stock for years now has been the

uncertainty surrounding the opportunities captured between the listed and

unlisted entities, with the unlisted entity far outstripping the listed entity on

revenue/margin parameters. The management refrained from giving any

concrete comment on any corporate development between the two entities.

While it did mention that nothing is planned in the short term, it left the floor

open stating it welcomes any ideas to benefit the stakeholders in both the

entities over the longer term.

No upfront denial could keep investors guessing

for some time and provide option value to the stock, in our view. This would

mean the stock may overlook near-term weakness in the current business –

until any concrete details emerge.

Valuation and view

While we maintain our long-term thesis on structural issues in the current business,

valuations could remain buoyant in the medium term on account of option value

(future technologies such as hydrogen fuel cell related opportunities and any

corporate development between the listed and unlisted entities) and an improving

outlook on capex spending hereafter. We largely maintain our FY22/FY23E

estimates (FY21E: +4%), but increase the target multiple to 20x (in line with the re-

rating for the entire sector) and TP to INR515. Maintain Sell.

31 January 2021

Cummins India

Quarterly Performance

Y/E March

Sales

Change (%)

EBITDA

Change (%)

As of % Sales

Depreciation

Interest

Other Income

PBT

Tax

Effective Tax Rate (%)

Adjusted PAT

Change (%)

Extra-ordinary Income (net)

Reported PAT

Change (%)

13,430

1.1

1,514

-29.5

11.3

291

769

1,940

525

27.1

1,415

(22.7)

1,415

(22.7)

FY20

13,084 14,534

-12.0

-3.3

1,525

2,158

-39.2

-4.8

11.7

14.8

293

296

926

723

2,102

2,538

269

551

12.8

21.7

1,833

1,988

(13.4)

6.2

(125)

1,833

1,862

(13.4)

(0.5)

10,528

-21.5

667

-61.2

6.3

308

898

1,208

-5

(0.4)

1,213

(13.9)

(30)

1,183

(16.0)

4,982

-62.9

-98.1

0.6

303

666

349

20.7

277

(80.4)

249

526

(62.9)

FY21E

11,602 14,243 13,038

-11.3

-2.0

23.8

1,674

2,417 1,677

9.8

12.0 151.5

14.4

17.0

12.9

327

320

329

580

629

697

1,887

2,681 1,999

431

695

440

22.9

25.9

22.0

1,456

1,985 1,559

(20.6)

(0.1)

28.6

356

1,456

2,341 1,559

(20.6)

25.7

31.8

FY20

51,577

-8.9

5,863

-20.2

11.4

1,187

203

3,315

7,789

1,341

17.2

6,448

(10.8)

(155)

6,293

(12.9)

(INR m)

FY21E MOSL

Var.

3QE

(%)

43,865 14,534 -2.0%

-15.0

0.0

5,797 2,138 13.1%

-25.2

-0.9

13.2

14.7

1,278

325

175

2,571

600

6,915 2,363 13.4%

1,639

520

23.7

22.0

5,276 1,843

7.7%

(18.2)

(7.3)

605

5,881 1,843 27.0%

(6.6)

(1.0)

Exhibit 1: Domestic revenue declined 3% YoY in 3QFY21

Domestic revenue (YoY)

Exhibit 2: Exports remained almost flat YoY in 3QFY21

Exports revenue (YoY)

30%

21%

13%

18%

36%

12%

3% 0%

-8%

-5%

22%

15%

-6%

-23%

-3%

-21%

-6%

-7%

-17%

-16%

-17%

-25% -20%

-26%

-61%

-64%

Source: Company, MOFSL

Exhibit 3: Overall revenue declined 2% in 3QFY21

Revenue (YoY)

30%

14%11%

-1%

-3%

-10%

-21%

-2%

-11%

Exhibit 4: EBITDA margin increased on favorable revenue

mix and sustained cost-control measures

EBITDA margin

16.216.9

15.1

14.8

14.614.514.514.0

12.8

11.3

11.7

6.3

0.6

17.0

14.4

-11%

-63%

Source: Company, MOFSL

31 January 2021

Cummins India

Story in charts

Exhibit 5: FY20 revenue breakup

Exports,

26%

Power gen,

29%

Exhibit 6: Overall revenue expected at 16% CAGR over

FY21–23E

Revenue (INR b)

YoY Growth (%)

Distribution

, 27%

Industrial,

19%

Source: Company, MOFSL

Exhibit 7: Domestic segment to post ~18% CAGR over FY21–

23E

Domestic (INR b)

YoY (%)

Exhibit 8: Exports to post ~11% CAGR over FY21–23E

Export (INR b)

YoY (%)

Source: Company, MOFSL

Exhibit 9: EBITDA expected at 17% CAGR over FY21–23E…

31.7

19.8

11.3

-8.7

5.5

5.4

3.4

-16.5

-8.7

-32.2

EBITDA (INR b)

YoY (%)

18.0

Exhibit 10: …as EBITDA margins are likely to expand from

FY20 levels owing to sustained cost-cutting measures

EBITDA (%)

17.8

16.1

-1.1

Source: Company, MOFSL

31 January 2021

Cummins India

Exhibit 11: PAT growth expected at 16% CAGR over FY21–

23E

PAT (INR b)

YoY (%)

Exhibit 12: RoE/RoIC gradually declined over FY10–20, with

some uptick expected over FY21–23E

ROE (%)

ROIC (%)

5.3

4.4 5.9 5.4 6.6

6.0

7.9 7.5 7.3 6.5 7.2 6.4

6.2

7.1

15 16

11 10 12 13

14 15

16 17 15

Source: Company, MOFSL

Highlights from management commentary

Demand outlook



Demand has normalized sooner than expected. However, the situation

continues to be uncertain. Overseas end markets are getting hit with a second or

third wave of COVID, which has not occurred in India yet. Hence, at the

company level, continued fluctuation is seen in utilization levels.

Real estate is showing signs of an uptick.

Pre-buying demand was strong and would pick up in the coming quarter owing

to new emission norms.

Powergen



Revenue was up 11% YoY to INR4.2b.

The segment saw stronger recovery in the areas of infrastructure, data centers,

and rentals.

Recovery is slower in the medium horsepower business in the end markets of

Hospitality and Commercial Real Estate.

The segment is seeing some supply chain issues, else it could have clocked even

higher numbers.

Industry



Revenue was down 4% YoY to INR2.6b.

The management expects construction activity to pick up going forward, which

should see revival in the Industrials segment.

The Mining sector is rebounding strongly on demand witnessed for coal, iron

ore, etc.

Cummins has introduced new products in the Marine segment; the

management hopes to have market share gains v/s global players.

Exports



Overall, exports grew 1% YoY to INR3.7b. High horsepower sales stood at

INR2.0b and low horsepower sales at INR1.5b.

Second and third waves of COVID are striking Europe and LATAM, which has

impacted real-time visibility. Middle East and Africa are faring relatively better.

31 January 2021

Cummins India

Distribution



Revenue stood 12% YoY lower at INR3.7b.

Margins



Cummins did not see any impact of commodity price inflation in 3QFY21.

However, expect the full brunt of the impact in 4QFY21.

The management

would try to take price hikes to offset the impact.

Other expenses came in lower – INR230m of write-offs were taken in 2QFY21;

hence, expenses are looking lower for 3QFY21 despite being normal.

While some cost elements (employee cost, etc.) have returned, the full impact

would be reflected Jan’21 onward (in 4QFY21).

Other key takeaways



Hydrogen technology

– Depending on the scale of demand, the listed entity is

participating in many tenders in the Rail, Construction, and Marine segments.

Thus, as things stand today, Cummins India expects these opportunities to come

in the listed entity.

Hence, if opportunities are higher in these end markets,

investments and opportunities would accrue to the listed entity.

Listed v/s unlisted entity –

All options available are on the table. Nothing is

planned in the short term, but the management is considering various ideas

over the longer term to benefit the stakeholders in both the entities.

Other income is higher on account of higher dividends from the JV, amounting

to INR380m. Also, exchange rate gains are seen.

CPCB’s new norms are likely to see a six-month delay. This would be pushed

toward early 2022. Costs would go up and so would the selling price. The

quantum cannot be stated as of now. However, in comparison with other

industries, this would be fairly significant.

While we maintain our long-term thesis on structural issues in the current

business, valuations could remain buoyant in the medium term on account of

option value (future technologies such as hydrogen fuel cell related

opportunities and any corporate development between the listed and unlisted

entities) and an improving outlook on capex spending hereafter. We largely

maintain our FY22/FY23E estimates (FY21E: +4%), but increase the target

multiple to 20x (in line with the re-rating for the entire sector) and TP to INR515.

Maintain

Sell.

Valuation and view



Exhibit 13: Earnings change summary

Earnings Change

INR m

Revenue

EBITDA

EBITDA margin

Adj. PAT

FY21E

43,865

5,415

12.3%

5,076

Old

FY22E

52,908

6,809

12.9%

6,207

FY23E

58,829

7,919

13.5%

7,113

FY21E

43,865

5,797

13.2%

5,276

New

FY22E

52,908

6,830

12.9%

6,242

FY23E

58,829

7,931

13.5%

7,141

FY21E

0.9%

Change

FY22E

0.0%

FY23E

0.0%

Source: MOFSL, Company

31 January 2021

Cummins India

Financials and valuations

Income Statement

Y/E March

Total Revenues

Change (%)

Raw Materials

Staff Cost

Other Expenses

EBITDA

% of Total Revenues

Depreciation

Other Income

Interest

PBT

Tax

Rate (%)

Adjusted PAT

Extra-ordinary Income

Reported PAT

Change (%)

Balance Sheet

Y/E March

Share Capital

Reserves

Net Worth

Loans

Deferred Tax Liability

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Investments

Curr. Assets

Inventory

Debtors

Cash & Bank Balance

Loans & Advances

Other Assets

Current Liab. & Prov.

Current Liabilities

Provisions

Net Current Assets

Application of Funds

2018

50,825

0.1

32,581

4,979

5,940

7,325

14.4

938

2,285

148

8,523

2,000

23.5

6,524

561

7,085

-3.6

2019

56,590

11.3

36,135

5,458

6,356

8,641

15.3

1,103

2,928

162

10,304

3,078

29.9

7,226

2.0

2020

51,577

-8.9

33,679

5,602

6,434

5,863

11.4

1,187

3,315

203

7,789

1,341

17.2

6,448

-155

6,293

-12.9

2021E

43,865

-15.0

27,723

4,950

5,395

5,797

13.2

1,278

2,571

175

6,915

1,639

23.7

5,276

605

5,881

-6.6

2022E

52,908

20.6

34,126

5,445

6,508

6,830

12.9

1,378

2,726

175

8,003

1,761

22.0

6,242

6.1

(INR m)

2023E

58,829

11.2

37,945

5,717

7,236

7,931

13.5

1,498

2,898

175

9,156

2,014

22.0

7,141

14.4

(INR m)

2023E

554

47,658

48,212

4,854

800

53,866

38,955

12,772

26,183

800

8,240

32,486

6,535

12,894

5,553

7,504

13,843

11,006

2,837

18,643

53,866

2018

554

39,306

39,861

2,515

299

42,675

28,665

8,445

20,193

380

5,487

29,253

5,375

13,263

4,709

1,287

4,621

12,637

11,114

1,523

16,616

42,675

2019

554

40,750

41,305

3,092

988

45,384

29,676

9,548

20,128

1,585

2,853

33,970

6,254

12,727

7,379

7,610

13,152

11,450

1,702

20,818

45,384

2020

554

41,195

41,750

4,854

800

47,404

30,955

8,617

22,338

800

8,240

28,163

5,729

11,316

4,538

6,579

12,137

9,650

2,487

16,026

47,404

2021E

554

43,910

44,465

4,854

800

50,119

32,955

9,895

23,059

800

8,240

28,341

4,873

10,576

7,297

5,596

10,322

8,207

2,115

18,019

50,119

2022E

554

45,658

46,213

4,854

800

51,867

35,955

11,273

24,681

800

8,240

30,595

5,877

11,596

6,373

6,749

12,450

9,899

2,551

18,145

51,867

31 January 2021

Cummins India

Financials and valuations

Ratios

Y/E March

Basic (INR)

Adj EPS

Cash EPS

Book Value

DPS

Payout (incl. Div. Tax.)

Valuation (x)

P/E

Cash P/E

EV/EBITDA

EV/Sales

Price/Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

RoIC

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors. (Days)

Asset Turnover (x)

Leverage Ratio

Net Debt/Equity (x)

Cash Flow Statement

Y/E March

PBT before EO Items

Depreciation

Interest & other

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

(Inc)/Dec in FA

Free Cash Flow

Investment & Others

CF from Investments

(Inc)/Dec in Debt

Interest Paid

Dividend Paid

CF from Fin. Activity

Inc/Dec of Cash

Add: Beginning Balance

Closing Balance

2018

23.5

28.9

143.8

14.0

65.5

28.3

23.0

24.9

3.6

4.6

2.1

16.4

15.6

15.7

1.2

-0.1

2019

26.1

30.0

149.0

16.4

78.6

25.6

22.2

20.9

3.2

4.5

2.5

17.5

16.2

15.0

1.2

-0.1

2020

23.3

27.0

150.6

16.4

90.3

28.6

24.7

31.6

3.6

4.4

2.5

15.4

14.0

11.2

1.1

0.0

2021E

19.0

25.8

160.4

9.1

53.8

35.0

25.8

31.4

4.2

1.4

11.9

10.8

10.0

0.9

-0.1

2022E

22.5

27.5

166.7

13.0

72.0

29.6

24.2

26.8

3.5

4.0

1.9

13.5

12.3

11.4

1.0

0.0

2023E

25.8

31.2

173.9

14.8

72.0

25.9

21.4

23.2

3.1

3.8

2.2

14.8

13.5

12.5

1.1

0.0

(INR m)

2023E

9,156

1,498

-2,723

-2,014

-1,317

4,600

-3,000

1,600

2,898

-102

-175

-5,142

-5,317

-820

6,373

5,553

2018

9,084

938

-1,486

-1,823

-338

6,376

-905

5,472

2,677

1,773

-100

-4,639

-4,731

3,418

1,291

4,709

2019

10,304

1,103

-1,205

-2,361

-2,341

5,500

-2,734

2,766

5,103

2,369

576

-121

-5,681

-5,226

2,643

4,709

7,379

2020

7,634

1,187

-1,366

-1,609

144

5,990

-2,366

3,624

-2,392

-4,758

1,762

-154

-5,681

-4,073

-2,841

7,379

4,538

2021E

6,915

1,278

-1,792

-1,639

766

5,529

-2,000

3,529

2,571

571

-175

-3,166

-3,341

2,759

4,538

7,297

2022E

8,003

1,378

-2,551

-1,761

-1,051

4,019

-3,000

1,019

2,726

-274

-175

-4,495

-4,670

-925

7,297

6,373

31 January 2021

Cummins India

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within

following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the

Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial

products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are

available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a

registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and

National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National

Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance

Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.

Details of associate entities of Motilal Oswal Financial Services Limited are

available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and

buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other

compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report

should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific

merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the

website at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental

research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated

from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability

or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong

Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst

Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of

research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity

to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not

located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under

applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers

Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any

brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is

intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as

"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which

this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration

provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange

Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-

dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this

chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public

appearances and trading securities held by a research analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and

Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL

in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,

of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the

SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and

inform MOCMSPL.

Specific Disclosures

1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOFSL has not received any compensation or other benefits from third party in connection with the research report

10 MOFSL has not engaged in market making activity for the subject company

31 January 2021

Cummins India

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The associates of MOFSL may have:

financial interest in the subject company

actual/beneficial ownership of 1% or more securities in the subject company

received compensation/other benefits from the subject company in the past 12 months

other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on

the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL

even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the

company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)

received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from

clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the

research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Terms & Conditions:

This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and

may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in

nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,

representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The

report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as

customers by virtue of their receiving this report.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for

informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing

in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this

document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this

document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views

expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade

securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of

the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or

entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in

all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost

revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees to exempt MOFSL or any of its

affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such

misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,

expenses that may be suffered by the person

accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;

Website

www.motilaloswal.com.CIN

no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,

Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:

INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company

Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth

Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is

a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.

Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.

Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no

assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance

Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench.

31 January 2021