Annual Report 2018 - 19 TABLE OF CONTENTS CHAIRMAN’S LETTER 1 TO THE SHAREHOLDERS 2 MANAGING DIRECTOR’S LETTER 2 TO THE SHAREHOLDERS 4 BOARD OF DIRECTORS 3 12 DIRECTORS’ REPORT AND 4 ANNEXURE 14 STANDALONE AND CONSOLIDATED 5 FINANCIAL STATEMENTS 105 BUSINESS RESPONSIBILITY 6 REPORT 240 1 Mark Levett Chairman, Cummins India Limited Dear Shareholders, I begin this letter with a sense of pride about being a Cummins in India has been a significant contributor not part of Cummins, an organization whose mission is just to Cummins Inc. but also to the Indian economy to make people’s lives better. While creating financial through the innovative and dependable solutions they stability and wealth for our stakeholders is essential to have been providing for over five decades. India is our future, doing so sustainably is equally important also one of the key emerging markets and like all other and it is this belief that has been central to the success markets, has its own unique set of challenges. With strategy of Cummins. stringent emission norms and massive infrastructure growth posing as the primary drivers of the economy, It has been a year since I have taken on this role with we look at these as an opportunity to provide even better Cummins India and it has been an exciting journey solutions that meet the diverse needs of our customers. topped with remarkable results. Last year, I shared with you the Mission, Vision and Values that serve I am confident of our future as we move ahead. Our as our guiding principles in delivering value to all our strengths remain. We are a diversified company. We stakeholders and making the World a better place. It continue to lead the industry in emissions technology has been our relentless commitment to our values and with expertise in fuel systems, filtration, exhaust mission that has allowed us to be successful by staying systems, turbochargers, electronics and combustion focused and determined to produce the highest-quality research. products and services for our stakeholders. In closing, I would like to express my gratitude to all It gives me immense pride to share with you that 2019 our shareholders for bestowing their trust on us and marks a centennial year for Cummins Inc. Throughout providing us with their support and foresight to help us our history, Cummins has delivered innovation to bring grow profitably. customers the right solution at the right time to power their success. It is this history of innovation and turning Thank You, challenges into opportunities that has allowed us to be successful. The centennial anniversary is not only about celebrating the past but also about staying relevant for the next 100. As we culminate the celebration of a century of existence this year, we stand at the threshold Mark Levett. of the journey here onwards for the next hundred. This moment presents us with both an opportunity and a privilege as it entrusts upon us the responsibility of preserving as well as strengthening our rich legacy. 2 Annual Report 2018 - 19 Our Mission Making people’s lives better by powering a more prosperous world. Vision Innovating for our customers to power their success. Values Integrity, Diversity and Inclusion, Excellence, Caring and Teamwork. 3 Sandeep Sinha Managing Director, Cummins India Limited Dear Shareholders, As we continue steadfast in our journey of growth, I am pleased to share that the results of your Company India on a Growth Path have been the best in the history in terms of growth, market share and profitability. We improved our earnings, exceeded our financial targets and delivered India strong cash flow. estimated to be th The Indian economy has witnessed a slew of reforms 5 like Goods and Service Tax (GST), demonetization largest GDP and expansionary fiscal policy measures like heavy in 2023 investment in infrastructure projects in the past few years. I am pleased to inform that your Company was Ease of doing business- successfully able to capitalize on the opportunities and Construction of deliver value to its stakeholders despite a slowdown 45 km roads/ day Rank 77 in the global economic scenario. We could do this in 2018-19, up from Global ranking in 2018 because of our capability to cater to evolving customer 27 km/ day target needs while still maintaining a disciplined focus on our achieved cost structures. in 2017-18 The Cummins Technical Center India (CTCI), inaugurated in March 2018 grew to a strength of 1700 100 skilled engineers that today, cater to the growing smart cities demand for leading edge technology solutions across the globe. planned in the upcoming Apart from our constant pursuit towards growth, we years also demonstrated awareness and wellbeing for others and were acknowledged for the same with two awards – ‘Golden Peacock Award for Corporate Social Consuming Class Responsibility-2018’ and ‘Special Commendation’ 85-90M 2026 337M Smartphone users at the Confederation of Indian Industry (CII)-ITC CAGR Sustainability Awards. 10.5% in 2018 (Highest global y-o-y 36M 2017 growth of 16%) As we celebrate Cummins Inc.’s centennial year, I feel proud that Cummins in India has been an integral part of the 100-year journey for almost six decades and has Sources: IMF, World Bank, United Nations, RBI, UNCTAD, eMarketer, Cashless India Consuming Class = Households successfully delivered a record performance in this with disposable income at 2012 prices > INR 485k special year. 4 Annual Report 2018 - 19 Financial Performance 2018-19 In the fiscal year Net profit before tax 2018-19, net sales for (excluding exceptional Free Cash Flow of your Company were at items) at In the fiscal year 2018- ` 19, net Croressales for your` Crores ` Crores 5,526Company were at 1,030 784 `4,952 Crores In the fiscal year 2018-19, net sales for your Company continued to return strong value to its shareholders in were at record `5,526 Crores, grew 12% over the alignment with its mission. previous year. Domestic sales at `3,873 Crores grew at 15% over the previous year and represents a new high An interim dividend of `7 per fully paid-up equity while exports at `1,652 Crores grew 5%. Profit before share of `2 each (350%) was disbursed in Q4FY19. tax at `1,030 Crores, grew 21% (excluding exceptional The 2018-19 financial year concluded with the Board items) over the previous year is also a record high. recommending a final dividend of `10 per share of `2 fully paid-up (500%) aggregating to `17 per share of `2 We are positive about our ability to grow the company each fully paid-up (850%), subject to your approval at profitably. The Company generated a significant the Annual General Meeting. amount of cash, strengthened its balance sheet and 5 Delivering Value to all Stakeholders Your Company continued to deliver value successfully launched 150 ton and 205 ton electric dump trucks by to its stakeholders by launching innovative products Bharat Earth Movers Limited (BEML). This has resulted and services to help customers win in their markets. in opening of avenues in the high tonnage dump truck market in India. In the Industrial business, your Company established a Power Systems plant in Pirangut dedicated to cater to In the Marine segment, your Company continued to the growing needs of the Rail, Construction and Marine deliver value to the Indian Navy, Coast Guard and business. Shipyards with its propulsion engines and diesel generator set offerings; and introduced powertrain Further strengthening our relations with the Indian solutions in the range 140 hp to 300hp for the fishing Railways (IR), your Company began production and boats segment. supply of the underslung power pack introduced last year for Diesel Electric Tower Cars (DETCs). Additionally, In the Construction segment, we have recorded the the scope was expanded beyond engines to a complete highest ever shipments, primarily driven by the increase power pack along with installation and commissioning in demand from the Construction equipment segment support. We also ramped up the supply of underslung in roads and infrastructure projects. With our entry in gensets used in Power Cars for long-distance trains the Backhoe loader segment last year, we started the thus enhancing revenue generation for Indian Railways. production and supply of our 3.9 liter engine and have For their recently launched Self-Propelled Inspection been successful in creating a presence in the segment. Car (SPIC) used for inspection of tracks, level crossings Working closely with several key customers and end and stations, IR chose the Cummins NTA855 engine users to understand the needs of the Excavator, Paver due to its underslung capability. Your Company also and Compressor segments, we successfully provided successfully provided Central Railways with engines fit-for-market products to cater to varying needs of the and loco-control system for a toy-train locomotive used customers. We also improved our value proposition in the on steep gradients and winding curves making this Excavator market by offering extended service intervals development a significant achievement for Cummins. and helped reduce their total cost of ownership. To address the upcoming BSIV norms in the Indian Market In the Mining segment, Your Company’s QSK 50 and in 2021 (notification awaited) for the Construction, QSK 60 engines successfully powered the recently Earthmoving, Material handling and Mining Equipment Power Systems plant inaugurated in Pirangut, Maharashtra 6 Annual Report 2018 - 19 (CEMM) - a tracked segment, we have initiated On the Exports front, our revenue growth was largely programs to launch superior electronic engines for all driven by low kVA gensets. Several product improvement customers. In addition to this, we continue to partner actions were also undertaken to strengthen our position with global construction equipment manufacturers to in the marketplace.