Cummins India Ltd (NSE: CUMMINSIND) Q3 2025 Earnings Call dated Feb. 07, 2025
Corporate Participants:
Shveta Arya — Director
Analysts:
Mohit Pandey — Analyst
Parikshit Kandpal — Analyst
Jonas Bhutta — Analyst
Amit Anwani — Analyst
Jason Soans — Analyst
Renu Baid — Analyst
Unidentified Participant
Amit Mahawar — Analyst
Vinod Chari — Analyst
Aditya Mongia — Analyst
Sanjaya Satapathy — Analyst
Pulkit Patni — Analyst
Priyankar Biswas — Analyst
Shrinidhi Karlekar — Analyst
Presentation:
Operator
Ladies and gentlemen. Welcome to Cummins India Limited Q3 FY 2024 ’25 Earnings Conference Call. We hope you all are keeping safe and healthy. [Operator Instructions] I will now hand the conference over to Ms Shweta Aria, Managing Director, Cummins India Limited. Thank you, and over to you, Ms Arya.
Shveta Arya — Director
Thank you. Good morning, ladies and gentlemen. I hope you’re all doing well and staying safe and healthy. Welcome to the Cummins India Limited Quarter 3 2024-’25 Earnings Conference Call. I am Shweta, Managing Director of Cummins India Limited. Joining me on the call today is Prasad Kulkarni, Interim CFO of Cummins India Limited. Thank you for joining us today. I would like to inform you all that the Board meeting — at the Board meeting of the company held earlier today, the Board approved sale of 100% subsidiary of Cummins India Limited, namely Cummins Sales; Service Private Limited CSSPL for a consideration of INR56.5 crores. Post the completion of the transaction, CSSPL will cease to be a subsidiary of the company.
The expected date of closing the transaction is April 1, 2025 and I would now like to share the financial results of quarter three financial year 2025. First, for the quarter ended, 31, 2024, with respect to the same quarter last year, our sales at INR3,041 crores are higher by 22% compared to INR2,502 crores recorded in the same quarter last year. Domestic sales at INR2,577 crores are higher by 18%. Exports at INR464 crores are higher by 43%. Profit before-tax at INR670 crores is higher by 11% compared to the same quarter last year. For the quarter ended, 31 December 2024 with respect to the previous quarter, our sales at INR3,041 crores are higher by 24% compared to INR2,448 crores recorded in the last quarter.
Domestic sales at INR2,577 crores are higher by 28%. Exports at INR464 crores are higher by 5%, profit before-tax at INR670 crores is higher by 13% compared to the previous quarter. The segment-wise sales breakup for the quarter ended, 31, 2024. For the domestic business, power gen domestic sales were INR1,271 crores, 18% higher compared to last year and 42% higher compared to last quarter.
Distribution business sales was were INR746 crores, 13% higher compared to last year and 13% higher compared to last quarter. Industrial domestic business sales were INR511 crores, 24% higher compared to last year and 26% higher compared to last quarter. For exports, high-horsepower exports were INR202 crores, 47% higher compared to last year and 1% higher compared to last quarter. Low-horsepower exports were INR216 crores, 47% higher compared to last year and 9% higher compared to last quarter. Regarding the sales outlook for the full-year 2024-’25, we expect to achieve double-digit revenue growth over the fiscal year 2023-’24. I now open the session for questions. Thank you very much.
Questions and Answers:
Operator
Thank you very much, [Operator Instructions] The first question is from the line of Mohit Pande from Macquarie Capital. Please go-ahead.
Mohit Pandey
Yeah, good morning, ma’am, and thank you for the opportunity and congratulations for the set of financial results. My first question, ma’am is on the domestic power gen business. If you could please comment on the pricing trends at the portfolio level and now that there is more than six months have passed with full adoption of CPCB port, if you think pricing levels have more or less settled. So that would be question number-one, ma’am.
Shveta Arya
Hi, Mohit. Thank you for the question. From a powergen domestic perspective, so we believe that pricing will take at least another one or two quarters to settle in the market. We spoke last-time that there was inventory of CPCB2 available till the last quarter. So we still will see — now we will see the market completely buying products. So another quarter or two is what we believe pricing will take to settle.
Mohit Pandey
Okay, ma’am. And a follow-on to that, if you could give end market-wise color on what has driven the strength in the domestic power gen market in this quarter that would be very helpful. Thank you.
Shveta Arya
Yeah. So the infrastructure growth in our country continues. And specifically for the power gen market, we see demand in the mission-critical power segment as infrastructure is getting built-in the country that continues to grow. Data center segment continues to grow in our country. And with the infrastructure spend, there are many other segments which continue to grow. So this demand is actually across various segments.
Mohit Pandey
Okay. And ma’am, typically you give breakup across UHP and medium HP, high HP for domestic, if you could please share that for this quarter.
Shveta Arya
Yes, I can do that. For this quarter, for Power Gen Low Horsepower, we recorded sales of INR82 crores. For the mid range, we recorded sales of INR196 crores. For the heavy-duty, we recorded sales of INR99 crores. And for the high-horsepower, we recorded sales of INR893 crores in this quarter.
Mohit Pandey
Okay, ma’am. Ma’am, does the high HP sale number imply a big data center delivery in the quarter?
Shveta Arya
Or yes, it includes data centers. It includes other mission-critical segments as well, which buy the high-horsepower products.
Mohit Pandey
Understood. My very last question on the sale of the wholly-owned subsidiary today, if you could give more color around the rationale and how was the valuation for that arrived? That would be my last question. Thank you.
Shveta Arya
Sure. So this wholly-owned subsidiary is actually a dealership entity and we had this one dealership entity that the company had shares in across the country, there are other dealerships that we have as well. And strategically, what we have seen is that having independent dealers around the country really helps us serve our customers well. So strategically, going-forward, that is the model that the company which we have adopted for the last year, last few many years, we will continue with that model. And with that intent in mind, we have divested this dealership entity. So I hope that helps.
Mohit Pandey
And any color on the valuation, if it is possible to share?
Shveta Arya
No, it’s a normal process of valuation that every company follows using. There’s nothing out-of-the ordinary.
Mohit Pandey
Okay. Understood, ma’am. Thank you so much and wish you all the best. Thank you.
Shveta Arya
Thank you.
Operator
Thank you. The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go-ahead.
Parikshit Kandpal
Yeah, hi,. Congratulations on a great quarter. So my first question is on pricing. So since these products were introduced by us in July, so from that point until now, have you seen any cut in prices for your own product portfolio?
Shveta Arya
So thanks for the question, Parikshit. Parikshit, we are still seeing the pricing settle. As I said, we will still see changes in the pricing probably come in the next two quarters. So we are watching this space continuously.
Parikshit Kandpal
When I’m talking about your product portfolio, about your.
Shveta Arya
Our product portfolio, we have been able to maintain pricing till now.
Parikshit Kandpal
Okay, that is what I was asking about.
Shveta Arya
Yes, we have been able to maintain our pricing.
Parikshit Kandpal
And if I look at the universe of the subsets of — I mean, till last few quarters, the competition has been lagging and introducing their nodes. So do you think now the — our competing nodes would be like across the competitive and entire competitive environment? So are — we have now the entire portfolio of competing products from our peers.
Shveta Arya
So yes, now everybody has launched their products. Cummins is the company which has products across the range. So our competition definitely has launched products in the ranges that they operate in.
Parikshit Kandpal
Is there any comments from your own market intelligence that what could be the pricing differential and also the total cost of ownership because if our engines are more efficient or they have more power density, do you think we are still competitive even if we are priced higher? So first of all, how much is the pricing differential between our and the universe and whether the total cost of ownership still give better value to customers?
Shveta Arya
What I can tell you is that we launched the products in July ’23 and we’ve had the time to really work on our product very well. So the total cost of ownership definitely works for the customer and our product is very well-accepted. The technology is quite advanced and our products are doing well in the market. So well-accepted product. We have been able to work on the product to make sure that the TCO works for the customers. And as far as pricing goes, this will settle in the market in the next two quarters and you’ll see how that goes. But the product is well-accepted and this is — this is advanced technology. There is higher content in the products and yet from a total cost of ownership perspective, given the advancement in technology, we believe that it works for our consumers.
Parikshit Kandpal
Any comment on pricing differential between us and the peers?
Shveta Arya
Yeah. It is quite dynamic, very different across nodes, very different across segments. It’s very difficult to give you one single answer for this.
Parikshit Kandpal
But high-single-digit or early double-digit mid-teens. So any commentary?
Shveta Arya
No, it varies. It really varies and it’s settling. So it’s quite dynamic. It’s not settled yet. So I won’t be able to give you a number just yet.
Parikshit Kandpal
But we’ll be higher than the peers, right? Our pricing will be higher than the peers. Is that the right understanding?
Shveta Arya
We have very advanced technology and we bring in expertise from around the world. We have aftermarket presence, which really helps our customers. So we definitely our brand commands that kind of value in the consumer’s mind. So I would say that what drives the value — drives the value of our product for our customers.
Parikshit Kandpal
Okay. And sir, the last question, the parent has announced $200 million CapEx for India and the country. So what portion of that will come to the listed entity? So how will it get divided between various entities? What will be our share in that and what will this capex be incurred for?
Shveta Arya
So our — we as a company keep evaluating our capex needs very regularly to see what are the new product ranges that we want to launch, what are the new technologies we want to launch for our customers. And that’s a regular cycle. And the parent has announced for a few countries their capital expenditure. It will definitely come to us as well based on our needs, what there we need to spend in our manufacturing capability, where we need to spend a new product introduction depending on that, it will come to us and that’s under evaluation at this point in time.
Parikshit Kandpal
Thank you. Okay, sure, sure. Thanks, John, let me ask you more questions. Thank you. Wish you the best.
Shveta Arya
Thank you.
Operator
Thank you. The next question is from the line of Jonas Bhutta from Birla Mutual Fund. Please go-ahead.
Jonas Bhutta
Yeah. Good morning, team and congratulations on a great set of numbers. Two questions, Shwatha. Firstly, on the domestic growth, what we see, particularly in the high-horsepower, there seems to be a delta of roughly INR300 crores to INR400 crores versus the normal run-rate of INR4500 crores, which is roughly INR900 crores this quarter. Is it fair to say the large part of this delta is driven by the data center order execution.
Shveta Arya
Thanks for the question. This is driven by a few things. Definitely, there is data center growth. There is also growth in mission-critical power requirements across different segments and there is better execution as well at our end. So it’s a mix of all those things.
Jonas Bhutta
Understood. And does the current order book on the data center projects give you enough visibility to sustain these kind of delivery levels at least for the next three to four quarters?
Shveta Arya
Data center demand continues to grow, Jonas, and we are continuing to see the movement in the orders coming in. So difficult to tell you for the next three, four quarters, the demand continues for now. We are continuing to build the order board. I really won’t be able to comment on the next three, four quarters with the — at this point in time.
Jonas Bhutta
Time. Sure. And is this what explains the — both year-on-year and a sequential dip in our gross margins, a higher execution of the data center piece and even a almost doubling of our LHP sales. You know, does that sort of bridge the gap in terms of the gross margin movement? So the gross margin movement.
Shveta Arya
Jonas, I would say the two big factors over there. One is that in the last year, if you’re looking at that, there was a one-time benefit that we had, which we didn’t have this year. And then overall mix of products that we saw in this quarter is what impacts the gross margin. It is not just those two that we pointed out, but the overall product mix that we saw in the quarter and the onetime that we had in the last year, which we didn’t have this year.
Jonas Bhutta
My second question was on exports. You know, any movement or development in CIL’s exports towards the US particularly, because that was something that you know was expected to start moving once the CPCB adoption sort of happens and we are more or less at the same at par with the US emission norms and we also sort of, I think a couple of quarters back announced that we’ve got certified by the US agency for a certain note. So any visibility on how is that panning out and how is that likely to pan-out over the next couple of years?
Shveta Arya
Yes. Janas, we launched certain products in that case for the North-America market in the higher ranges electronic engines. And these were launched some time back. So we are still watching how the market but the products got launched.
Jonas Bhutta
So would it — can you share North-America as a percentage of our export sales in the nine months.
Shveta Arya
No, difficult to say that really the products are picking-up, very early days,. So still picking-up..
Jonas Bhutta
Got it. And any update because as the parents sort of announced the $200 million capex across three regions, you know, any clarity because the parent entity, some of the factories are getting pivoted to executing these large data center orders there themselves. There was belief that certain products sort of get — lines get shifted to China and India. Any development there? And should we read into the capex announcements in sync with this?
Shveta Arya
I would say that I answered this earlier as well that we are continuously evaluating our capex requirements, especially towards building our manufacturing capabilities and enhancing our products as-needed for the market. And based on our requirement for our customers and the markets we serve here in India is how we will get the capex. And that continues. The company is cash-rich and we continue to get the capex that we need to serve our customers. And it is in evaluation. This is our needs at this point in time.
Jonas Bhutta
Thank you. Sure. That’s helpful and wish you all the best. That’s it from my side.
Shveta Arya
Thank you.
Operator
Thank you. The next question is from the line of Amit Anwani from PL Capital. Please go-ahead.
Amit Anwani
Hi, thanks for taking my question. My first question pertains to the Industrial segment where we have given very strong performance and the nine-month sales is almost equivalent to the full-year sales of last year. Any color you would like to give, which sub-segments railway, mining, construction, where are we getting traction and how one should look industrial sectors in coming quarters with respect to the trends for you? You and possible for you to share the breakup of sub-segment for the first-nine months, yeah.
Shveta Arya
Sure. Let me do that. For the first-nine months, let me give you a little color on the sub-segments of the industrial market. Construction, we have INR455 crores. Rail, we had INR357 crores, mining, INR170 crores and then the rest of the segments like marine compressor, oil and defense, others. So I gave you the top few segments there. The overall number for the nine months is INR1,1289 crores. In the industrial segment, there are two or three things which led to this growth. The first, the construction segment, which because there was strong demand from our customers, specifically execution of infrastructure projects that is happening and hence construction equipment movement there and demand.
So we had backlogs over there, which we were able to clear through better execution and there was strong demand in the market. So that was the construction segment. And then railways, a really good demand from railways and we were able to match it with good execution. So this demand was across diesel electric tower cars, power cars, all the places we play in the railway segment. So good demand in the quarter with good orders coming in and execution in the railway. Those are the large factors for the Industrial segment growth. Do we expect the trends to continue? The growth of this segment is largely linked to the capital expenditure by the government. We continue to see that expenditure happening. And hence, we continue to see that demand.
Amit Anwani
Right. My next question is on the gross margin. You highlighted that the previous base quarter was having some benefit — one-off benefits and the mix impact. How should — how should one look at the gross margins now going-forward as you’ve already highlighted that the prices are yet to settle for the CPCB4. So shall we consider this 35% as a kind of baseline number going-forward or is there any chance that the gross margin will further normalize in upcoming quarters?
Shveta Arya
So from a gross margin perspective, I think our endeavor is to continue improving. Improving it. It obviously depends on lot of factors like mix and others during different quarters. I would say our efforts to make sure that our products, we are continuously working on them, bringing in cost reductions, bringing in efficiency in our manufacturing, those efforts continue. So the endeavor is to continue improving the margins.
Amit Anwani
Okay. Sure. Lastly, a bookkeeping question. What was the value-wise contribution of CPCB 4 in this quarter?
Shveta Arya
Sorry, contribution, the contribution of CPCB 4 in sales in this quarter. Okay.
Amit Anwani
Yeah.
Shveta Arya
Okay. CPCB 4 roughly would have been around 40% in this quarter of total. Of the total power gen.
Amit Anwani
Okay. Thank you so much. Thanks.
Operator
Thank you. We’ll take the next question from the line of Jason from ITBI Capital. Please go-ahead.
Jason Soans
Yes, sir. Thanks for taking my question. Just in reference to a previous participant also, I understand that you mentioned the industrial segment breakup, but just wanted to from your viewpoint, just wanted to know-how is the outlook in various subsegments in terms of end-market demand, say it construction, marine comprehensors or mining. Just wanted and in relation to that, just also would want to ask with the CEV norms coming out in January 2025, what is the pricing increase, if any, you are expecting or the newer.
Shveta Arya
Let me answer the first question on the construction rail mining trends first. I’ll ask you probably to repeat the second question later. The first question, how do we see the trends? So I did tell you in the construction market, there was demand and there was some backlog. So backlog we have cleared. The demand continues, but construction is a segment which gets cyclical as well. So we continue to watch it, okay. The base demand because of the infrastructure growth in the country and the capital expenditure continues. But it — it is a segment which can be cyclical.
So we continue to watch that. Difficult to say at this point in time how that — how that will play-out in this year. Rail. In rail, there were quite a few orders that came in the last quarter and we were able to execute them as well. The base demand in the railways continues. Definitely the frequency of the orders and all of that changes based on how the tenders come out. Then again, mining, we do expect activity to pick-up in mining. We — again, it’s a tender-based business. So it really depends on the tender velocity. We anticipate the tender velocity to be better in this year remains to be seen how the tenders come out. And if the tenders do come out in time, then we will definitely be able to execute and fulfill the demand.. Sure, sure. And you repeat your second question from me?
Jason Soans
Yes. So the CEV, the construction equipment vehicle, the BS5 norms coming from January 2025 for the construction equipment and agricultural equipment, which is a non-road segment. Just wanted to know with engines, you catering to that segment and with that, that’s already come into effect. So just wanted to know in terms of you supplying engines to the OEMs, what is the percentage, if anything you have seen and the margin impact for us for the industrial segment?
Shveta Arya
It is a small portion of the total sale and whenever these kind of emission changes happen, it’s a wait-and-watch after you introduce the product. It takes the market some time to adopt it, right? So both of those things, it’s a small portion. I would not say that it has a very large impact or bearing on the numbers.
Jason Soans
Okay. Sure. And, just wanted to know in terms of your — you obviously alluded to mission-critical equipment. If you could provide some color in terms of further breakdown, like for example, say, manufacturing real-estate, hotels, what do you think is driving this mission-critical equipment? Just would want some more color on the end-market demand in terms of power gen.
Shveta Arya
So it’s across-the-board really, Jason. There are — there are segments like commercial reality, there are definitely manufacturing, there are hospitals. So it’s across-the-board, very difficult to split it for us.
Jason Soans
Yeah. Sure, sure, sure. And finally, just would want to know from an export standpoint, your picked-up this quarter. So just in terms of geographies, just some color on how Europe or how is for Africa, how trajectory looking in those geographies?
Shveta Arya
So it still remains, exports still remains a mixed bank. This quarter we did see Middle-East pickup. We definitely saw Latin-America pick-up as well. But it’s a mixed bag. We continue to watch the situation. Our efforts to improve our sales in each of these regions continue and some of what you see is also a result of our efforts happening in those regions. But it’s a mixed bag at this point in time, continue to watch it. There’s no specific trend that I can point out to say that this is likely to continue and sustain. There are definitely these geopolitical issues that continue to exist and now with the US tariffs, everyone is evaluating around the world on how they will impact each of the end-markets. It’s under evaluation at this point in time, likely to have an impact under evaluation.
Jason Soans
So thanks. Those are all my best. Thank you so much. Thank you.
Shveta Arya
Thank you.
Operator
Thank you. We’ll take the next question from the line of Renu from IIFL Securities. Please go-ahead.
Renu Baid
Yeah. Hi, good morning,. My first question would be a bit on the Industrial segment. If you see incremental growth for the quarter essentially has come from mining and to some extent from rail. So to this extent and can you throw some light in terms of — there were quite a few new products that were in pipeline for these end-markets. Where are we with respect to the commercial volume offtake for the new product introductions in these segments. And do we see the volume growth uptake that you’ve seen in the mining and rail sustaining through the next few quarters?
Shveta Arya
So in the rail segment, I definitely said that diesel electric tower cars, powered cars, those are the places where we had good orders. These are existing products, definitely in the power car space, CTCB4+ products go. So if that’s what you’re referring to the new product, well-accepted in the power card segment and that’s what led to the growth. And it — railways does continue to invest. So it is a tender-based business. So the demand continues to be based on the tender velocity that come up. We continue to see the base demand in the railway segment. In mining, again, execution based on tenders in this particular quarter. So there were more number of orders to fulfill in this quarter. And these were existing product-related sales. So there is continuous endeavor to upgrade our product. The product in the railway segment was the new product that we launched well. Mining also, we expect the velocity of tenders to be to be there in this year as well. So both — in both those segments, given government infrastructure spending, we continue to see demand.
Renu Baid
So where are we with respect to the approvals for Vandev train and the products that were going-in these products.
Shveta Arya
So we are working on those. We are working on those products and it’s a long-time. It’s a long process. It’s a long gestation period. These are new products. There’s a lot of technology, R&D effort that goes on at our end, along with the railways as well. And these products also take time to come out into the field because there’s a long trial period for them. So it will take some time. We are continuing to work on it, and we are on track based on our internal plans.
Renu Baid
Okay. Second is on the distribution segment. While there was a broad perception that the growth in distribution was significantly led by the kits for upgrade of the old gensets now that CPCB 4 has been in-place, but we have continued to see the distribution revenues inch northwards. So can you highlight the key drivers here would these be associated with the AMC revenues for CPCB4 products or a good growth coming in for industrial base? Some more color on this would be appreciated.
Shveta Arya
In the aftermarket, it is really linked to the utilization of the product. The higher the products get utilized in power gen or industrial in each of those sub-segments, the higher utilization, which we are seeing happening, that leads to better aftermarket demand. So that is one of the factors. And while there is CPCB4+ product available in the market, that is for new sales. For existing Gen cells, we provide these solutions like retrofit emission control device or DSK and they are continuing to pick-up because if you see in the NCR region during November and December when the guidelines are introduced, people who want to buy new then go for CPCB4 class, people who have existing GenSets have the option to buy retrofit emission control devices or do you fuel kits from us. So those continue to sell. So that combined with higher utilization of assets already on-ground is leading to the demand for aftermarket and definitely better, better execution of all those.
Renu Baid
Sure. And my last question is, previously the team used to reiterate that even if we see CPCB4 coming in, given the localization, the broad guidance on the gross margin was in 34% to 36% range. And so do we stand-by those numbers given the way the mix is evolving and commodities are behaving? And also could you mention what would be the level of localization that we are currently at for CPCB4 range and what are the plans to increase it further in the next 12, 15 months? Thank you.
Shveta Arya
So let me first answer the localization part. Has a very large part of the product portfolio localized. We are a global company. Our supply-chain is quite integrated and based on the scale of the components in different regions, we get them for our products. But largely the CPCB4+ product is localized and we continue to move towards opportunities where we can localize even more. And then on the margins, we are as now the products sell more, we get more information, we get more opportunities to improve the value that we provide to our customer. We also get more information on our product usage. That really guides us on how we can make our products even more cost-effective. So that effort continues and that can lead to a margin improvements, but that’s an endeavor at our end to try and improve our cost so that we can provide better value to our customers.
Renu Baid
Thank. Got it. Thanks much and best wishes team. Thank, sir.
Shveta Arya
Thank you.
Operator
Thank you. The next question is from the line of Subramanium Yadar from SBI Life Insurance. Please go-ahead.
Unidentified Participant
Ma’am, if you can let us know what was the one-time benefit in Q3 FY ’24? And you also mentioned that overall mix in this quarter was different. So which category if you can highlight lower KV or in export lower or higher whichever is where the margin is lower to the general.
Shveta Arya
So the onetime in the last year was some provisions that we had taken, which we at the end-of-the year based on assessments had to reverse. And from a mix perspective, this is across products, different products that we have. We have a portfolio of products and across a number of products, at different points in time when we end-up selling different products, it can impact the margin. So it’s not one or two that I can highlight for you that there were — there was a mix across a portfolio of products.
Unidentified Participant
So my understanding was ma’am because you have taken some low-credit products. So is that contributing to lower gross margin or is it that export is increasing where in lower horsepower you might have a lower-margin?
Shveta Arya
Sorry,, could you please repeat that question? It wasn’t clear.
Operator
Sir, I’m sorry to interrupt. I would request you to use your handset. Your voice is little bit.
Unidentified Participant
Yeah. Hello. Can you hear me now?
Shveta Arya
Yes. Yes.
Unidentified Participant
I’m just wanted to understand because we have cut prices in the lower KV segment, if I’m right. So is it hurting our gross margin at that level or is it because our exports are increasing, wherein lower horsepower we might have a lower-margin in that category.
Shveta Arya
No, no. I would not say that is the case. It’s a matter of — on certain products, we have different margins and it’s a mix of products that have gone out into the market. I cannot really attribute the margin on the two aspects that you mentioned.
Unidentified Participant
Okay, okay. Thank you, ma’am. Yeah.
Operator
Thank you. The next question is from the line of Amit Mahawar from UBS Group. Please go-ahead.
Amit Mahawar
Yeah, good morning,, and it is great to see strong growth in domestic market. I have two quick questions. First is, can you let us know the Nine-Month market-share in CPCB 4+ product vis-a-vis last year. So what is the market-share we have in four-plus product this year? I’m sure there’s no base last year as well.
Shveta Arya
The CPCB 4+ product continues to do well in the market. The consumer acceptance for the product is high. People recognize that it is very advanced technology and the Cummins brand is delivering the promise of reliability along with innovation. Our market presence in CPCB4+ is also strong as our presence has been all along in the market.
Amit Mahawar
So can I still say it’s like more than 85%, 90%, which is the case last communication what Ashwarth had given us was almost 90%. Are we maintaining that number?
Shveta Arya
I won’t be able to say that. I can tell you that our market presence in CPCB4+ is very strong.
Amit Mahawar
Fair, fair. Thank you. The second question is on exports. You alluded to North American mandates we have. We have had lot of launches in last years. Is the run-rate for exports in ’26 and ’27 looking higher to you basis these notes and which are these notes in terms of end-markets? Thank you.
Shveta Arya
So end-markets continue to be a mixed bag for us really, Amit. And now with the US tariffs being announced, we’ve gone — we are all evaluating across different regions on how these tariff changes will impact the end-markets. At this point in time, it’s really difficult to say because the evaluation is in-progress, the announcements of tariffs have been very recent. So yeah, please go-ahead, you were saying something.
Amit Mahawar
Yeah, the quick one is, can I say the current nine-month gross margins and I understand the limitation in guiding us for that is the best-case we have. We have the best of all the possible scenarios pent-up in rail, possibly with good margins, distribution, unprecedented growth, you had a very strong mix, perhaps that it’s just ever in last six quarters. Can I say Nine-Month gross margin is the peak number we have today? Thank you.
Shveta Arya
It would be the peak number that we’ve seen. And you’re right, it’s a mix of all those factors really working in our framework. And we continue our efforts towards cost-reduction and providing value. So you know, definitely all the factors was very positive just for us in the business.
Amit Mahawar
Thank you,, and good luck.
Operator
Thank you. We’ll take the next question from the line of Vinod from PhillipCapital. Please go-ahead.
Vinod Chari
Yeah, hi. Thanks for the opportunity. If you look at the last two budgets, last two budgets, the government has been emphasizing a lot on SMRs. So do you think structurally this could be a direct competition to a product like DG set-in — when you come to data center applications. How do you look at the future of data DG sets in the — given that there’s a lot of R&D happening on the battery side as well on storage as well as SMRs getting pushed. How should we look at the whole industry, say, say, 10 years down the line?
Shveta Arya
From our perspective, we continue to see data center demand growth. And in the data center demand, the diesel gem-set requirement, the diesel gem-set is the backup requirement, which has the ability to provide continuous power for a long period of time. And that is the insurance that data centers really value. We see that continuing at this point in time and we don’t really anticipate the small reactors, there’s still work going on over there. And the way we see it, small reactors definitely, then they become feasible for the data center market can be the primary power provider to data centers. Diesel GEM cells will continue to be the backup power requirement of the data centers because this is the — this is the — diesel cells are the products which can provide continuous power no matter what conditions for a long period of time as much as you can maintain them and keep providing the fuel. So it does remain the primary backup power source.
Vinod Chari
But what about battery storage?
Shveta Arya
Once again, the reliability of a diesel as a buck power is well-known. And at this point in time, we do not see that getting replaced so easily till the reliability and the prices of the batteries come to very, very similar space of a diesel genset, which is not the case today.
Vinod Chari
Okay, okay. Thanks. Thanks for the clarification,. Thank you.
Operator
Thank you. [Operator Instructions] Thank you. We’ll take the next question from the line of Aditya Mongya from Kotak Securities. Please go-ahead.
Aditya Mongia
Yeah. Hi, everyone, and thanks for the opportunity. The question that I had was more on the Mexican or let’s say, the interplay over here on tariffs as you are suggesting. Just wanted to kind of get a sense that basis our capabilities, can we replace some of the notes that Mexico is giving to the US in Power Gen. Just some more color on what could be the business prospects from a tariff increase that happens in case of Mexico? That would be the question here.
Shveta Arya
So first and foremost, the tariff increases are being evaluated at this point in time to see what is the impact. Second, from a supply-chain perspective, it’s not just the tariff, it’s also the logistics cost and all the other things that get added when you send a product from one place to the other. So it’s a mix of those things we have to evaluate to optimize our network to say which is the best place to build and which is the best place and which is the best place to build the engines and export. So it will be an evaluation of these factors this year, to be honest, and that’s continuing to go on at this point in time. I won’t be able to really say whether — which way it will show us the feasibility.
Aditya Mongia
Just a follow-up ma’am, not a separate question, but is this are the notes that we are making a direct overlap or do we have to make separate notes by itself to kind of replace Mexico if the opportunity comes?
Shveta Arya
No, no, no. The North American market from a powergen perspective is a very different market. So while we — we make very different products in India, while we can make those products, but these are — these are different, there is no overlap.
Aditya Mongia
Got that. I’ll get back-in the queue for more questions. Thank you. Sure.
Operator
Thank you. The next question is from the line of Sanjay Satpathy from Capital. Please go-ahead.
Sanjaya Satapathy
Yeah, thanks for the opportunity ma’am. Can you please just help us understand that considering all the mix change and everything that has happened, what is the kind of sustainable EBITDA margin that you are looking at and is there any scope of improvement from here on?
Shveta Arya
Scope for improvement, we definitely hope to because we are working on cost-reduction for our products. At all points in time, we are looking to improve the value to our customers and we continue to get the benefit of our scale. We also continue to bring in efficiency in our operations. So the endeavor to improve the margins is there. But just like you said, the margins are a play of our efforts, what’s happening in the market, the volumes that we get and also the mix finally that we see across our different product portfolio. So it’s — it’s a mix of all those things.
Sanjaya Satapathy
So can we say that, I mean, then this 19 odd percent what you have reported, that is kind of sustainable and with all the efforts that you’re talking about, there can be improvement, but we don’t know whether it will happen now or not.
Shveta Arya
You’re right. Our endeavor is to improve. And will it happen or not, I won’t be able to give you a number just yet or be able to tell you. Our efforts continue.
Sanjaya Satapathy
Understood. And my — the second question is that on this, I said you have said that you have the inflation and many such things, but still the price is a little unsettled and you’re saying that it will take couple of quarters time is — but how is the overall inventory situation and is the industry and a situation to correct any kind of competitive dynamics quickly enough or the inventory will kind of stop you from not being able to responsive to the market changes.
Shveta Arya
So the inventory of CPCB2 is now done in the market. Now the market — the demand in the market will be only for CPCB 4 plus in this year. So that is not a factor. But given that all the competition has their products in the market, now the CPCB 2+ inventory is extinguished in the market. And now that is why I say that we will see another quarter or two to see how the pricing settles. So — but no, inventory impact, I think we — that’s behind us at this point in time.
Sanjaya Satapathy
Okay. And how is the difference your price versus your competition and is the pricing premium similar to what it used to be in CPCB2 or the premium has gone up?
Shveta Arya
Cummins, Cummins is a well-known brand in this space and our products are very well-accepted. The technology and the reliability of the product is well-accepted. So the value to the customer is through those factors. And pricing is a function of very different — different dynamics in the market continues to change. It’s difficult to say that here is — here is one answer for the pricing that we get-in the market because it varies across nodes, across customer segments, segments across various different brands.
Sanjaya Satapathy
But overall, are you really skeptical that there can be significant change in pricing because you were saying that it will take couple of quarters to settle, but like how — is it going to — is it like there are quite a few new entrant which are coming in or it is going to be a competition among the known players and considering the technology that you have, are like the file you were saying that settle, but already in the market for some time. So overall, how should one see it?
Shveta Arya
I’m not skeptical. This is a very, very advanced technology. And because of the content addition, the consumers take time to adopt and for the real pricing to settle in the market. That is what I mean. It’s not being skeptical about it, but just that the content has changed and the price levels in the market have changed. The — and the product is an integration of different components, very advanced technology. So really the reliability of a product comes out after a period of time. That’s what the customers value and that’s when they are ready to pay the higher price for the content and the technology. The customers have to see the product performing in the market for the long-term, see the reliability, see the quality and understand this technology. There are the competition which existed, those are the competitors in the market. There are no new entrants per se. But this is a very difficult and advanced technology to master. So it takes time to.
Sanjaya Satapathy
Understood, sir. Thanks a lot.
Operator
Thank you. [Operator Instructions] The next question is from the line of Pulkit Patni from Goldman Sachs. Please go-ahead.
Pulkit Patni
Yeah. Thank you for taking my questions. Two questions. The first one, ma’am, while I completely understand there has been a mix change, but just my elementary understanding is that what you’ve done on high HP in this quarter is INR900 crores of revenue and this is a number you used to do on the overall PowerGen number till a few quarters back. Our understanding was that on the high HP is where you make the maximum margin because that’s where our brand positioning is the strongest and competition is the least. So to that extent, can you explain what this mix change means? Because the contribution of the biggest HP segment seems to be the highest in the quarter. That’s my question number one.
Shveta Arya
Thanks for the question, Pulkit. So yes, there is the sales of around INR900 crores in the high-horsepower segment definitely is there. But across — across all the different customer segments and applications that we sell, there is — there is power gen here, there is industrial markets over here, which have various different sub-segments and there is distribution business unit. And there is a portfolio of products which goes in each of these three that I spoke about, Industrial Distribution, different products that go in. And based on what volumes have gone up and which sub-segment over here, the actual margin that you see is a play of that. High-horsepower is just a part of power gen. There are various other sub-segments also in industrial where we had higher volumes, for example. Distribution also grew. So that comes into play over here. Yeah. So Pulkit, that is the reason you see the margin play-out in this way.
Pulkit Patni
Sure, maybe I was looking at too simplistically. My second question is on capex. Now even if we leave aside what the parents said. Given the fact that we finished our capex cycle about five years back, we’ve seen very strong growth in the last few years. Are we reaching a stage where we need to now plan new capacity or we have sufficient capacity there for the next few years even without adding something, we are in a good shape. Just you know, I’m not trying to time it, but are we close to that start of the capex cycle for you again?
Shveta Arya
We have been continuously adding capex over the last few years, continuously, slowly, steadily adding capex. And even today, we are evaluating — so this is a continuous evaluation process,. Well, you’re right that there was a large capex cycle that we had five years ago. Even in the last five years continuously small capex has continued to be aggregate. And there are many projects going on even now, sustainance projects which for our facilities, which are going on, which are used for the upgrade of our manufacturing facilities, which are used to improve the output of the facility, you know, build more utilizing the same lines and also some newer products require changes. So all of that has happened and is continuing to happen even now.
Pulkit Patni
Sure. So any CapEx number for next year that you would like to share with investors.
Shveta Arya
I know I won’t be able to share that with you.
Pulkit Patni
No problem. Thank you for answering my questions. Thank you.
Shveta Arya
Thank you.
Operator
Thank you. We’ll take the next question from the line of Priyankar Biswas from BNP Paribas Exane. Please go-ahead.
Priyankar Biswas
Good morning, ma’am. My first question is regarding your distribution segment. Can I get some idea like what would be the contribution of RDCD and dual kits, let’s say, the distribution mix? And what is the reason that I asked, I also want to get a sense of the continuity because I guess there is still a lot of, let’s say, pre-CPCV for products that needs to be converted. So can you throw some color on that aspect?
Shveta Arya
Yeah. So we did saw — we did see good contribution of the RECD dual-fuel kits in this quarter. But in the distribution business, the asset-base that we have in Power Gen and industrial segments on-the-ground at this point in time, which is managed by our distribution business is really large. So the contribution of RACD as compared to what we do for our existing asset and also replacing engines, which are old, rebuilding them doing all the AMC work for all our assets, that is really the larger contribution to the DV business. While I can definitely tell you that we have seen strong growth in the RECD product sale as well, which we continue to see because of large asset-base in the Power Gen segment today, which is non-CPCB4+ and certain government policies which keep coming in or like the CAQM efforts that happen in Delhi or the graph guidelines that happen in Delhi or different state pollution control boards, which continue to come up with these guidelines for their states mandating the use of RECB or that is continuing at this point in time. So we will see that demand.
Priyankar Biswas
So is it fair to say that this level of distributions at least for the nine months that you have delivered that should possibly continue or maybe grow in the next coming years. So would that be a fair assessment?
Shveta Arya
Yeah, absolutely. Our endeavor to grow. As we continue to grow our asset-base in the field, we definitely have endeavor to be able to service them and have them in our foods. So we definitely put in our efforts in that direction.
Priyankar Biswas
And ma’am, just two small numbers that I require from your end. While you gave us the breakup for industrials and what would you mind to share the numbers for the water and marine specifically for the quarter?
Shveta Arya
For the marine space for the quarter, we had around INR20 crores of revenue for this quarter. And what else did you ask? Marine and compressors?
Priyankar Biswas
Compressor.
Shveta Arya
Yeah. For compressor in the quarter, we had INR51 crores.
Priyankar Biswas
Okay, ma’am. That’s largely all from my side. Thank you. Thank you.
Operator
Thank you. Ladies and gentlemen, we’ll take the last question for today, which is from the line of Srimidi Karlekar from HSBC. Please go-ahead.
Shrinidhi Karlekar
Yeah, hi. Thank you. My question is on exports business. Would it be possible to comment us on-demand outlook for some of the large exports market like US, UK and China?
Shveta Arya
Very difficult because we are in the evaluation of phase of seeing the tariff impact at this point in time. What we have done in the past few months is we spoke about it, we have made efforts to increase our exports to each of the markets that we operate in. From a product portfolio perspective, from channel perspective, our endeavor has gone in and we are continuing to do that. But the tariffs have recently been announced and that evaluation for different regions is happening and the answer for different regions might be different. So very difficult to tell you at this point in time what that will end-up in.
Shrinidhi Karlekar
Yeah. Thank you. And my second question really is on the — this order backlog at the hand. I know you don’t really quantify that number, but would it be qualitatively comment whether your order backlog at the hand is higher compared to the previous quarter and how is it compared to the same-period last year?
Shveta Arya
And order backlog as compared to the last quarter, what would we would have cleared would have been pretty similar. As compared to the last year same quarter, we would have done better because we’ve executed better in this quarter. We’ve been able to work a lot in clearing our backlog. So definitely this year, this quarter as compared to last year, much better,.
Shrinidhi Karlekar
No, I was just saying pending orders, is it more or it has been we have backlogs.
Shveta Arya
You mean do we have backlogs?
Shrinidhi Karlekar
Yeah, so the backlog is it higher?
Shveta Arya
We have a lot of backlogs. We’ve really managed to execute and clear a lot of backlogs to be honest in this quarter.
Shrinidhi Karlekar
Okay, understood. Thank you for answering my questions and all the very best. Thank you.
Operator
Thank you. Thank you. As that was the last question for today, I would now like to hand the conference again to Ms Shreta Arya for her closing comments. Over to you, Ms Aria. Thank you.
Shveta Arya
Thank you everyone for your active participation and engagement during the call today. Cummins India believes that the broader domestic economic outlook is stable and India’s GDP is expected to grow by 6.4% to 6.6% in financial year ’25 based on the current estimates. Fiscal and monetary policy stability, coupled with the government’s focus on infrastructure development and strong private sector participation really works well for our end-markets. The company continues to closely monitor global geopolitical events and their impact on-demand and supply chains. Cummins India Limited is well-positioned to leverage all opportunities to sustain its growth momentum. With a strong balance sheet, world-class manufacturing infrastructure, best-in-class talent, we are confident that we will be able to sustain our growth trajectory. Thank you for your continued trust and confidence in the Cummins brand. With this, I would close the call. Thank you so much, everyone, for joining.
Operator
[Operator Closing Remarks]