Cummins India Management Discussions


1. Industry Structure and Development

Economic Trends and Implications

The Financial Year 2022-23 was marked by an uncertain and fragile global economic environment. The geopolitical crisis in Europe fuelled global inflation in energy and commodity prices, forcing central banks across economies to undertake monetary tightening. This adversely impacted the global growth outlook, and multiple agencies have lowered the growth forecasts for 2022 and 2023. For a net importing country like India, the depreciating rupee resulted in a higher Current Account Deficit (CAD) and increased inflationary pressures.

The Indian economy has shown resilience and emerged as the fastest-growing major economy, with a GDP growth rate of 7% in FY 2022-231. Core industry output reported a growth of 7.6% in FY 2022-232 driven by higher output of coal, cement, and fertilizer industries. Manufacturing Purchase Managers Index (PMI) remained in the expansionary zone resulting in higher capacity utilization across industries.

Infrastructure development continues to be a focus area for the Government of India, with multiple projects being executed under the initiatives - PM Gati Shakti and the National Infrastructure Pipeline. The Union Budget 2023-34 increased the outlay for capital investments by 33% to ?10 lac crore3. Developing quality infrastructure will be instrumental in reducing the cost of logistics and will boost exports by improving the competitiveness of Indian products.

Policy interventions like Production Linked Incentive (PLI) Schemes, National Logistics Policy (NLP), Free Trade Agreements (FTAs), and Foreign Trade Policy 2023 are expected to provide the tailwinds to the economic activity going ahead. Structural reforms and measures taken to improve the ease of doing business have resulted in India emerging as an attractive FDI destination.

Energy security and decarbonization have emerged as major themes not only in India but globally as well. The Government of India has identified "Green Growth" as one of the seven priorities in the Union Budget 2023-24. Increasing the share of renewables in the energy mix will help in the decarbonization of the grid. The National Green Hydrogen Mission, with an outlay of ?19,700 crores, envisages making India a hub for Green Hydrogen by incentivizing production and consumption. These developments in the direction of sustainability and green energy are positive for the economy.

The growth prospects face headwinds from the economic slowdown in developed economies, hawkish forward guidance by central banks on inflation, a depreciating currency, and geopolitical risks. However, high foreign exchange reserves, sustained foreign direct investment and rising private consumption can mitigate some of the downside risks. The uncertainty in the macro environment has led to a downward revision of the GDP forecast by multiple agencies for FY 2023-24.

Sources:

1. Ministry of Statistics and Programme Implementation (MOSPI)

2. Index of Eight Core Industries (ICI) Ministry of Commerce & Industry

3. Ministry of Finance

2. Opportunities and Threats

Key Opportunities

Power Generation

FY 2022-23 witnessed robust growth for the Power Generation market driven by strong business activity and economic growth across industries. Key segments driving the growth of the Power Generation market included Datacentres, Real estate, Manufacturing, and Infrastructure.

While the average power supply deficit at the national level continues to remain less than 1%, your Company expects the Power Generation business to follow a growth trajectory led by opportunities arising from segments like infrastructure and manufacturing due to higher capital expenditure by the Government and private sector companies. Rising demand in the realty sector and investments by global and domestic players in the datacentres market also provide growth opportunities.

The emission norms are getting more stringent for the power backup industry, with the implementation of CPCBIV+, effective from 1st July 2023, your Company is prepared to bring forward best-in-class, sophisticated, and compliant products for the customers.

Industrial

Railways: Indian Railways is set to achieve its ambitious target of 100% track electrification of broad-gauge network by 2023 which is driving demand for Diesel Electric Tower Cars (DETCs) that are used in the installation and maintenance of overhead electric lines. Your Company believes that this will also fuel demand for the electrified propulsion industry in the long term. With the expansion of the railway network and dedicated freight corridors becoming operational, growth is expected in the track maintenance sector.

Indian Railways focus on reducing dependency on diesel in the auxiliary power sub-segment is driving demand for hotel load converters. Your Company has ventured into the supply of hotel load converters which will help regain business in the auxiliary power sub-segment.

To move towards a green economy with net zero emissions, Indian Railway is also evaluating hydrogen fuel cell solutions for the "Hydrogen for Heritage" initiative. Your Company is actively exploring ways to partner with Indian Railways on this initiative.

Mining: India achieved record coal production in FY 2022-23 at 892 million tonnes, registering an annual growth of 14.65%. With increased power demand further intensifying the pressure to enhance domestic coal production, new coal blocks are being developed, and mining operations are being contracted to private players to enhance productivity. Growth in domestic coal production is expected to have a favorable impact on the Heavy Earth Moving Machinery (HEMM) market in which your Company is a critical technology supplier.

Marine: In line with the Indian Navys fleet expansion and fleet modernization plan backed by the ‘Atmanirbhar Bharat initiative, there is a strong pipeline of opportunities from defense PSU shipyards. Increased opportunities are expected in the commercial marine segment due to the Government of Indias mandate to use indigenous vessels for inland water transport and vessels operating in government ports.

Oil & Gas: An investment of Rs 1.25 lac crore has been planned for developing the pipeline infrastructure for the 11th round of the CGD network. In line with this, your Company continues to expect strong demand for gas compression engines from the city gas distribution segment.

Defence: Reforms by the Government of India to focus on indigenous design, development, and manufacturing, along with an intent to promote exports of defence equipment expected to boost domestic production. Your Company is expecting growth in engine requirements from Original Equipment Manufacturers (OEMs) participating in this sector.

Pumps: Your Company is looking to export FM / UL certified pump packages to global OEMs.

Construction: Infrastructure growth is a key catalyst to achieve the Government of Indias plan to be a 5 trillion-dollar economy in the next few years. Under the "National Infrastructure Pipeline", the government has made an investment plan of Rs 100 lac crore over five years, whereby more than 60% of infrastructure projects are from construction-intensive sectors like Roads, Railways, Airports, Irrigation, Urban infrastructure, and Ports.

Your Company is a leading engine supplier in the Construction equipment segment and is well placed to take advantage of the strong industry tailwinds fuelled by the Governments impetus on economic growth and infrastructure investment.

*Sources: Ministry of Railways, IROAF - Indian railways Organization for Alternate fuels, Ministry of Coal, Ministry of Petroleum and Natural Gas, Ministry of Defence, Ministry of Road Transport and Highways and India Investment Grid - Government of India.

Distribution

Growth is expected in the Powergen business on the back of strong demand for maintenance of Datacentres and commercial realty as contact-intensive services pick up. The introduction of CPCBIV+ emission regulations will see some impact on maintenance practices.

Investment in the infrastructure sector and the increasing pace of project delivery will further boost the utilization of equipment leading to the requirement of maintenance and better aftermarket revenue.

Change in emission norms for off-highway equipment to CEV BSIV is triggering a change inservice support model from OEMs to prefer Cummins, resulting in more aftermarket opportunities.

Aggressive coal production targets to meet energy needs is driving the growth in the mining sector. This will lead to higher equipment utilization and demand for HEMM (High Tonnage) vehicles with high horsepower Q Series engines.

Execution of the Dedicated Freight Corridor (DFC) project by Railways and strengthening of the track network across the country will lead to higher usage of overhead cranes and track maintenance equipment, driving demand for aftermarket services.

Rapidly developing domestic gas pipeline network under the City Gas Distribution (CGD) initiative in various cities will lead to higher demand and usage for gas compressor engines and parts.

National Green Tribunals (NGT) emphasis on cleaner energy alternatives and regulations on the use of diesel-based power backup gensets will increase demand for Dual Fuel Kits and Retrofitted Emission Control Devices (RECDs).

Exports

Strong demand for Powergen segments is expected from Latin America, and Middle East regions. Telecom, rental, healthcare, manufacturing, and marine segments are driving growth in these markets.

Your Company is also tapping into opportunities available in Industrial segments such as rail and marine in regions such as Latin America, Africa, and Asia Pacific, building upon our existing presence in the region.

Key Threats

Power Generation

With the domestic players expanding their product ranges and international players gaining a foothold in the region, competition is rising in the Powergen segment. As a result, pricing pressure is intensifying across the industry. The products are also witnessing significant cost increases driven by the rise in commodity prices, geopolitical conflict, and supply constraints.

Industrial

Railways: With rail electrification work nearing the 100% target by end of 2023, demand for DETC is expected to soften from FY 2023-24.

Mining: Timely allocation of coal blocks to private players and ramping up of coal production is critical to boosting demand for mining equipment.

Oil & Gas: Due to the Covid-19 extension granted to CGD players, a lack of infrastructure readiness is delaying the release of tenders for compressor packages, thereby impacting shortterm demand.

Construction: Your Company is ready and excited to launch best-in-class products for expected Construction, Earthmoving, Material Handling and Mining Equipment (CEMM) BS IV emission norms. A delay in clarity in norms implementation timeline could defer the launch of these products.

Distribution

Growing environmental concerns leading to bans on the use of DG sets in Non - Attainment Cities (NACs) and better availability and quality of grid power could result in lower utilization of DG sets.

Target of 100% Rail electrification by the year 2023 will limit restrict usage of diesel engines to Diesel Electric Multiple Units (DEMUs) and Power Car applications which will reduce maintenance requirements from customers.

Exports

Your Company anticipates volatility in demand due to economic slowdown in advanced economies, ongoing geopolitical conflict, and the tightening of monetary policies by central banks of all major economies.

Your Company is experiencing strong competitive activity in the Powergen segment. Global OEMs and Genset assemblers, are driving increased competition in the market.

3. Product-wise Performance

Power Generation

Your Company launched 2000kVA prime-rated DG set powered by the K50 mechanical engine to cater to customer requirements in commercial realty, infrastructure, and manufacturing segments at competitive pricing. It offers improved power density with optimized TCO for the customers.

Industrial

Railways: Your Company has strengthened its market presence and partnership with Indian Railways through the supply of complete DETC propulsion packages.

Marine: Your Company has successfully delivered the largest genset of 1 MW for Hindustan Shipyard Ltd. (HSL) Diving Support Vessel for the Indian Navy. DG sets >1 MW for Commercial marine applications have also been supplied.

Oil & Gas: The segment showed robust growth due to higher demand from gas compression OEMs.

Defence: Production ramp-up of key applications such as Missile Carrier Vehicles, Armored personnel carriers, and Towed Artillery Guns is driving demand for engines >400HP.

Construction: With a strong customer focus & excellent value proposition, your Company has won businesses from new and existing customers in both tracked & wheeled equipment categories.

Distribution

Your Company witnessed growth in the whole goods portfolio due to the strong focus on the opportunity to re-power competition engines by providing a cost-effective solution in segments like Railways, Powergen, and Construction.

New launches drove growth in the Power Generation market. Dual Fuel Kits and RECDs were launched to help customers meet the NGT regulations. The "Power Booster" service bundle was offered as a comprehensive, cost-effective solution for customers seeking a single point hassle- free service for their genset.

To cater to the high-growth On-highway segment, your Company launched a new range of brake linings, clutches, and CNG Kits.

Exports

Your Companys growth in Exports revenue for the previous financial year was primarily driven by an increase in sales of low-horsepower products like Q-series and B-series across geographic markets. The K50 engine continued to experience higher demand in industrial segments.

4. New Business initiatives for Financial Year 2022-23

Power Generation

Focusing on customer needs, significant steps were taken to improve the power density of products to reduce the total cost of ownership, lower the maintenance cost and provide the benefit of a smaller installation footprint.

The Central Pollution Control Board (CPCB) of India announced the CPCBIV+, Power Generation emission norms for <800KW range, which are the most stringent emission norms in the global power generation industry. With its well-established technology leadership, your company has meticulously developed products that comply with the new emission standards.

Industrial

Railways: Your Company has succeeded in design and development of a Hotel Load Convertor to meet the requirements of the auxiliary power sub-segment of Indian Railways. This year also, your Company saw the successful commissioning of the complete propulsion system for Diesel Electric Tower Cars (DETCs) to Indian Railways.

Marine: Your Company has a strong order board for commercial marine and has successfully onboarded new customers.

Mining: Your Company continues to innovate and develop fit-for-market products to expand its presence in the HEMM segments.

Pumps: Your Company has successfully expanded its product portfolio with high-speed ratings of FM / UL certified engines for the global pumps segment.

Defence: Your Company has secured new orders for the wheeled Troop carrier vehicles and Artillery Guns from Defence OEMs.

Construction: Your Company has strengthened its leadership position by leveraging global experience, technology leadership and strong partnerships with all major equipment manufacturers and is placed in an excellent position to benefit from the governments focus on infrastructure development in the country.

Distribution

Qualtrics-based NPS measurement system launched to improve customer service and experience.

2-Hour Service Response Guarantee introduced for select sub-segments.

A state-of-the-art training facility was inaugurated in Wathar, Maharashtra. The 15,000-square feet campus will offer training to Cummins and dealer service engineers.

IT infrastructure used for dealer management has been revamped to improve our channel partners order and inventory management processes.

Organized All India Dealers Meet (AIDM) to acknowledge the exceptional performance of its dealers in 2022. Cummins India leadership team appreciated our dealers continued partnership and encouraged them to adopt a growth mindset to start the next phase of growth.

Exports

Your Company has undertaken several product improvement initiatives to offer more value to its customers. This includes enhancements to existing products, cost optimization and the launch of Fit-For-Market (FFM) products. Your Company launched new series of Fit for Market (FFM) gensets for unregulated markets - Africa Middle East, Asia Pacific, and Latin America.

Along with the improvements in products and processes, your Company is leveraging channel synergy to improve understanding of customer requirements and improve sales.

5. Achievements

Power Generation

Your Company achieved volumes of nearly 25,000 generator sets in FY 2022-23, providing nearly 4,800 MW power to customers across India.

In the high horsepower segment, your Company successfully executed the orders for a large hyper scale datacentre coming up in India. Hyperscale datacentres present a huge business potential and with this prestigious win your Company is well positioned to expand its presence in this segment and meet the stringent customer requirements.

We reinforced partnerships with our customers across all the end user segments, collaborating to enable growth. Your Company has been recognized as the recipient of the Best Partner Award at the CtrlS Strategic Partner Awards 2022. CtrlS is a leading Indian Company providing datacentre and cloud hosting services.

Industrial

Railways: Your Company maintained a strong partnership with Indian Railways and was able to export India-built DEMUs for Mozambique.

Marine: Your Company has received an order for the submarine genset project from Indian Navy marking its first-ever foray into the submarine application for Cummins globally.

Mining: Your Company has made further inroads in Heavy Earth Moving Machinery (HEMM) market (above 100T dump truck) by working with key OEMs.

Construction: With two new certified engine platforms, 4-cylinder, and 6-Cylinder, for the CEV BS IV norms for wheeled construction equipments, your Company has been able to strengthen its leadership position in the industry.

Distribution

DBU achieved Net Promoter Score (NPS) of 88% which is the testimony of customer loyalty towards Cummins, and its service support.

Your Company was granted the ‘Green Channel Status by the Ministry of Defence, Government of India for a period of five years, for supplying diesel engines and related parts.

Your Company was recognized by the Oil and Natural Gas Corporation (ONGC) for successfully repowering their heavy-duty truck with minimal modifications. ONGC issued an appreciation letter to Cummins India for its efforts.

Model Depot contract for part supplies to Coal India through Company depots was renewed and is expected to drive sales growth.

Exports

The Low kVA Fit-for-Market products are gaining traction in the unregulated markets of Latin America, Africa, the Middle East, and Asia Pacific.

Your Company saw strong demand for Industrial Marine Engines in Asia-Pacific and North America markets.

6. Outlook and Initiatives for the Current Year and Thereafter

Power Generation

Your Company will focus on enhancing current products, particularly in high horsepower range and developing value-added offerings for the customers.

With a greater focus on more stringent environmental norms in the future, your Company is positioned favorably as a pioneer in producing engines with cleaner technology.

Power backup solutions operating on alternate energy sources are expected to enter the power generation landscape in the coming years. Your Company sees these technologies as opportunities to serve customers since they become more viable.

Industrial

Your Company is investing to offer locally built products to customers and support the Government of Indias "Make in India" and "Atmanirbhar Bharat" initiative.

Railways: With continued efforts towards achieving 100% electrification of broad-gauge network, your Company is looking to pursue growth opportunities in electrified propulsion system solutions.

Marine: Your Company aims to maintain its relationship with the Indian Navy, Coast Guard as well as major shipyards to offer integrated propulsion and genset packages for upcoming projects. With fit-for-market products, your Company plans to make further inroads in the fishing boat segment.

Mining: Your Company continues to invest in new technologies in mining segment for higher capacity equipment and future emission regulations (CEMM).

Defence: Your Company is well placed to address emerging opportunities resulting from Government of Indias focus on giving boost to domestic defence manufacturing industry and increasing share of indigenous content in defence equipment.

Construction: Your Company is developing BSV certified electronic 4-cylinder and 6-cylinder engine platforms to address Bharat Stage V (CEV BSV) emission norms from April 2024 for the Off-highway wheeled segment in India. For tracked applications, your Company is planning to introduce electronic 4-cylinder and 6-cylinder engines before next emissions.

Distribution

Your Company, along with all industries and markets, continues to experience global supply disruption, impacting many areas of the business in both first fit and aftermarket. We are mitigating these effects by focusing our efforts on supplier recovery, adequate staffing, focus on optimizing logistics and transportation.

The Company expects to strengthen its position in the On-highway segment through fit-for-market product and service offerings, improved last mile reach and enhanced branding.

Addressing the growing ESG focus amongst its customers, your Company will extend its emission- reducing products to new business segments and applications.

Exports

Your Company is focused on increasing the exports of its products and is positioned strongly in the marketplace across key geographies.

Focusing on customer needs, your Company has taken significant steps to improve the development of Fit for Market products for Latin America, Asia Pacific, Africa, and Middle East regions.

Your Company continues to improve the support provided to its customers and distributors worldwide by leveraging the channel-factory synergy.

7. Risks and Concerns the Management Perceives

Your Companys export growth hinges on the increase in demand in partner countries. The Company continues to be cautious about export business performance due to the ongoing economic uncertainty and aftereffects of the pandemic in partner countries. Because of Companys international business presence, we are exposed to foreign currency exchange rate risks.

Capital investment in the private sector has been lagging even though the countrys attractiveness for investment has been well established. Coupled with inflation being on the higher side along with high-interest rates, delayed capital investment plans could have downside risk for domestic demand.

As your Company readies for the launch of new products driven by CPCB-IV+ emission norms, there is expected to be some downside risk to the demand of the products given pre-buy in the months leading to the change.

Measures to Mitigate Risks

To counter the slowdown in global economic growth and demand, it was imperative to maintain focus and leadership in the domestic market. New product and market development, overall portfolio diversification and better regional penetration for existing products was and will continue to be the focus areas for your Company.

Various restructuring projects combined with cost reduction programs, which leverage Six Sigma approach, such as ‘Accelerated Cost Efficiency (ACE) V, Accelerated Move towards Zero Defects (AMaZE), Accelerated Supply Chain Excellence and Transformation (ASCENT) have had a significant positive influence on your Companys profitability. Continued focus on these efforts will help your Company to maintain cost leadership in the domestic market and will remain the preferred source for exports.

Your Company is actively working on its Supply Chain for further improvements. Dual sourcing adjusted payment terms with financially weaker suppliers, price revisions, supplier agreements, inventory building (areas wherever necessary) are some of the measures that your Company is taking to make the supply chain more agile and resilient against disruption.

8. Internal Control Systems and its Adequacy

Your Company has established adequate internal control procedures, commensurate with the nature of its business and size of its operations. These controls have been designed to provide a reasonable assurance regarding maintenance of proper accounting controls for ensuring orderly and efficient conduct of its business, monitoring of operations, reliability of financial reporting, accuracy and completeness of the accounting records, the timely preparation of reliable financial information, protecting assets from unauthorized use or losses, prevention and detection of frauds and errors, and compliances with regulations. Your Company has continued its efforts to align all its processes and controls with global best practices.

To provide reasonable assurance that assets are safeguarded against loss or damage and that accounting records are reliable for preparing financial statements, the Management maintains a system of accounting and controls, including an internal audit process. Internal controls are evaluated by the Internal Audit department and supported by Management reviews. All audit observations and follow-up actions thereon are tracked for resolution by the Internal Control function and reported to the Audit Committee. As an ongoing program, the reinforcement of the Cummins Code of Conduct is prevalent across the organization. The Code covers transparency in financial reports, ethical conduct, regulatory compliance, conflicts of interest review, and reporting of concerns. Anti-fraud programs, including whistle-blower mechanisms, are operative across the Company.

9. Risk Management

The Board and the Risk Management Committee take responsibility for the overall risk management process throughout the organization. Through an Enterprise Risk Management program, the Companys business units and corporate functions address opportunities and attendant risks through an institutionalized approach aligned to the Companys objectives. The business risk is managed through cross-functional involvement and communication across businesses. The results of the risk assessment and residual risks are presented to the Senior Management. The Risk Management Committee reviews business risk areas inter-alia covering leadership excellence, customer centricity, technical capability and capacity, VPI execution, legal & environmental compliances, data security, product quality, product planning and business continuity plan.

10. Key Financial Ratios

i) Details of changes in key financial ratios, including significant changes i.e. change of 25% or more as compared to the immediately previous financial year, along with detailed explanations:

Particulars

FY 2022-23 FY 2021-22

Explanation for significant change

Debtor Turnover

5.45 5.29

NA

Inventory Turnover

6.48 6.38

NA

Interest Coverage Ratio (Debt Service Coverage Ratio)

74.38 77.55

NA

Current Ratio

2.70 2.53

NA

Debt Equity Ratio

0.07 0.08

NA

Operating Profit Margin (%)

22.2% 16.91%

During the year the Company could achieve higher revenue from operations and higher profits resulting in better Return on Equity Ratio.

Net profit Margin (%)

14.77% 12.28%

NA

Note: The disclosed financial ratios are in alignment with Schedule III of Companies Act, 2013, as amended and as per guidance note on ‘Division II - IND AS Schedule III to the Companies Act, 2013 (Revised in January 2022) issued by Institute of Chartered Accountants of India. Please refer to Note no. 45 of Standalone Financial Statements for additional disclosure.

ii) Details of any change in Return on Net Worth as compared to the immediately previous financial year:

Standalone

Consolidated

Particulars

2022-23 2021-22 2022-23 2021-22

Return on Net Worth (%)

22.39% 16.29% 22.79% 16.36%

Return on net worth is computed as net profit by average net worth. The details for change in return on net worth are explained in relevant sections above.

11. Human Resources Development and Industrial Relations

The total number of employees including the contractual employees stands at 3,634 as on March 31,2023.

Leadership Excellence

Your Company focuses on investing and building capabilities in leaders at all levels through various initiatives to develop ‘Future Ready Leaders and build leadership talent for future needs.

In line with our ‘Hire to Develop philosophy, we continue to invest in our sponsorship programs and leadership development programs. Details are following:

• 91 employees availed education assistance to pursue higher education programs using the Global Education Assistance Policy (GEAP).

• 230 leaders across 2 Cohorts successfully graduated the Building Success in You (BSY) program. BSY Cohort 1 was launched in April 2022, and BSY Cohort 2 was launched in October 2022.

• Global Leadership Development Program (GLDP) was launched in March 2023 with 23 leaders as participants.

• 71 leaders were covered across 3 sessions of Building Success in Others (BSO) - Leadership Conversations program.

• 80 leaders were covered across 5 sessions of BSO - Cummins Environment & You program.

• BITS (Pilani) M.Tech in Automotive Engineering degree program got launched in October 2022. With this, 94 employees were pursuing Company sponsored B. Tech program and M.Tech Programs during financial year 2022-23.

Hire-To-Develop and Seamless Talent Deployment

Your Company is continuing with the important initiative of hire-to-develop that presents growth opportunities to employees for self-development by taking up responsibilities across functions and businesses. At least 363 professional employees have moved into different roles or functions within the organization. There were 6.2% of professional employees who were promoted to the next salary grade due to change in their job profiles and relative advancement in career growth.

As your Company continues to grow and expand, getting visibility to talent insights becomes increasingly important. By standardizing, integrating, and automating talent management processes. Your Company has provided Leaders with an efficient technology-based process called Integrated Talent Management (ITM). ITM touches the key stakeholders - employees, managers, and businesses and enables all to work together to achieve their goals and helps employees reach their full potential with two-way communication and feedback.

In your Company, we are working on the following strategic initiatives - Reimagine the HR function to meet evolving needs, deliver predictive and prescriptive talent analytics, and empower the workforce through technologies. Under these initiatives, leaders will have more autonomy and accountability to deliver talent management strategies. They will have greater real-time access to talent intelligence by which they can make more informed and proactive decisions. At every level, leaders will have the capability and capacity to deliver on their leadership responsibilities. Your Company is working towards making talent processes, tools, and approaches to be largely harmonized, allowing HR employees to consult more seamlessly across the organization.

Recruitment

Continuing the focus around employing the right and diverse talent at both entry and experienced level and developing them for future roles within the organization, this year, your Company hired 87 entry-level professionals supplemented with 574 experienced hires.

The Company hired 39 (45%) female candidates as freshers in addition to 216 (38%) female candidates with required and relevant experience keeping our overall gender diversity hiring at 39%, thus showcasing the commitment towards gender equality. Your Company has increased its focus on diversity beyond gender by hiring a workforce from diverse backgrounds like People with Disabilities, LGBTQ+ & North-East region of India.

The Company is now successfully running the ‘Partnership and Engagement program with premier engineering institutes like IITs and NITs to hire top engineering talent thereby continuing our focus on ‘Hire to Develop philosophy at an early stage.

This year again your Company continued its focus on increasing brand presence on social media platforms viz. LinkedIn, Facebook, and Instagram and will continue to focus on improving this engagement with the digital media.

Diversity, Equity, and Inclusion (DE&I)

Diversity, Equity, and Inclusion is in the DNA of your Company. Reiterating Mr. J Irwin Millers (Cummins Chairman, 1951-1977) famous quote "Character, ability and intelligence are not concentrated in one sex over the other, nor in persons with certain accents or in certain races or in persons holding degrees from universities", your Company has five Employee Resource Groups (ERGs) focusing on the primary dimensions of diversity namely: Gender, Generation, Culture, Person with Disability (PwD), and LGBTQ+. Promoting the organisations Diversity, Equity and Inclusion agenda, these ERGs work on initiatives that contribute to making organisations environment ‘Inclusive enabling employees to bring in their full potential at workplace. Initiatives undertaken by these ERGs include revisiting internal policies and processes, introducing new policy or guidelines to support a diverse dimension, rolling out effective workshops and awareness events, conducting audits and recommending workplace adjustments amongst others.

The Company to focus on increasing our gender (female) diversified talent, which is today at 25%. As the next step, your Company is working to achieve gender parity in our workforce, by moving the needle to 50% representation of female talent. In this journey, the WE Network (Women Empowerment Network) ERG will continue to be a strong partner with the business. As the Company hiring primarily through our campus and lateral hiring, we would also focus on the pool of talent who have taken a career break but are now all geared up to restart their career.

‘Wings, Employee Resource Group, focused on hiring and providing a conducive environment to Persons with Disability, celebrated International Day of Persons with Disabilities (IDPWD) inviting senior India and global leaders to address the audience and had persons with disabilities share their success stories which inspired many. The Company also prioritising how we can create a safe and inclusive environment in the Company to also attract the LGBTQ+ talent. ‘India Pride, ERG for LGBTQ+ community worked on creating more awareness, promoting Pride Ally program, and holding training sessions on bursting myths and sensitizing employees. Another key area of focus is under-represented regions of our country in the workforce i.e., talent from Northeast India. Our ERG, ‘Ekam, is concentrating on spreading more awareness about different regions, cuisines, cultures etc through events, webinars, and competitions. In addition, we have an ERG, ‘NeXus, focused on generation awareness. They actively organized Brown bag Lunch and Learn sessions with senior leaders, a quiz contest ‘SmarTicus and a series of podcasts.

Your Company continues to be sensitive to the fact that todays working couples live in nuclear family setups and depend a lot on the Corporate on-site child-care facility. For your Company, on site creches are not just a legal compliance but reiterates our core value of ‘Caring. The Company has taken steps to ensure that the prime focus of these centres is not just to provide a safe and child friendly environment, but also ensure that there are various interventions planned throughout the year that stimulate the childs development and give an opportunity to the parent (employee) in playing an active role in the same, thus making them feel engaged in their childs key growing years.

For your Company to be successful in consistently delivering on its commitment to provide an inclusive environment to a diverse workforce, senior leaders commitment to lead, to advocate and to advise on issues related to diversity and inclusion are critical. In the Financial Year 2021-22, your Company hosted its first Diversity, Equity and Inclusion Townhall on March 15, 2022, themed Winning with the Power of Difference. In this event, Mr. Ashwath Ram, Managing Director of your Company, shared his personal story and commitment towards DE&I alongside aspirational goals and way forward with all employees. He reiterated his 100% commitment to work towards:

• Achieving our Gender Representation goals

• Ensuring strong regional diversity with focus on North-East

• Promoting talent from under-represented groups with focus on economically poor background

• Transforming lives with dignity of LGBTQ+ by securing their livelihood and enabling economic empowerment.

This event also consisted of an address by Carolyn Butler-Lee, Vice President - Diversity & Inclusion, Cummins Inc. and a panel discussion witnessing zealous participation from senior leaders of your Company. The efforts to achieve above mentioned goals were continued in the financial year 202223.

Megasite Update

At Cummins Megasite, Phaltan, living up to the spirit of ‘One Cummins, your Company continues to move talent seamlessly within all the plants based on employee and business needs. Your Company believes in "Hire to Develop" and acts by providing internal opportunities as well as recruitment of fresh talent through campus recruitment. Right talent balance is achieved through hiring special skills from outside to meet business talent needs.

At Cummins Megasite, your Company has achieved 18.8% female representation amongst the shop-floor employees and 14.8% female representation amongst the professional employees. The Company continued to provide certain kind of COVID support in terms of precautions related to sanitisation, voluntary use of mask, providing booster vaccination for employees & their families. As it was challenging to get vaccines in open market as well as Government Hospitals, we extended this vaccination support to our contractual employees & their families as well. This helped us to ensure employee well-being and business continuity. We are actively working on implementing a broad plan to ensure retention & engagement of employees at Megasite, part of which has already been implemented.

Right Environment

Your Company is committed to fostering a physically and psychologically safe, integrity based, respectful, inclusive, high-performance culture that breaks down hierarchies and organizational boundaries while engaging the full talent of our diverse employees to delight all our stakeholders consistently. Your Companys efforts to drive awareness and commitment amongst employees towards ‘Cummins Code of Business Conduct, ‘Treatment of Each Other at Work Policy and other Ethics and Compliance policies continue year on year through various communication platforms, trainings, emailers, portals, posters etc. which helps in creating and sustaining the right environment for all the stakeholders, both internal and external to the organization. Every year, your Company utilizes its learnings via various speak up channels and ensures to upgrade all relevant policies to help its employees unleash their full potential. In addition to the other policy awareness and trainings, the Company also focuses its efforts on creating awareness, through training, posters, email communications etc. on "Prevention of Sexual Harassment" under the Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 ("POSH Act").

12. Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objective, projections, estimates and expectations may be ‘forward-looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in government regulations, tax laws and other statutes and incidental factors.