The Hindu Business Line : Cummins board approves demerger of services wing

, THE board of directors of Cummins India Ltd, manufacturer of diesel engines, has approved the demerger of the services business of Cummins Auto Services Ltd (CASL) with Cummins Diesel Sales & Services (India) Ltd (CDSS), a 100 per cent subsidiary of the company, to optimise synergies in the after-market operations.

Speaking to Business Line, Mr Anant Talaulicar, Chairman, Cummins India, said that the board has approved the demerger of the services segment of CASL and was merging it with CDSS.

CASL, which made its debut three years ago, had a business model for itself but during its course of working found that it was not a financially viable model, he added.

"CASL did look around for some alliances, which did not fructify, and it was then decided to approach the merger movement with CDSS."

CASL has two divisions - a services segment and a retails parts segment.

This method was being used so as to optimise the system that is already in place, Mr Talaulicar said.

For the year ended March 2005, Cummins India has recorded a 28 per cent increase in net sales at Rs 1,191.8 crore against Rs 932.4 crore for the year ended March 2004.

Domestic sales grew 12 per cent and exports rose to a record level of Rs 402.4 crore (Rs 227.4 crore).

An official release said that the profit before tax for the year rose by 34 per cent per cent to Rs 185.3 crore (Rs 138.1 crore).

The board has proposed a final dividend of 100 per cent, in addition to an interim dividend of 100 per cent paid earlier.

Net sales for the quarter ended March 31, 2005 stood at Rs 316.8 crore, an increase of 16 per cent over Rs 272.7 crore earlier.

Net profit before tax in the last quarter rose by 47 per cent to Rs 56.9 crore (Rs 38.6 crore).

The company had exceeded its sales targets and was able to increase PBT by 34 per cent.

"We have been able to neutralise inflationary impacts through aggressive cost reduction programs, increased productivity, and indigenisation. Our future outlook is positive and is reflected in the declaration of 200 per cent dividend for 2004-2005."

Cummins has produced more than 167,000 engines to date in its modern manufacturing facilities in Pune. The company manufactures an average of 10,000 engines per year. It is the flagship company of the Cummins group in India.

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