Cummins India - Draft Electricity Bill Sentimentally Negative: Motilal Oswal
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Motilal Oswal Report
In light of rising pollution levels, particularly in metros and large cities, the Draft Bill states that the electricity distributor shall ensure uninterrupted (24x7) power supply to all consumers so there is no requirement of running diesel generating sets.
We believe the draft version of the bill is just the first step towards moving to a cleaner environment and may be followed by stringent measures in due course of time.
We carry a structurally negative view on diesel gensets, particularly on account of improvement in power availability leading to the lower utility value of generators.
The Draft Bill solidifies our long-term thesis on industry evolution in India.
Additionally, disruptions from solar energy and battery storage, among others, would only limit category growth.
Notably, domestic powergen forms 27% of Cummins India Ltd.’s revenue.
Moreover, the distribution segment drives growth from the installed bases of the powergen and Industrial segments.
Thus, there may be a risk to growth for 40– 45% of Cummins’ revenue over the longer term.
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