India ABO Supplier Conference Anant J. Talaulicar June 29, 2016 Public

Championing Manufacturing in India 23 June 2016

Presentation by Mr Anant Talaulicar, Chairman, CII Manufacturing Council and Chairman and Managing Director, Cummins Group India 2

Vision of Make in India To generate 100 Million jobs and increase sectoral contribution to GDP to 25% by 2022 2022: GDP ~ 2.7 Trillion USD 2015: GDP ~ 1.8 Trillion USD Aspiration: Current: Manufacturing contribution to GDP

Manufacturing contribution to GDP

17% = ~ USD 300 Billion

Assuming 6% yoy GDP growth

25% = ~ USD 675 Billion

Manufacturing sector will need to grow at least 14% yoy to reach 25% of total GDP by 2022

© Confederation of Indian Industry

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Initiatives of the CII Manufacturing Council To drive double digit growth in Manufacturing sector To help actualize vision of Make in India – To generate 100 Million jobs and increase sectoral contribution to GDP to 25% by 2022

Task force on Advanced Manufacturing

•

Identify Champion Industries that will drive double digit manufacturing growth keeping in mind Industries of Tomorrow

•

Creation of policy and regulatory roadmaps for these industries

Champion Manufacturing Industries 2025

Building Manufacturing Competitiveness Domestic Ecosystem  Make in India Dashboard  Prioritized dashboard  Model policies that are championing manufacturing in states

Firm Level Competitiveness

 Recipe for Excellence tool © Confederation of Indian Industry

Global Eco-system  FTAs  Climate Change  Market Access Opportunities 4

Study on Champion Manufacturing Industries – Approach Identification of top manufacturing sectors 1. Aerospace and Defense 2. Auto and Auto Components 3. Cement 4. Chemicals 5. Engineering 6. ICTE 7. Pharmaceuticals 8. Steel 9. Textiles, Made-ups & Apparel 10. Footwear 1

Identification of universe of subsectors

Identification of top subsectors based on CA and SA

~156 sub-sectors identified across 8 sectors

~56 sub-sectors identified as leading

Commercial Attractiveness (CA) ; Strategic Attractiveness (SA) © Confederation of Indian Industry

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Champion Segments identified Sector

Sub-Sector

Aerospace & Defence

Aircraft Components

Construction Machinery

Auto-Electricals & Electronics

Industrial Valves and Pumps

Auto and Auto Components

Automotive batteries

Sector

Engineering

ESDM

Solar energy components (PV) Conventional Lighting and LED lighting fixtures and controls Mobile phones and accessories Printed Circuit Boards and subassemblies Bulk drugs

Pharma

Generic Pharmaceuticals

Two and Three wheelers Cement Agro and Pharma Intermediates Agrochemicals

Chemicals

Basic Polymers and Elastomers

Machine Tools Pressure Vessels

HCV Passenger Cars

Cement

Sub-Sector

Pharma APIs

Construction Chemicals Other Performance Chemicals

Flats

Steel

Forgings and Castings Longs

© Confederation of Indian Industry

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Study on Champion Manufacturing Industries – Way Forward

Connect with Sectoral Committee heads 10 – 30 June 2016

Actioning of recommendations by sectoral committees

On-going

Roadmap for sub-sectors 15 July 2016

Launch at 2nd Anniversary of MII September 2016

© Confederation of Indian Industry

Sensitization and buyin from nodal ministries 15 - 30 July 2016

Sharing roadmap with PMO

30 – 15 August 2016

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Background •

The CII Manufacturing Council undertook a detailed exercise to distill the ‘recipe of success’ of manufacturing companies in India over the long term.

•

Performance of 32,000 companies was analysed over a 10-year period using ROCE as a primary measure with follow-on conversations with CEOs of the top performing companies to gain deeper insights.

•

Building on these insights, CII’s Centers of Excellence and specialized services teams were brought on board to help build a framework that would help gauge a company’s competitiveness and identify their weaker links.

© Confederation of Indian Industry

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… creating a unique ‘Recipe for Excellence’ tool . . .

• • •

Easy to use Available 24 x 7, across all internet enabled platforms Geography agnostic

Log onto www.ciimissionmfg.com © Confederation of Indian Industry

… that assesses firm- level competitiveness ... across 6 functional parameters that are core to an organization…

Operations

Human Resources and Leadership

Marketing

Environment, Sustainability and Governance

Research and Development

Supply Chain Management

© Confederation of Indian Industry

…by completing an objective, easy to fill questionnaire…

© Confederation of Indian Industry

…to identify a company’s overall competitiveness …and in relation to its industry peers…

All manufacturing

© Confederation of Indian Industry

…at a functional level…

O is median

© Confederation of Indian Industry

…or across key functions …

Operations

Marketing

Environment, Sustainability and Governance

Human Resources and leadership

Supply Chain Management

Research & Development

© Confederation of Indian Industry

… Revealing some valuable insights …

1. Your unit’s weakest operational link 2. Where your unit stands w.r.t. your industry peers and from companies of similar size, scale and employee strength 3. How far your unit is from ‘perfection’ and guide you on the path to achieving manufacturing excellence

© Confederation of Indian Industry

… CII Centres of Excellence / specialised teams just a click away ..

CII Technology / R&D team

© Confederation of Indian Industry

Fostering a national manufacturing competitiveness movement …

Creating value and scale

Future product extensions for scale and impact 1.

Phase 3

2. Geographical index

Value

Phase 2

Sectoral index – Targeting through sectoral committees / clusters / Associations Council (ASCON)

Levels of sophistication to be added

Phase 1 Scale and reach © Confederation of Indian Industry

3.

Creation of in-depth surveys for each function

4.

Addition / Integration of current offerings of CoEs such as Water / Food processing

5.

Leverage for international business development of CoEs

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& helping you scale the peak of manufacturing competitiveness

The Peak of Manufacturing Excellence The Toolkit

Companies journey towards excellence

•

Advisory services to guide companies on their onward path to excellence

•

Capacity building through Training and Sharing of best practices through case studies and publications

•

“Recipe for Excellence” diagnosis

Base Camp 2

Base Camp 1

© Confederation of Indian Industry

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Join the movement!

www.ciimissionmfg.com

© Confederation of Indian Industry

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Cummins Inc. Engine Business

Distribution Business

Power Systems Business

Components Business

1919 - Commenced in Columbus, Indiana

Cummins Business Services

Operations in 190 Countries 90 manufacturing locations

54,600 employees Capex and R&D: $1.5B

600 distributor locations 7,200 dealer locations

Making people’s lives better by unleashing the Power of Cummins

Key Organization Changes • •

•

• •

HMLD is now the Engine Business (on and off-highway engines upto the ISX) – Srikanth Padmanabhan Power Systems is a combination of the old HHP Engine business (K19 and above) as well as the Power Generation business – Dave Crompton New & ReCon Parts which was a part of the old Engine Business is now a part of Corporate Supply Chain, but the selling portion & P&L is within each business – Lisa Yoder Marketing Communications and Market Strategy functions have been centralized in Corporate – Marya Rose No change to Components or Distribution

Why We Are Here – Guiding Principles Vision: “Making people’s lives better by unleashing the Power of Cummins”

Personality:     

Core Values:      

Integrity Innovation Delivering Superior Results Diversity Global Involvement Corporate Responsibility

Decisive Driven To Win Agile Passionate Caring

Mission:  Motivating people to act like owners working together  Exceeding customer expectations by always being first to market with the best products  Partnering with our customers to make sure they succeed  Demanding that everything we do leads to a cleaner, healthier, safer environment  Creating wealth for all stakeholders

No Longer Merely the Right Things to Do

Corporate Responsibility

Diversity

Corporate Responsibility Technical Education for Communities (TEC) ITI in Phaltan

ITI in Kolhapur

Diversity

Diversity at Workplace

Diversity Procurement

External Environment & CMI Performance

External Environment – Continues to be Challenging GDP Growth Rates – Key Economies

10% 8% 6% 4% 2% 0%

USA -2% -4%

Source: IHS projections, May 2016 India: on Fiscal year basis

EU

Brazil

Russia

China

India

2015 Financial Summary 2015

2014

Revenue

$19.1B

$19.2B

Gross Margin

25.9%

25.4%

EBIT

$2.39B

$2.50B

Net Earnings

$1.40B

$1.65B

EPS

$7.84

$9.02

Cash Flow from Operations

$2.1B

$2.3B

ROE

19%

20%

ROANA

25%

26%

EBIT, ROE, and ROANA exclude asset impairment charges and restructuring actions

Cummins Inc. Revenues $19,221 $19,110

$20,000

$18,048

$17,500 $14,342

Millions

$15,000

$12,500

$17,334 $17,301

$13,226

$13,048 $11,362

$10,800

$10,000 $7,500 $5,000 $2,500 $0 2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Strategies for Profitable Growth

Manage effectively through periods of weak demand Position the company to outperform

Build on key capabilities to add new growth

India ABO Performance & Future Outlook

Strategic Leadership Team Anant Talaulicar Chairman and Managing Director – India ABO

Sandeep Sinha Chief Operating Officer

Rajiv Batra Finance & Facilities

Sudha Dhar Ashish Chief Aggarwal Information Government Officer & GAC Relations

Qureish Vikas Thapa Shveta Arya Venkat Human Strategy & Shipchandler Ramana Internal Resources Legal & Secretarial Chief of Staff Audit

Operating Leadership Team Sandeep Sinha Chief Operating Officer – India ABO

Ashwath Ram Mandar Deo Amit Kumar Power Systems EBU India

Bhavana Anjali Pandey Bindra Components Distribution Business Business

Jayeeta Paul Shamli Aditi Lakhani Chapalge Sowerby Sharma Corporate CTCI / CRTI / Director Product Quality Planning & Communications Eng Champion Mgmt. & Branding

Hardik Shah

Niranjan Kirloskar Fleetguard Filters

Milind Madani

Sandeep Kalia Valvoline Cummins

Manoj Solanki

Corporate Supply Chain Organization

Babu Nagarajan Cummins Business Services

India ABO Revenue (INR ‘000 Cr) 12.0 10.3

10.0

9.2

9.6

9.3 8.6

7.7

8.0 5.9

6.0

4.9

5.4

4.1

4.0 2.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Revenue represents Conso + Unconso sales & excludes KPIT

Past & Future 2011-2013

2014-2015

2016-2018 Outlook

5.6-6.6% GDP Growth

7.2-7.3% GDP Growth*

7.5-7.7% GDP Growth*

Low

Strengthening industry

industry growth

growth

Infrastructure Bottlenecked

Slow Infrastructure Growth

Stronger Infrastructure Growth

Drop in Consumer and Business Confidence

Growth in Consumer & Business Confidence

Stronger Consumer & Business Confidence

Flat industrial growth

*GDP for 2015 onwards at Market price #Fiscal years

Long Term Growth Intact Macro Trends Growing Middle Class & and Favorable Demographic Dividend

Emissions Regulations Infrastructure Development

Energy – Price/Availability Globalization

Macro Trends and Our Capabilities Will Drive Profitable Growth Macro Trends

Key Capabilities

Growing Middle Class & and Favorable Demographic Dividend

Technology Leadership

Emissions Regulations

Local Manufacturing Scale

Infrastructure Development

Strong Partnerships

Energy – Price/Availability

Diverse Talent & Leadership

Globalization

Strong Customer Support Network

Goal Tree 2016 Objectives

Common Critical Initiatives

Strategic Principles

Become Excellent in Customer Support

Achieve Financial Targets Over the Cycle First Choice of Customers Great Place to Work

Domestic Market Share Leadership

Develop a Growth Mindset Move from Multinational to Global

Exports

Achieve Supply Chain Excellence Meet Financial and Operational Targets

Low Cost Producer

Achieve Low Cost Provider Increase the Strategic Impact and Effectiveness of IT

Great Place to Work

Invest in Leadership Development and High Performance Teams Become World Class in Health, Safety and Environmental Sustainability Embed Corporate Responsibility into our Business

Achieve Zero Defect

Five Philosophies for our Facilities

safe

green

clean

lean

diverse

Continued Investments in 2016 

Cummins Technical Center India



Growing aftertreatment and fuel systems businesses



TCL exports – components and engines



QSK23, V28, K38 and K50 genset assembly lines



Connecting rods machining for KV’s, QSK60 & QSK78 for exports



Upgrade and expand CTT plant at Dewas and Pithampur



Expand the India Parts Distribution Center

Cummins Technical Center India

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1,700

new test cells BU/Common Labs

professionals at launch

A “Global Integrated Technical Organisation” that serves the needs of all businesses, both in India and worldwide

Right Environment Statement - India “Cummins is committed to fostering a physically and psychologically safe, integrity based, respectful, inclusive, high performance culture

that breaks down hierarchies and organizational boundaries, and engaging the full talents of our diverse employees to delight all our stakeholders (employees, customers, partners, shareholders,

suppliers, communities) consistently.”

Realizing Our Vision Making people’s lives better by unleashing the Power of Cummins Great Leadership

Best Company

Right Environment

Great Results Performance Ethic

The Most Fundamental Leadership Requirement (Value)

“Leaders love to love people” “Leaders love to love”

World-Class Leadership at Cummins

Two levels of accountability:  Role Model – demonstrate skills on a day-to-day basis  Champion – drive your organization toward world-class performance in the skill areas

Leadership Values & Personality Performing Teams

Authentic Leadership

Experience

Core Values

Personality

Integrity

Decisive

Innovation

Driven to Win

Delivering Superior Results

Agile

Diversity

Passionate

Global Involvement Corporate Responsibility

Caring

Leadership Values & Personality Performing Teams

Skillsllsuthentic Leadership

Experience

First Five Leadership Skills Coach and Develop Foster Open Communication Diversity Management

Talent Management Think Strategically / Set The Aim

Second Five Leadership Skills Creating Safety

Authenticity & Trust

Constructive Conflict

Alignment

Individual & Collective Accountability

Leadership Values & Personality Performing Teams

SkillsllsuthentiLeadershi

Practicexperienc

Leader’s Role in Employee Engagement Career Opportunities for Growth Meaningful Work

Good Boss

Work-Life Balance

Recognition & Rewards

Organizational Culture

Learning & Development Senior Leadership

In Conclusion  Building one of the World’s Best Company requires the Best Leadership  The Best Leadership creates the Right Environment & Great Results

 The Right Environment & Great Results lead to Making the Most People’s Lives Better  Leadership is YOUR Responsibility  It is a great OPPORTUNITY placed before you

Conditions to Support Outlook  Stable and progressive government to drive growth agenda  Infrastructure spend as per Government plans

 Timely emissions regulations, moving to BS VI after BS IV  Government push for GST implementation

 FDI limits relaxed to boost foreign investments

Well Positioned for Growth          

Values based performance ethic Market leadership Long term partnerships Global technology with localization capabilities Customer support capabilities Sustaining business strategy Strong balance sheet Significant infrastructure Experienced leadership team bench Distinctive culture and a diverse, talented workforce

Summary  Align with us on : -

Values, Leadership, Culture, Quality – Zero Defect, Capacity, Drive for TCO minimization, Customer Service, Responsiveness, Risk Sharing, Dependability

 Continue to partner together closely to : - Capture the future with disciplined investments, and

- Grow profitably

 Thank you!