The steady rise in Cummins India Ltd’s share of “other income" (non-core business) in profits over the last few years, does not bode well for the company as it mirrors the sustained weakness in its core power-generation business, where revenue and profit growth have been wobbly. “While profit after tax (PAT) has grown just 4% in the past decade, other income has risen at a compound annual growth rate (CAGR) of 16% and forms about 30% of profit before tax (PBT) indicating a poor quality of earnings," said a note by Motilal Oswal Financial Services Ltd.
Brokerage firms expect the share of other income to rise to about two-fifths of PBT by FY21, with covid-19 dimming business prospects both in India and overseas.