MOSL: CUMMINS (Sell)-Draft Electricity Bill sentimentally negative
CUMMINS: Draft Electricity Bill sentimentally negative
(KKC IN, Mkt Cap USD3.4b, CMP INR918, TP INR695, 24% Downside, Sell)
- Draft Bill aimed at lowering pollution via other generation sources: In light of rising pollution levels, particularly in metros and large cities, the Draft Bill states that the electricity distributor shall ensure uninterrupted (24*7) power supply to all consumers so there is no requirement of running diesel-generating (DG) sets. The State Commission may consider a separate reliability charge for the distribution company, if it requires funds for investment in infrastructure, to ensure the reliability of electricity supply to consumers.
- Urges consumer to shift to cleaner energy sources: The Draft Bill further states consumers using DG sets as essential backup power shall endeavor to shift to cleaner technology (such as renewable energy with battery storage and sources) within five years from the date of publication of the Amendment or as per the timelines given by the State Commission - the timelines are still ambiguous and based on the reliability of supply by the distribution company in that particular city.
- Onus to lower DG set consumption on DISCOM: The Draft Bill mandates the distribution licensee to simplify the process of providing temporary connections to consumers for construction activities or any other temporary usage. These connections are to be given within 48 hours. This would discourage the use of DG sets for temporary activities in the area of the distribution licensee. The temporary connection shall be given through a prepayment meter only.
- Minor risk to DG set players in metro markets over medium term: Since this bill is a draft version and does not talk about the blanket ban on diesel genset usage, no material impact is expected over the near term. However, it does take away a portion of the addressable market in metros as well as prospective customers over the medium term.
Cummins India is engaged in the manufacturing of diesel and natural gas engines. Co.'s operations are comprised of four business units; Industrial Engine, which caters to the industrial sector with its spectrum of diesel engines ranging from 65 HP to 3500 HP; Power Generation, which addresses standby and prime power needs through the design and manufacture of pre-integrated generator sets, transfer switches, paralleling equipment and controls; Distribution, which provides products, packages, services and solutions for uptime of Co. equipments; and Automotive, which integrates Co.'s diesel and natural gas engines with related technologies.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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