Further, competitive pressures in Africa, too, have led to lower exports. This led to a sharp fall in margins, necessitating reduction in costs, including through voluntary retirement schemes.
Analysts at JM Financial believe the change in sales mix over the previous decade is a positive with the share of distribution increasing from 16 per cent to 24 per cent and share of industrial segment from 11 per cent to 17 per cent to offset dip in power business. The ratio of genset to aftermarket sales has also reduced in favour of aftermarket, offering steadier revenue profile.
The reduction in capex intensity and rental income would keep cash generation high. The fall in metal prices should also support margins. All this could result in increasing dividends.
While the fall in share price has made valuations attractive and it has long-term triggers, there are short-term worries on the demand side, both in the domestic and export segments.
Investors, thus, should await momentum trends once the lockdown ends.