Bharat Forge is tapping new avenues after some effect of the pandemic. Bhushan Mhapralkar looks at factors driving the growth prospects of the company.
Bharat Forge is emerging stronger from the pandemic. Claimed to maintain a positive outlook of the M&HCV segment on the back of infrastructure spending and the government’s focus on increasing manufacturing share in GDP, PLI schemes, scrappage policy, etc., Bharat Forge is known to explore opportunities in the aluminium space after the commencement of operations at its Nellore plant. Witnessing a rise in consolidated revenue from operations at 19.57 per cent to Rs.2082.85 crore for the fourth quarter ending March 2021 (Q42021) as compared to the consolidated revenue earning of over Rs.1741.92 crore in the same period (Q42020) a year ago, the company has secured an order for the development and supply of defence components. Becoming its 100 per cent subsidiary, Kalyani Strategic Systems is well-poised to help Bharat Forge meet eligibility criteria for defence contracts. The pandemic in the first quarter of last fiscal
causing temporary disruption, Bharat Forge is concentrating on budgetary support and eliminating any slack in physical interactions with buyers that may have been created. With several successful artillery and vehicle trials by its side, the company is keen to take its cooperation with its clients in the defence space to the next level. Said to follow a three-horizon strategy that involves artillery guns, armoured vehicles and speciality vehicles as products; some other type of speciality vehicles as products, and electronics and high-end tech as the third line, Bharat Forge is eyeing a significant chunk of business from the Indian Army as part of the ‘Atmanirbhar Bharat’ policy.
Reporting a consolidated net profit of Rs.212.12 crore for the last quarter of FY2020-21 against a net loss of Rs.68.59 crore in the year prior to this, Bharat Forge, an automotive, defence and aerospace components supplier, is confident of strong growth on the basis of an encouraging rebound in export markets. Said to expect robust demand in major export segments such as CVs, construction and mining, and oil and gas, the company looks well poised to tide over the current weakness in the domestic market, according to industry sources. Drawing attention to CV majors like Volvo, Daimler and Paccar providing positive demand commentaries and the 2021 calendar year forecast of retail units in North America and Europe being raised by at least 10 per cent post a sharp downturn seen in the 2020 calendar year, sources mention that a strong demand rebound in medium and heavy-duty commercial vehicles in Europe and North American market will help Bharat Forge gain good export traction.
Set to benefit from the local manufacture initiative by the Defence Ministry that imposes restrictions on the import of certain weapons and specialised artillery equipment, the company has seen its aerospace business get impacted because of the fall in demand for global and regional air travel given the centre and state restrictions known to dissuade flyers. Investing Rs.0.01 million to acquire a 100 per cent stake in Kalyani Powertrain Private Ltd. with an aim to undertake various initiatives in the field of e-mobility, Bharat Forge makes airframes, structural, aircraft turbines, fan blades, landing-gear components, compressors and engine parts for the aerospace industry. Acquiring 70 hectares of land at Khed for around Rs.2.4 billion, the company is confident of making positive progress on the aerospace front as growth returns to the aviation sector. Claimed to have restrained from utilising much capex in FY2020-21, Bharat Forge has emerged as a successful bidder for Sanghvi Forging & Engineering Ltd. (Sanghvi Forgings). On May 06, 2021, the Company invested 0.10 million to acquire a 100 per cent stake in the equity of BF Industrial Solutions Private Limited (formerly known as Nouveau Power & Infrastructure Private limited) as a Special Purpose Vehicle (SPV) for implementation of approved resolution plan for acquisition of Sanghvi Forging, Baroda. Keen to see a significant uptick in defence and e-mobility activities, the company is exploring new segments such as renewable energy, and metals and mining. With an EBITDA percentage increase of 310 bps (a little over three per cent) despite the cost inflationary pressures, Bharat Forge is well-poised for upgrading its industrial manufacturing capabilities with the acquisition of Vadodara-based Sanghvi Forgings. Well aware of the spate of changes in regulations coupled with deteriorating fundamentals of the underlying economy leading to torrid times for the automotive industry, the company is continuing to identify and address the new opportunities in the domestic automotive industry.
