Captains Speak     

Published: January 31, 2024
Updated: January 31, 2024

Bharat Forge

Eyeing mining, railways, aerospace

“Bharat Forge has made an additional investment in Kalyani Power Train Ltd (KPTL), which is engaged in the electrical vehicle (EV) and e-mobility solutions space,” said Amit Kalyani, Deputy Managing Director, at a conference call organised to discuss the September 2023 quarter results. He added, “The proposed additional investment is for setting up manufacturing lines to supply EV components through KPTL’s subsidiaries.” Besides Mr Kalyani, the conference call was also taken by Subodh Tandale, Executive Director, and Kedar Dixit, CFO.

Reviewing the company’s performance during Q2 FY2024, Mr Kalyani revealed that for the quarter ended September 2023, consolidated net sales (including other operating income) of Bharat Forge has increased 22.68% to Rs 3,774.19 crore compared to the quarter ended September 2022. Sales of the forgings segment rose 19.09% to Rs 3,375.88 crore (accounting for 87.03% of total sales). PBDT rose 29.22% to Rs 549.58 crore. Provision for depreciation rose 12.34% to Rs 211.33 crore. Fixed assets increased to Rs 6,659.78 crore as of September 30, 2023 from Rs 6,164.08 crore as of September 30, 2022. Intangible assets declined from Rs 377.37 crore to Rs 294.97 crore. Profit before tax grew 42.60% to Rs 338.25 crore. Extraordinary items were Rs - 2.10 crore. Provision for tax was an expense of Rs 121.79 crore, compared to Rs 93.22 crore. The effective tax rate was 36.18% compared to 39.71%. Minority interest decreased 183.49% to Rs -12.36 crore. Net profit attributable to owners of the company increased 55.72% to Rs 227.23 crore.

FORGINGS FLY

Referring to the year to date (YTD) performance, Mr Dixit, the CFO, said net sales (including other operating income) of Bharat Forge increased 29.08% to Rs 7,651.46 crore. Sales of the forgings segment rose 21.81% to Rs 6,858.30 crore (accounting for 87.63% of total sales). The PBIT margin of the forgings segment rose from 11.30% to 11.97%. The PBIT margin of the ‘Others’ segment rose from a negative 0.38% to 10.44%. The overall PBIT margin rose from 10.63% to 11.78%. OPM jumped from 14.50% to 15.90%, leading to a 41.52% rise in operating profit to Rs 1,216.80 crore. PBT grew 41.88% to Rs 677.19 crore. Net profit attributable to owners of the company increased 45.19% to Rs 450.63 crore.

Pointing out that “the India CV business registered a 12% YoY growth in H1FY24, outperforming the overall market,” Mr Kalyani added that “the sector’s long-term trajectory is very promising, driven by the government’s focus on infrastructure spending and positive economic activity. The export CV business continued to be marginally positive. North American Class 8 build rates, inventory levels and sales remained steady. European CV sales remained stable as economic activity continued to recover gradually.”

According to Mr Tandale, Executive Director, “Passenger vehicles has been a standout sector for the company over the past few quarters and it continues to rise driven by marketshare gains, increasing value addition and order wins from newer geographies and customers. Today, this sector accounts for almost 25% of its exports and will continue to be a key contributor to the growth of the group. The India PV business remains well-placed for growth, driven by premiumization and the shift towards utility vehicles within the PV space. The company expects this trend to continue, supported by a burgeoning middle class and higher disposable incomes. The export PV business continued with its strong growth, driven by an improvement in marketshare and enhancement of geographical reach.”

OTHER VERTICALS

Maintaining that “the Indian industrial segment’s performance continues to be sanguine,” Mr Kalyani added that supply of components to KSSL (Kalyani Strategic Systems Ltd) drove YoY performance. “The revival in the infrastructure and capital goods space is leading to a strong order pipeline. The management expects the momentum in its businesses to continue in the H2FY24 performance along with strong cash flow generation.”

He added, “The export industrial business continues to benefit from new products and expanded engagements with existing clients. The mining & construction vertical continues to hold steady, post a strong run. The company continues to actively source newer markets. It remains focused on building new relationships within the industrial space, targeted at construction & mining, railways, agri equipment, aerospace, etc.”

According to Mr Dixit, in H1FY24, the standalone business secured new orders worth Rs 740 crore across various segments, including Rs 300 crore for e-mobility programmes. During the quarter, the company’s defence vertical, KSSL, secured new business worth Rs 1,100 crore, taking the executable order book to Rs 3,000 crore over the coming 24 months. Excluding the impact of a seasonally weak quarter in the European market, the overseas operations performance has shown improvement consistent with the increase in capacity utilization of the aluminum business.