Baba Kalyani expects defence vertical revenue to grow nearly 60% in FY25

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Baba Kalyani, CMD of Bharat Forge says the company’s defence business will grow by nearly 60% this financial year.

The defence vertical had revenue of ₹1,500 crore for the financial year 2023-24 (FY24).

In a post-earnings conversation with CNBC-TV18, Kalyani said things have improved significantly over the last three months, and the company has sealed defence export contracts worth nearly $500 million during the period.

These are the edited excerpts of the interview:

Q. What kind of revenue growth can you deliver in FY25 on the base that you’ve delivered for FY2024? Also, the defence vertical has picked up big time and is clocking close to ₹1500 crore in FY24. What’s the contribution from there for FY25?

A: We have almost a ₹5,000 crore order book right now. 80% of that is exports and that does not include the Indian artillery orders, which are yet to be finalised. Once that happens, that is likely to be another ₹2,000-3,000 crore. We are developing large export customers, and a lot of new technologies in our company. The big advantage is that the government of India’s big push that is being given for exporting defence products is really helping.

Q: What could be the execution, revenue on a consolidated basis and from the defence vertical in particular, since you are sitting on a big order book and are going to get more orders as well?

A: I would say we would grow anywhere between 50 to 60% on last year’s (FY24) execution on the defence vertical.

Q. What about growth on the consolidated basis? Last year you did high teens.

A. It should be pretty similar. We have three verticals, which are now kicking in very well. Our component business is doing well, defence has really bolstered things up in a very good way, industrial vertical, which is our casting business, has grown 30% and we expect to see similar growth coming in this year. We still have two more verticals that are part of our pivoting away from just being a component maker. One of them is our overseas subsidiaries in the aluminium business and we hope by the end of this year, we will have both of them making profits and our electric mobility vertical, which will also start showing some traction.

Q. Revenues in the defence business were about ₹465 crores in Q4. You’re saying you’ll grow from 50 to 60% in FY 25 On top of that

A. For full year, revenue was about ₹1,500 crore and we will do about 60% more than that next year (FY25).

Q. What’s changed in the last three months for the market? When you came out with the Q3 numbers you said expect the growth momentum to moderate in both domestic and the export market in FY25. The oil and gas segment is weak, there is a decline in US production volumes etc. Now, you are guiding for significant growth in FY25.

A. In the last three months, we got nearly $500 million of export contracts on defence. That was a big change. As far as the US market is concerned, the big change there is that all the OEMs we supply to have all given extremely positive guidance. If you see the guidance of Volvo, Daimler, etc., have all given an extremely positive guidance, which was not so 3-4 months ago, when the general tune was that US was heading for a recession. Also, we’ve been able to increase our market share in that market.

We are very clear that we will turnaround our overseas business this year completely.

Q. So the US business as well in the international business will be a big turnaround in FY25.

A. The US will make profits in Q4 and the European business will make profit for the year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow