Tag: Bharat Forge

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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Bharat Forge Q4 Results: Defence, industrials, castings to drive FY25 growth; Stock at record high

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

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Auto component and construction company Bharat Forge Ltd on Wednesday reported a rise of 59% in net profit at ₹389.6 crore for the quarter ending March 31, 2024. The profit figure was higher than CNBC-TV18’s poll of ₹378 crore. It reported a net profit of ₹244.5 crore in the year-ago period.

The company reported a one-time loss at ₹13.3 crore as against a loss of ₹41 crore in the year-ago period.

Bharat Forge’s revenue from operations surged 16.6% to ₹2,328.5 crore for the fourth quarter as against ₹1,997 crore a year ago.

The company’s operating profit or EBITDA rose 35.1% to ₹659 crore, compared to ₹488 crore in the same period last year. Margin stood at 28.3% in the reporting quarter as against 24.4% last year.

At a consolidated level, Bharat Forge expects FY25 to be a year of growth driven by Defence business, Industrials, and Casting business. The company sees continued improvement in capacity utilisation of the overseas business.

The turnaround of the overseas business coupled with margin improvement in other business verticals should result in strong growth in profitability in FY25.

The company recommended a final dividend of ₹6.50 per equity share of the face value of ₹2 each for the financial year 2024.

This will result in a dividend payout of 325%, which is subject to approval of the members of the company at the ensuing annual general meeting.

The final dividend, if approved, will be paid on or after August 14, 2024, the company said in a filing.

In an interaction with CNBC-TV18, Bharat Forge CMD Baba Kalyani said the company has an order book of ₹5,000 crore now. “80% of that is exports and, that does not include the Indian artillery gun orders, which are yet to be finalised. Once that happens, that is likely to be another ₹2,000-3,000 crore.”

The big advantage, Kalyani said, the government of India’s big push that is being given for exporting defence products is really helping.

In the last three months, the company has received about $500 million of export contracts on defence.

“As far as the US market is concerned, the big chain there is all the OEMs that we are supplying to all has given very positive guidance going forward. So if you see the guidance of Volvo, Daimler, all have given an extremely positive guidance, which was not so, three, four months ago,” he said.

Following the earnings announcement, shares of Bharat Forge Ltd. rallied over 7% to hit a record high of ₹1,356.75 apiece on the NSE. The stock has gained nearly 7% in 2024 so far.

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Bharat Forge shares decline after North America Class 8 truck orders fall to nine-month low

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

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Shares of Bharat Forge fell on Friday after Class 8 truck orders in North America fell to a nine-month low in April.

Data indicates that the North America Class 8 truck orders declined 18% month-on-month in April to the lowest level since July 2023.

This is the fifth straight month that class 8 truck orders have declined in North America.

Class 8 truck orders in North America fell to 14,400 units in April, down from the 18,200 units it had declined to in March.

This is also the second straight month that the class 8 truck orders remained below 20,000 units, after falling below it for the first time since August 2023 in March.

Bharat Forge, the defence-to-auto component supplier has presence in the North American market when it comes to class 8 trucks.

In an interaction with CNBC-TV18 in November last year, Bharat Forge Chairman Baba Kalyani said that the company has seen a big improvement in North American truck orders and that the company is currently in a major transformation phase to move from components to products.

Out of the 29 analysts that have coverage on Bharat Forge, eight of them have a “sell” rating on the stock, while 19 of them have a “buy” rating.

Shares of Bharat Forge are currently trading 0.6% lower at ₹1,266.50. The stock is flat so far in 2024, gaining only 1.5%.

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Bharat Forge in focus after Class 8 Truck orders in North America fall by a third

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

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Shares of Bharat Forge are in focus on Wednesday after Class 8 truck orders in North America fell by a third compared to February.

Class 8 truck orders in North America fell to 17,300 units in March compared to 19,000 units in the same period last year. In the month of February, that figure stood at 25,700 units. On a year-on-year basis, that figure is down 9%, while in comparison to February, orders are down by 33%.

Truck orders have slipped below the 20,000 units mark for the first time since August 2023.

Class 8 truck orders also declined for the fourth straight month when compared on a month-on-month basis.

“Nascent improvements in the freight market and select OEMs’ efforts to smooth demand, notwithstanding forced conservatism among a portion of the truck buying populace, capped Class 8 order activity in March,” shared Steve Tam, ACT’s Vice President and Analyst. “While we will have to wait for the details of the month’s order volumes, logic suggests waning demand for tractors in the market retrenched in March,” he added.

Bharat Forge, the defence-to-auto component supplier has presence in the North American market when it comes to class 8 trucks.

In an interaction with CNBC-TV18 in November last year, Bharat Forge Chairman Baba Kalyani said that the company has seen a big improvement in North American truck orders and that the company is currently in a major transformation phase to move from components to products.

Shares of Bharat Forge ended 0.7% lower on Tuesday at ₹1,156. The stock has risen 50% over the last 12 months.

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Bharat Forge shares close 2% lower as promoter releases pledge on 1.62% equity

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

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Bharat Forge Ltd shares closed more than 2% lower on Wednesday after the company’s promoter released a pledge of 1.62% equity. The company informed the stock exchanges on February 28 that the promoter, or PAC, on whose shares encumbrance has been released is Sundaram Trading and Investment Private Ltd.

As per the reporting date of February 22, 2024, the promoter group BN Kalyani released a pledge of 1.62% of Bharat Forge’s share capital, amounting to 75 lakh equity shares. The shares have been encumbered in the favour of Tata Capital Ltd.

Shares of Bharat Forge dropped 3% to a low of ₹1,142.3 apiece on BSE on Wednesday. However, the stock recovered some early losses to close at ₹1,152.2, down 2.16%.

The stock has gained 5% in the last three months. Shares of Bharat Forge dropped 10% so far this year. The stock has given returns of over 40% to investors in the last one year and 90% in the last three years.

The company’s consolidated net profit increased sharply by 220.66% on a year-on-year (YoY) basis to ₹264.55 crore in the quarter ended December 31, 2023, compared to ₹82.5 crore reported in the year-ago quarter. Its net sales rose 15.3% to ₹3,866.41 crore in the three-month period from ₹3,353.36 crore in the corresponding period of the previous fiscal year.

Bharat Forge’s Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) stood at ₹753.8 crore in the third quarter of FY24, which was 49% higher than ₹505.86 crore in the same quarter a year ago.

ALSO READ | CNBC-TV18 exclusive | Bharat Forge confident of hitting ₹20,000 crore revenue in the next two years

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Bharat Forge gives cash boost of ₹134 crore to subsidiary BFGH

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

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Auto components major Bharat Forge Ltd on Thursday (February 22) announced a strategic infusion of €15 million (approximately ₹133.58 crore) into Bharat Forge Global Holding GmbH (BFGH).

“…the Company has on February 22, 2024, infused funds in Bharat Forge Global Holding GmbH (BFGH), a wholly-owned subsidiary of the
company. This amount will then be invested by BFGH into Bharat Forge Holding GmbH (BFH) for subsequent investment in Bharat Forge Aluminiumtechnik GmbH (BFAT), a wholly owned subsidiary of BFH,” Bharat Forge said in a regulatory filing.

This investment, to be made by BFGH into Bharat Forge Holding GmbH (BFH), is earmarked for subsequent funding of Bharat Forge Aluminiumtechnik GmbH (BFAT), a significant step-down subsidiary in Germany.

BFAT, a wholly-owned subsidiary of Bharat Forge Holding GmbH, specialises in producing forged and machined aluminium components for the automotive industry.

The investment is structured as a related party transaction and is expected to be completed by February 29, 2024. The company will continue to maintain full ownership of BFAT and BFH through its subsidiary, BFGH.

Shares of Bharat Forge Ltd ended at ₹1,130.05, up by ₹6, or 0.53%, on the BSE.

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Bharat Forge shares drop 6% as analysts expect up to 15% downside after Q3 results

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

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Two of three brokerages expect Bharat Forge shares to pull back up to 15% in the next 12 months after India’s leading forging company projected a moderate growth scenario for the last quarter as well as the next fiscal.

Bharat Forge shares tanked up to 6% to hit a low of ₹1,063.4 apiece on BSE in early trade on Tuesday, a day after the stock was drubbed more than 14% following the release of its third-quarter results. The stock fell the most in a single day on Monday since March 2022.

Brokerage CLSA assigned a ‘sell’ rating on Bharat Forge with a target price of ₹977 per share, implying a potential loss of 13.5% from Monday’s close.

While mentioning that the third quarter results were above estimates, CLSA said that the management expects growth momentum to moderate in both domestic and export markets.

Subsidiaries continue to be in red, which is dragging down consolidated profit growth, the brokerage noted.

Brokerage Jefferies also downgraded the target price on Bharat Forge to ₹950 per share with an ‘underperform’ rating. The target price suggests a potential downside of up to 15%.

“The company gave a cautious outlook as it expects growth momentum to moderate,” Jefferies said in a report. The brokerage also expressed concern over cyclical headwinds in the exports and Indian trucks sector, and on rich valuations of the company.

Jefferies cut the earning per share (EPS) estimate for FY24-26 by 7-10%. It also noted that the Q3 consolidated EBITDA rose by 56% YoY and 8% QoQ but was 5% below estimate.

However, Morgan Stanley painted a bull scenario for Bharat Forge with an ‘overweight’ rating and a target price of ₹1,346 per share, implying a potential upside of up to 19% in the next 12 months.

The brokerage mentioned that the stock reaction to moderate growth projection is overdone.

Standalone business revenue of Bharat Forge was 3% ahead of estimate and revenue is driven by domestic non-auto business, MS said in a report.

Domestic and export auto business was in line with estimates while defense business revenue and EBITDA were 28% and 14% ahead of estimates, it added.

“EV business was weaker while casting was in line. International subsidiary margins improved by 100 bps QoQ to 1.7% Vs the estimate of 2%,” Morgan Stanley said in a note.

The management has guided for moderation in growth momentum “across industries” in Q4FY24 and FY25, MS clarified on its call.

Bharat Forge reported a net profit of ₹377.8 crore for the December quarter, up by 31% over the year-ago period on the back of a favourable product mix and focus on cost optimisation.

Its revenue also rose by 16% year-on-year to ₹2,263.3 crore in the period under review.

Bharat Forge shares were trading 4.89% lower at ₹1075 apiece on BSE at 9.31 AM.

Catch live market updates with CNBC-TV18.com’s blog 

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Bharat Forge shares post biggest single-day drop since March 2022; crash over 14%

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

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Bharat Forge net profit jumped almost 31% to ₹377.8 crore in the quarter ended December 31, 2023, driven by a favourable product mix and focus on cost optimisation. The company had reported a net profit of ₹289.1 crore in the October–December period of the last fiscal.

Bharat Forge revenue also increased by 16% to ₹2,263.3 crore on a year-on-year basis in the period under review. It had posted a revenue of ₹1,952.1 crore in Q3FY23.

Bharat Forge EBITDA (earnings before interest, taxes, depreciation, and amortisation) also rose 24% to ₹663 crore in Q3FY24, against ₹535.1 crore in the same quarter a year ago. Bharat Forge’s margin for the quarter came in at 29.3% compared to 27.4% in the quarter a year ago.

#3QWithCNBCTV18 | #BharatForge reports Q3 earnings 👇

>>Net Profit up 30.7% at ₹377.8 cr Vs ₹289.1 cr (YoY)

>>Revenue up 16% at ₹2,263.3 cr Vs ₹1,952.1 cr (YoY)

>>EBITDA up 24% at ₹663 Cr Vs ₹535.1 cr (YoY)

>>Margin at 29.3% Vs 27.4% (YoY) pic.twitter.com/RhzzH4raun

— CNBC-TV18 (@CNBCTV18Live) February 12, 2024

During the quarter, the company secured new business worth ₹550 Crores across Automotive, Industrial, Defence, Aerospace and Castings (Ferrous & Aluminum).

The company said its board has accorded in-principal approval to raise funds not exceeding ₹500 crore through term loan, non-convertible debentures or any other debt instruments.

Bharat Forge shares post biggest single-day drop since March 2022—Here’s why

Bharat Forge shares posted their biggest single-day drop since March 2022, tumbling more than 14% in a weak market that saw a sell-off across sectors. The management commentary also pointed at moderation in the growth momentum in Q4FY24 and beyond.

“Looking ahead in Q4 and further into FY25, we expect the growth momentum to moderate in both the domestic and export markets across industries,” Bharat Forge Chairman and Managing Director Babab Kalyani said in a regulatory filing. The company’s endeavour will be to outperform the market driven by its diversified business mix, he added.

“Our commentary is derived from what we hear from our customers. Our export markets are largely in Europe and the US and both markets are seeing some amount of cyclical peaking. Europe is also under other pressures, right from cost increases due to geopolitical events in their vicinity and lots of fundamental changes in the overall European marketplace,” Amit Kalyani, Deputy Managing Director of Bharat Forge told CNBC-TV18 on Monday.

“US exports will be positive because it is going to be driven by infrastructure growth, elections are going to happen, so there will be some push for growth… Sectors that were largely driven by China are going to see pressure. That is something that will play out for all companies, we are just being prudent and calling it out upfront because we believe in long-term rather than quarter-to-quarter kind of business,” he added.

“On the growth side, 10% growth is still on the cards. If things work out better, then it could be even higher than that,” he further added.

Bharat Forge dividend news

Bharat Forge also announced an interim dividend of ₹2.50 per equity share, which translates into 125% of the face value of ₹2 each of the company. The company has fixed February 23 as the record date for determining eligible shareholders for the interim dividend payout, which could be credited on or before March 12.

For the year ending March 2023, Bharat Forge has declared an equity dividend of 350.00% amounting to ₹7 per share. At the current share price of ₹1,130.95 this results in a dividend yield of 0.62%. The company has a good dividend track report and has consistently declared dividends for the last five years.

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Family vs professional owned businesses: Boon or bane?

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

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Infosys co-founder Narayana Murthy once believed mixing family with business is not the right approach. It’s a belief he held so strongly that he actively discouraged his wife, Sudha Murty, from joining Infosys in any professional capacity.

While Murthy has changed his stance —  he calls it “wrongly idealistic” now —  in the years since the founding of Infosys, his son Rohan Murty is not going get a play at the software giant built by his father.

Murthy, in his younger days, was an outlier in a country where, even today, more than eight out of ten companies in India (in line with the global average) are owned and managed by the founder’s family.

Some of the world’s biggest companies controlled by the founders or their family members include Google, Tesla, Softbank, Samsung, and Louis Vuitton, to name a few.

Our readers in India would be familiar with the conglomerates run by the Ambanis, Adanis, Birlas, Mittals, Bajajs and many more.

Bharat Forge’s Baba Kalyani is part of the overwhelming majority of Indian businessmen who believe in owning a family business. “When you have a family who is involved in business, the amount of passion they bring to it, the ability to work as many hours as is required to make it happen is all there, which necessarily may not be there when you have somebody from the outside,” he argues in an exclusive interview to CNBC-TV18’s Managing Editor Shereen Bhan.

His son Amit Kalyani serves as Deputy Managing Director at Bharat Forge, a company he joined in 1999.

What does data tell us about the efficiency of family businesses? 

“In India, substantial wealth creation has historically been attributed to large promoter families,” said a recent newsletter by investment firm Marcellus, which referenced a Credit Suisse study, focused on the phenomenon of “owner-operator” businesses, said,

The Credit Suisse report in question was based on an exclusive “Family 1000” dataset, encompassing 1,000 major family-owned businesses spanning the Americas, Europe, and Asia Pacific. A big chunk of the sample was from Asia Pacific.

It found that, since 2006, the global “Family 1000” universe has consistently returned 300 basis points more than the average (adjusted for sectoral deviations). The trend that holds true across all regions, according to Credit Suisse.

What works for family-owned businesses?

Credit Suisse found that family businesses have lesser risk appetite and are more focussed on generating profits than other businesses that are run by professionals. “Family-owned businesses can be shown to spend less than their non-family-owned counterparts on research and development (R&D),” the global investment bank noted in its March 2023 report.

The report found that these companies enjoy stronger human and social capital, and a potentially more efficient operating model. “We believe these factors help to enhance the ability of family-owned firms to transform an innovative idea into a profitable proposition more effectively than non-family-owned companies,” the Credit Suisse study highlighted.

So, businesses run by families are good at controlling costs and making more money. Their customers and clients tend to have a higher trust in the business because the family has a serious skin in the game.

Family-owned businesses can afford to have a much longer vision for the company whereas professionals may be hamstrung by the short-term growth aspirations of the shareholders they’re answerable to.

The decisions can be faster at a family-run business due to the lack of layers and bureaucracy. The underlying family values provide a consistency to the culture of the organisations they own.

Take the case of Baba Kalyani. “I am glad that my son is there with me because it is also a lot of support, to have your family in business, especially if they are engaged, they are qualified, they know what they are doing and they have a vision of what they want to achieve,” he said,

Amit Kalyani has been working with Bharat Forge since 1999, starting his career in manufacturing and moving on to IT and finance. He has been the group’s executive director since May 2004.

These, and many other, advantages aside, being an outsider with a stake in family-run businesses comes with a few risks too.

Conflicts of interest, lesser checks and balances, as well as nepotism are among the top reasons often cited by critics.

Checks and balances

In India, regulators have tried to make governance more transparent with many measures. For instance, at least one in three directors on every Board have to be independent. However, this has not always been effective.

In May 2018, the Securities and Exchange Board of India (SEBI) decided to separate of the roles of Chairman and Managing Director at the top 500 listed companies with effect from April 2020.

However, the said provision was later deferred by SEBI for two years, i.e., from April 1, 2022. But the pressure from the industry forced the market regulator to make the decision voluntary.

Lack of diversity

Only 63% Indian family business leaders surveyed by consulting firm PwC said that they have formal governance structures like shareholder agreements, family constitutions and protocols, and even wills. The global average on this count is 65%.

The same survey showed that 31% of the companies worldwide, and at least one in four Indian family-run firms, have no women on the board at all.

This number doesn’t reveal the regional disparity. For instance, another survey (of 357 Indian companies) by SP Jain Institute of Management and Research showed that active female participation was 97.8% in South India compared to 41% in the western part of the country.

Succession

And, one of the biggest concerns has been succession. While the owners of Reliance Industries, the Aditya Birla Group, the Piramal Group and JSW Group have fortified succession in their own companies, the same is not true for a big chunk of India Inc.

Baba Kalyani believes that it’s the American way to have a CEO who typically serves an eight-year term to avoid the risk of stagnation.

But this is not something Kalyani himself holds with. “Now I am here for 52 years and I haven’t seen things getting stagnated, maybe they would have been better if I had retired after 8 years,” Kalyani said.

Kalyani who recently turned 75, says he’s in no mood to retire.

“The day I think, I don’t enjoy it that day I am gone,” Kalyani told CNBC-TV18.

Adaptability

Many family-run businesses have also been less agile in adapting to social and technological changes. Conflicts within the family have also been a huge risk for other stakeholders.

The challenges multiply in an era of an unprecedented pace of social and technological changes.

It can be particularly daunting for the older promoters who aren’t empathetic to the aspirations and preferences of the new generation of customers as well as the people working for them.

The problem has been so acute in the startup space that the phrase ‘founder’s syndrome’ was born a few years ago. The term is used to describe the inordinate amount of authority that a founder assumes and is often seen taking the ‘my way or the highway’ attitude.

As the CNBC-TV18 columnist Srinath Sridharan points out, the founder’s syndrome can make it tough for companies to embrace new ideas, allow independent opinions to reflect the hard realities, and even to attract the right talent.

These are important points to remember for stakeholders in family businesses. Family businesses can be more resilient but they are not fool proof.

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

Bharat Forge hits all-time high on signing MoU with Tamil Nadu to invest up to ₹1,000 crore

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

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Bharat Forge Ltd shares hit an all-time high of ₹1,290 apiece on BSE on Tuesday after the company announced that it has signed a Memorandum of Understanding (MoU) with ‘Guidance’, the nodal agency of the Tamil Nadu government.

Bharat Forge signed an MoU with Guidance on Monday, January 8, 2024, as part of the Tamil Nadu Global Investors Meet 2024, for investments of an amount, not exceeding ₹1,000 crore, over a period of five years, the company said in a stock exchange filing.

The company is doing so to expand its manufacturing footprint in Tamil Nadu.

The MoU signed with Guidance is non-binding and has no material impact on the operations of the company at the moment, Bharat Forge informed the bourses.

In an interview with CNBC-TV18 on Monday, the Chairman and Managing Director of Bharat Forge, Baba Kalyani, had said the forging company is on track to achieve a revenue milestone of ₹20,000 crore in the next two years.

The company’s Deputy Managing Director Amit Kalyani has identified the defence business as Bharat Forge’s primary pivot for the future, citing its current global expansion and the anticipation of further growth.

Kalyani pointed to the defence business, industrial business, and aerospace business as large growth drivers that would help Bharat Forge scale globally.

Bharat Forge shares were trading 2.3% higher at ₹1,285.6 apiece at 12:45pm on January 9.

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