Bharat Forge Sets Up Spv To Transfer Investments

In a move to clean up its balance sheet, city-based Bharat Forge has floated a special purpose vehicle (SPV) called Kalyani Utilities Pvt Ltd into which all financial investments will be transferred.

This is part of its restructuring exercise being undertaken by the company to enable it to mark-to-market all its financial investments. In fiscal 1999-2000, Bharat Forge restructured investments worth Rs 97 crore.

In the current year, the company plans to transfer Rs 50-crore worth of financial investments to Kalyani Utilities. The SPV has an equity base of Rs 22.5 crore of which the Kalyani family has contributed Rs 7.5 crore and the balance amount has been brought in by Bharat Forge.

 

The SPV has entered into windpower generation to get the benefits of depreciation and other tax benefits. The SPV will also get into other forms of power generation.

"The investing community has been critical of the investments made by us in our group companies and we have decided to clean up the balance sheet and transfer all the investments into the SPV," Baba Kalyani, chairman and managing director of Bharat Forge said. He also informed that the company has embarked on a programme that will enable it to comply with generally accepted accounting practices accounting norms.

Bharat Forge plans to substantially reduce its debt from the current level of around Rs 409 crore to Rs 310 crore by March 2001.

In fiscal 1999-2000, the company undertook capital expenditure of Rs 200 crore which was largely met from internal generation.

A major part of the capital expenditure went towards importing a hi-tech 16,000 tonne forging press line from Muller Weingarten, Germany, at a cost of Rs 145 crore, last year. As a result of this capital expenditure, Bharat Forge's capacity of forgings rose to over 1 lakh tonne.

According to Kalyani, the newly acquired machines will enable the company to provide its customers with complete back-up assurance against disruption of supplies on account of equipment breakdowns and other problems.

The new Weingarten press line will enable the company to undertake smooth supplies to the export market. "We have a distinct plan to step up exports to 25 per cent of our total sales in the next few years," Kalyani said.

A major part of Bharat Forge's exports go to Meritor Automotive of USA. Besides, it also exports to DaimlerChrysler, Volvo and several other automotive giants.

Recently, Bharat Forge entered into an alliance with ICICI and PriceWaterhouseCoopers to create e-market for steel and auto components. Two separate web sites are being created on an international platform for e-trading in steel and auto components by investing around Rs 30 crore for each of the sites.

Amit Kalyani, son of Baba Kalyani, has been inducted into Bharat Forge as chief technology officer to drive this e-initiative.