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Bharat Forge Ltd.

BSE: 500493 Sector: Engineering
NSE: BHARATFORG ISIN Code: INE465A01025
BSE 00:00 | 01 Feb 866.85 -8.35
(-0.95%)
OPEN

886.95

HIGH

903.70

LOW

845.00

NSE 00:00 | 01 Feb 868.15 -5.95
(-0.68%)
OPEN

884.85

HIGH

903.80

LOW

845.05

OPEN 886.95
PREVIOUS CLOSE 875.20
VOLUME 76242
52-Week high 919.50
52-Week low 595.85
P/E 38.77
Mkt Cap.(Rs cr) 40,361
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 886.95
CLOSE 875.20
VOLUME 76242
52-Week high 919.50
52-Week low 595.85
P/E 38.77
Mkt Cap.(Rs cr) 40,361
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Bharat Forge Ltd. (BHARATFORG) - Chairman Speech

Company chairman speech

The strong revival in consumer demand post pandemic alongside thesupply chain constraints has triggered a greater challenge of hyperinflation with sharpprice increase in all major commodities including food items. The central banks of manycountries have raised the interest rates to control the scenario.

Automobile Industry

The year gone by has been a mixed one for the automotive industry.

On the one hand the demand was fairly strong yet on the other supplyside challenges made it difficult to fulfill them. Globally sales were impacted becauseof the semi-conductor crisis and the waiting period only got longer as production wasconstrained.

FY 2022 performance of the Indian Automotive industry looks healthygiven the low base of COVID-impacted FY 2021. However the industry's production in FY2022 is still down more than 25% when compared to peak volumes registered in FY 2019.Hopefully the coming years hold much better prospects for the industry as a whole.

The Year Gone by Reflecting back through the events of FY 2022firstly I take this moment to express gratitude to our team globally who have done acommendable job to ensure that the Company delivers on the commitment made to ourcustomers globally.

The financial performance has been impressive: 71% growth in topline atrebling of bottom line two acquisitions in India focused on Industrial sector; all thiswhile maintaining a robust balance sheet. This is despite the fact that our commercialvehicles and the Oil & Gas business the backbone of our business traditionally isstill significantly below the previous peaks achieved in 2019. This gives an indication ofhow much your Company has evolved and diversified.

The year also saw us make progress in various aspects of our business.We saw a sharp improvement in the performance of our overseas subsidiaries whilesimultaneously strengthening their presence in the Aluminum forgings space.

The Defence and E-mobility business are starting to witness meaningfultraction with successful firing trials of the ATAGS and the receipt of maiden order forsupply of power electronics to a leading Indian CV manufacturer. We strengthened ourpresence in the Industrial space with the acquisition of JS Auto Cast setting afoundation for multi-year growth in our industrial business.

Overall we are quite happy that we have been able to deliver a goodyear in spite of all the external challenges.

Resilient Performance in a Challenging Environment

In the backdrop of strong recovery across all key segments andgeographies the Company has recorded sharp jump across performance parameters.

Our standalone revenue increased 71.3% to ' 62546.12 million. If notfor the supply chain related issues which impacted OEM production we would have closedthe year with topline close to or surpassing the record FY 2019 levels.

Buoyed by an improvement in capacity utilization EBITDA grew 128.6% to' 16798.16 million and PAT by 245.4% to ' 10778.06 million in FY 2022.

On a consolidated basis the revenues increased 65.1% to ' 104610.78million in FY 2022 and EBITDA by 129.5% to ' 19810.02 million.

A Revitalized International Operations

FY 2022 turned out to be an important year for our overseassubsidiaries. For the past many years we were working towards improving their financialperformance and the same is now bearing results. A combination of product and costrationalization focus on productivity and investment towards a more favorable product mixwill hopefully result in sustainable 10%+ margins going forward. Historically this stoodat an average of 5%. In CY2021 we achieved over 10% margin and expect this to improve inthe medium to long term.

We also commercialized a new greenfield facility in North Carolina US.With this we now have two facilities (one each in North America and Germany) to cater thealuminum forgings requirements for global marquee OEMs. These facilities will play a keyrole in enhancing the Group's presence in the EV transition globally. Interestingly weare witnessing higher inquiries than originally which while signaling healthy growthwill necessitate more investment in capacity. We are cognizant that the new facility willreport EBITDA level loss because of low utilization levels in the 1st year of operation.

Diversification from Position of Strength

At Bharat Forge diversification to adjacent sectors/process has beenan important focus area. We have always done so from a position of strength and see it asadding new layers to offer more solutions to our customers and create value for ourstakeholders.

Continuing with this we have now diversified into the industrialcastings space through the acquisition of JS Auto Cast.

This Company gives us a platform to address a huge untapped marketacross wind energy hydraulics construction mining among others both in India andglobally. We are confident that this business will help in taking our industrial businessto the next orbit. As a Company philosophy we want to be #1 or 2 in any segment we enteror focus on.

Defence: Journey Towards Self-reliance

India under the leadership of the Honorable Prime Minister NarendraModi has made significant strides towards self-reliance in Defence manufacturing. Withthe concept of positive indigenization list there is a time-bound limit to import ofproducts/equipment's. Since the notification of the first and second lists contracts for31 projects worth ' 53839 crore have been signed by the Armed Forces Acceptanceof Necessity (AoNs) for 83 projects worth ' 177258 crore have been accorded.Additionally cases worth ' 293741 crore will be progressed in the next five-sevenyears.

The Government's policies are in the right direction and the journeytowards self-reliance is getting stronger. The entire Russia-Ukraine conflict has onlymade this determination even greater; underlining the fact that India cannot depend onimports. We have to produce ourselves.

Bharat Forge is well-positioned and making progress in this spacethough not necessarily at the pace which we had originally expected.

But we are steadily getting there.

We are getting repeat orders for our armored personnel vehicles andrecently supplied vehicles to the Indian Army. Besides many other products and platformsare now playing out and impressing the armed forces including artillery platform where wesuccessfully completed final army trials.

We expect things will start falling into place in the coming 12-24months.

The defence activities will be undertaken by KSSL a 100% subsidiary ofBFL. They will always be guided by "ETHOSS" Principle. It will be an"Ethical Organization" with focus on "Societal Sustainability". KSSLwill not engage in developing manufacturing or distribution of controversial weaponsystems prohibited by various international treaties or conventions.

E-mobility: a Silent Revolution Underway

E-mobility is an area that we have kept under the radar so far notwanting to make much noise just like the EVs themselves. I am confident that thetremendous progress made in the last year as well as our products will speak forthemselves. What pleases me the most over the past year has been the organic work we havedone in our R&D center and the build-up of the organization structure. The comingyears will see these bear fruit starting as early as FY 2023 itself.

Tork Motors has successfully launched their e-motorbike KRATOS with a2000 strong order book. Before effecting deliveries Tork is taking added precautions interms of safety testing.

All our E-mobility related investments are now consolidated under our100% subsidiary Kalyani Powertrain Limited.

In another significant development we have been declared as asuccessful applicant under the component production linked incentive (PLI) scheme of thegovernment. So the intent from here is to make necessary investments towards becoming thekey manufacturers of E-mobility components for both domestic and global customers.

The inevitability of shift to E-mobility is slowly becoming a reality.I am confident that FY 2023 should mark the maiden year of revenue contribution from ourE-mobility vertical.

Balancing Growth and Financial Position

One thing that we are essentially proud of is our ability to fundgrowth without disturbing the strength of the balance sheet. In the last few years wehave made significant investments in organic and inorganic opportunities. We have investedin international operations new businesses new technologies strategic stakeacquisitions and even acquisitions. In spite of these our balance sheet remains strong.

At a low net debt equity of 0.20 and strong cash position of '24818 million as on March 31 2022 we have significant headroom to keep our enginesrunning at full steam. This is an under-appreciated strength especially in the presenttimes when uncertainty is at an all-time high.

Growing the ESG way

ESG is an important focus area and we are embedding it into everyaspect of our business for a sustainable development. We have been doing many things overthe years. 100 villages have been adopted across Maharashtra where we are driving holisticlong-term development through focused interventions in education health livelihood andinfrastructure development. And the success stories there have been inspiring. Severalinvestments have been made towards responsible operations including minimizing resourceconsumption reducing emissions and entering green business areas of light-weighting andE-mobility.

The intent now is to step up. As I write a decarbonization roadmap isbeing prepared within BFL and our Group companies which involves enhancing the share ofrenewable energy planting trees and modernizing plants where required. We also target toachieve zero water discharge/solid discharge and 100% recycling to create a circulareconomy.

BFL V2.0

Bharat Forge has secured and expanded its core business over the yearsand this continues to be part of our strategy going forward. While we do that we havealso diversified into several new markets. Some are adjacent markets and some are marketswhere we see good synergy with our core strengths. By doing this we have built a nicediversified portfolio focusing on several different global growth markets. To ensure sharpfocus on our end markets we have reorganized our internal structure over the last fewmonths. We now have five vertical business units focusing on these end customer markets -Automotive Industrial E-mobility Defence Aerospace & Turbomachinery. Thesebusiness units are fully equipped with the infrastructure and organization to serve theirrespective markets. Given the unique pace nature and requirements of these markets thebusiness units will have the flexibility to organize themselves in such a way that theycan serve their customers well. We believe this market-focused structure will help us tobe more in sync with our customer needs and be more responsive to the shifts in these endmarkets.

This in turn will help us get our fair share of the growthopportunities in these markets.

This year I complete 50 years at Bharat Forge. It has been a veryexciting journey which has seen your company grow from less than USD 1 million sales in1972 to USD 1.4 billion today. I would like to thank all my colleagues and ex-colleagueswho have been a part of this journey and our Customers for their belief and constantsupport our Investors & Financial institutions for their unwavering trust and finallyto the authorities at the State & Center for enabling our dream of 'Making in Indiafor the World' a reality.

Every decade had an inflection point which made us stronger.

The 90's was about setting up 16000T automatic press line 2000's wasabout organic growth and global M&A to speed up customer access 2010's was aboutIndustrial business. The 20's are about EV Defence Al forgings Industrial business.This journey of small steps to bigger strides has not been without its fair share ofchallenges but this journey has been made possible because of a strong foundation oftechnology manufacturing and innovation along with talent creation and the strongcommitment and performance of Team BFL.

Closing Comments

I think we are positioned well because we have the capacity we haveinvested in people for the sunrise sectors developed products and because we believeIndia's manufacturing is going to see significant tailwinds arising out of the crisisglobally. I see no reason why the country will not be able to reach the USD 5 trillion GDPmark in the next few years.

We are confident of a stronger and sustainable performance over themedium to long term. I thank all stakeholders for believing in us through the journey. Weseek your continued support as we look to maximize value creation for all.

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