In a bid to de-risk its business model, Pune-based Bharat Forge has decided to increase focus on non-automotive segments. The Rs 3,085-crore forging major is looking for acquisitions in North America and Europe in the non-automotive space.
The company is eyeing defence, shipping, aerospace, energy and hydrocarbons sectors and expects to generate revenues of Rs 1,000 crore from these segments by 2008. Going forward, it aims to achieve 40% of its revenues from the non-automotive segment in the next five years from a level of 17% today.
The expansion in the non-automotive space would involve an investment of nearly Rs 350 crore, funded with internal accruals. It would be setting up a 40,000 MT plant at Baramati and 60,000 MT plant at Mundhwa specifically for the non-automotive play.
Sources say the company is also considering setting up a plant in Durgapur with an outlay of Rs 800 crore. About 60% of the unit’s output would be in the non-automotive space. The plant will export to China and Southeast Asia.
P K Maheshwari, executive director, Bharat Forge, told DNA Money, “We have been into the non-automotive segment for quite some time, but company is now giving more focus on this. We have bigger plans for the coming days.”
On acquisitions and supplying components for Tata’s Rs 1 lakh car, Maheshwari said, “We are in talks with every automobile manufacturer and Tata also comes in that segment. The company is always looking for acquisitions.”
Asked if the China foray is a mistake, he said, “We don’t think so and things will be clear in the coming years.”
Analysts said the forgings used in non-automotive sectors are usually large in size, small in quantity, but with high margins. Bharat Forge’s China foray could bring difficult times in view of the commercial vehicle overhang in that market. Also, a slowdown in the US commercial vehicle demand this year could affect its revenues.
The company has posted a net profit of Rs 62 crore for the quarter ended December from Rs 53 crore in the corresponding year-ago quarter.
Bharat Forge, the country’s largest manufacturer of auto components with a capacity of close to 6 lakh tonnes a year, is the flagship company of the over $1.5 billion Kalyani group.
It manufactures components for engines and chassis for commercial vehicles and cars, for General Motors, Toyota, Volvo and Caterpillar.
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