Happy Forgings' MD Ashish Garg says global forging business a big opportunity

Amidst soaring inflationary cost challenges around the world, global original equipment makers are scouting for the best alternate cost sources beyond China, and that is what Ludhiana-based component maker Happy Forgings Ltd is looking to capitalize on over the coming years. 

Thanks to increased interest, Happy Forgings expects its international business revenue share to increase from a third of its business to 40% in just two years. The company expects robust growth in its forging business with a higher share of exports over the medium term, as businesses are being moved to India from Europe due to recent inflationary pressures.  

“We are seeing a lot of business coming in from Europe. There is high inflation in Europe, and because of this, we are seeing a lot of business getting shifted to India permanently,” Happy Forgings Managing Director Ashish Garg told Autocar Professional today. 

Another major reason for global companies eyeing India is that many are aggressively de-risking their supplies and looking at sourcing beyond China. This has aided significantly in narrowing India’s trade deficit in the domestic component industry during 2022-23. 

Happy Forgings, which is eyeing a public issue worth up to Rs 1,008.6 crore next week, is a leading supplier of crankshafts for commercial vehicles and industrial use. It also manufactures components such as front axle beams, steering knuckles, differential cases, suspension products, pinion shafts and valve bodies for commercial vehicles and farm equipment, and railway, oil and gas, and power generation segments. 

The company currently exports its products to countries such as the UK, Italy, Spain, the United Kingdom, Brazil, Japan, and the United States. With a robust outlook for the forging business, Happy Forgings expects its export and export contribution to the revenue to improve over the coming years.  

“We have 21% of the revenue coming from direct exports and 11% from indirect exports. Going forward, exports will improve further. Direct and indirect exports will be over 40 percent in the next two years,” Garg said. Direct exports are done by the company itself, while indirect exports refer to those exports which are done by the traders. 

In 2022-23, the company’s consolidated revenue came to Rs 1,196.5 crore. Around 44 percent of the revenue comes from the commercial vehicle segment, while the farm equipment and off-highway vehicles segments contribute 36.8 percent and 15.9 percent, respectively. 

Ashok Leyland, VE Commercial Vehicles, SML Isuzu, Sonalika, Swaraj Engines, Dana, JCB, and Liebherr are some of the company’s customers. Around 70% of the company's revenue from operations come from its top 10 customers. 

Meanwhile, Happy Forgings has also started supplying forged and machine components to sports utility vehicles. Currently, the segment contributes only 1.5-2 percent of the total revenue and Mahindra & Mahindra is the only customer.  

With high demand for sports utility vehicles, which now account for more than passenger vehicle sales, Garg expects the sports vehicle segment revenue to contribute around 4-5% of its topline with more customers onboard.