Bharat Forge has provided Rs 89 crore towards impairment of its investment in Tevva Motors (Jersey) Ltd, the company said in a regulatory filing today.
In June 2018, Bharat Forge had taken a strategic stake in the UK-based Tevva Motors, a provider of electric powertrain solutions for commercial vehicles for 10 million pounds (about Rs 90.30 crore). The technology has its application on 7- or 14-tonne buses for use in city transport, e-commerce or school buses, amongst others. The deal provided Bharat Forge the rights to commercial usage of technologies developed by Tevva Motors within India.
"Like several other start-ups, Tevva too has been severely affected due to COVID crisis. While Tevva's technology platform is evolving, its financing and the commercial outlook remains uncertain now. Consequently, as a matter of prudence, the company has provided Rs 890.00 million in standalone financial results," the company said in its regulatory filing.
Bharat Forge management in a conference call with analysts revealed that two recent developments backed its decision to write off the investments in Tevva. The first is that Tevva is at an advanced stage of receiving a grant from the UK government for the development of EV technologies. Secondly, a large US-based company had shown serious interest in commercialising Tevva's technologies. However, after the emergence of the pandemic, the talks with the American firm did not fructify. At the same time, there is still no clarity over technology grants from the UK government.
According to Amit Kalyani, deputy MD, Bharat Forge, the company's investment in Tevva helped it in save a crucial 3-4 years by leveraging the technologies licensed from Tevva Motors. The company now hopes to use it in servicing its Indian customers.
Restructuring international operations
Bharat Forge management added that its foreign subsidiaries have been severely affected by the sudden shutdown. However, the move by Germany and Sweden to offer a significant percentage of wages to short-term workers helped the company in negating the impact of fixed cost. Bharat Forge is now under the process of restructuring and expects a double-digit reduction in fixed cost over the next two years.
Covid19 hits Q4 performance
The ongoing pandemic has affected the performance of Bharat Forge, which is arguably the world's largest forging company. The global major estimates the sales loss during Q4 and FY2020 to the tune of Rs 200 crore, and the impact on profitability at Rs 90 crore.
Bharat Forge's total revenues declined by 47.2 percent in Q4 FY2020 to Rs 881 crore as compared to Rs 1,668 crore in Q4 FY2019. For FY2020, the company recorded total revenues of Rs 4,563.9 crore, a decline of 30 percent as compared to FY2019. PBT before exchange gain/ (loss) for Q4 FY2020 declined by 87.3 percent to Rs Rs 53.5 crore as compared to Q4 FY2019, while for FY2020 the same declined by 55.4 percent on a yearly basis.
Baba Kalyani, CMD, Bharat Forge said, "Over the past few years, the company invested over Rs 1,300 crore in setting up new capacities across forging and machining. Our focus will be on filling up these capacities and generate free cash flow which will be utilised for bringing down gross debt levels over the next 3-5 years.”