Bharat Forge lines up capex of Rs 1,000 crore for 2.5 years, defence to hold 10% of revenue by FY24

Bharat Forge, the country's largest forging company, is eyeing Rs 1,000 crore in capex for its India business in the financial year (FY) 2023-24 until the first half of FY 2025-26 which will be incurred towards core business, electric vehicle components and systems, and defence, a senior company executive said. 

In the defence business (under artillery systems), the company is ready with protected vehicles, armored vehicles, unmanned vehicles, and ammunition. Additionally, it is iming to start in-house production of various other components such as traction motors, high-voltage DC-DC converters, controllers, and inverters.

"We are undertaking a large expansion now in various areas within our Indian business. This will be in forging, machining, EV related forging, and components, and our defence plants are also coming online. So, we'll probably invest somewhere around Rs 1,000 crore in the next 2.5 years," said Amit Kalyani, Joint Managing Director, Bharat Forge, over a conference call recently. 

Kalyani also highlighted that Bharat Forge’s defence business won an additional Rs 280 crore in new orders in the last quarter from multiple customers and product segments. Seeing the current global demand, he opined that soon the defence segment will contribute 10 percent to the overall company’s revenue. 

“Our combined order pipeline (in defence) now stands in the range of Rs 2,200 crore to Rs 2,300 crore, which is largely exports. This will be executed over the next 18 months, and this encompasses orders across vehicles, artillery systems, components, naval solutions, and unmanned systems. This basically marks the entry of Bharat Forge into the system space. Seeing the global demand, this segment should be close to 10 percent of our overall revenue by the end of this year and will keep on increasing going ahead,” Kalyani added. 

He further said that the company would also repay over Rs 1000 crore of debt in the next two years through internal approvals.

According to brokerage firm Motilal Oswal Financial Services (MOFSL), the company's established businesses incubated over the last 5-10 years have reached pivotal moments and have the potential to offset any anticipated challenges in the core operations.

"The defence segment is poised for significant growth, with execution already underway. The e-mobility sector presents a substantial opportunity and possesses foundational elements, but the competitive landscape is yet to evolve," MOFSL said in its latest report.

With the upcycle in the commercial vehicle industry and easing chip shortages helping passenger vehicles, the company is witnessing multiple growth drivers in the automotive segment in both domestic and export markets. 

"A strong order book leading to strong growth in the high margin non-auto segment, the contribution from the defence and renewable segments, and rising traction in the e-mobility division will steer momentum in the favor of the company," analysts at Prabhudas Liladher said in a recent company report. 

New Entity

In the electric-mobility space, apart from focusing on electric two-wheelers through Tork, the Pune-based company is also looking towards retro-fitment kit business in the commercial vehicle sector, which means converting diesel trucks of 8-13 tons gross vehicle weight capacity into electric trucks. Bharat Forge is also investing close to Rs 150 crore in setting up this new entity in Pune, called Kalyani Powertrain (KPTL). 

“We have received all certifications and completed mileage goals on test vehicles for this business. As a part of the controlled launch, KPTL has initiated a pilot programme with select customers,” B N Kalyani, Chairman & Managing Director Bharat Forge said in the company’s latest annual report. 

According to the company's management, this facility will start its operations in full-swing over the next two years. KPTL claims to be the first company to secure AIS 123 (EV retrofitment) certification for the N3 category in India.