Bharat Forge Ltd. (BFL), the flagship company of the over $2.5 billion Kalyani Group, is vigorously working on development of a business model that is better insulated from the vagaries of the external environment. The company has invested in creating capacities and global manufacturing footprint to maximise growth opportunities across sectors and geographies.
BFL’s performance in 2011-12 represented a big step forward. It was one of the most challenging years for the global economy. After achieving consistently high growth over the past eight years, the Indian economy has apparently run into a turbulent weather over the last few months. The global economic uncertainty, coupled with lack of political consensus in India for implementation of major economic reforms, posed challenges to BFL.
“I am confident that if the Government is able to take the initiatives in certain key areas and kickstart economic reforms, the economy will turn around in this fiscal to grow at about 6.5-7 per cent. This would provide a platform to return to 8-9 per cent growth in the medium term. Implementation of reforms, coupled with removal of bottlenecks that have stifled economic growth, would restore investor confidence and revive the momentum for sustained high economic growth”. – Baba. N. Kalyani, Chairman.
BFL has been focusing on building state-of-the-art forging and machining facilities, investing on new technologies and R&D, opening up new growth sectors as key verticals, and developing new markets, geographies and customers for products as well as solutions. Over the next few years, Bharat Forge is expected to consistently leverage these to create much higher levels of customer delight and cement its leadership position in the market.
Despite the sluggish external environment, Bharat Forge put up an impressive performance in FY 2012 on the back of robust growth in the commercial vehicle industry globally and sustained ramp-up of non-automotive business. The major highlights of the standalone business in FY2012 were the significant growth of 42 per cent in exports to Rs. 17,347 million and the continued traction in non-auto sales, both domestic and exports, rising by 32 per cent to Rs. 12,885 million.
Growth in automotive markets
BFL is a leading supplier of critical & safety components for the automotive market globally with a well-diversified customer base across all geographies. The focus of the automotive business has been limited to the medium & heavy commercial vehicles due to the company focus on technologically advanced product requirement. However, BFL has started addressing the light and small commercial vehicle segment which is witnessing a shift in product requirement on the back of change in emission norms.
India
The Indian automobile industry witnessed a slowdown in growth, with total four-wheel automobile production, including passenger cars and CVs growing by 7.8 per cent. 
Slowdown was mainly in passenger cars, which grew by only 4.7 per cent. The CV segment, which is the company’s primary market, recorded a healthy growth of 19.8 per cent. This was driven primarily by light CVs (LCVs), which grew by 27.3 per cent, while medium and heavy CVs (M&HCV’s) grew by 10.8 per cent.
USA
However, the revival witnessed in CY2010 continued in CY2011. Total four-wheeler production grew by 10.8 per cent. Passenger car sales remained robust with a growth of 10.4 per cent, while LCVs grew by 9.4 per cent. The largest growth was seen in the M&HCV segment that recorded 57.4 per cent growth in CY 2011. BFL has strong relations in the US CV market and has significantly increased its auto exports to the US on the back of supplies to the M&HCV segment. It is important to note that the US now has an aging truck fleet which augurs well for the market.
Europe
Driven by economic uncertainty and the worrisome fate of the Euro zone, Europe remains a very volatile market with no long-term trends and developments in the horizon.
The total four-wheeler market grew by a meagre 0.4 per cent in CY2011. Passenger cars, by far the largest segment of European markets, witnessed a 1.4 per cent drop in sales – with the high end segment faring better than the middle and low end. Coincidentally, Bharat Forge largely supplies products for higher end passenger cars. Despite uncertainties, however, the sales of both MCVs and HCVs were robust, growing at 25.2 per cent and 35.8 per cent respectively.
It needs to be noted that a large share of component suppliers in Europe are owned by small entities. It is often difficult for them to maintain steady supplies in such volatile markets. The OEMs have increasingly realised the risks of relying on such companies for their regular business needs and are looking at vendor consolidation and focusing on developing relationships with technologically strong and financially stable suppliers. Bharat Forge is discussing with European OEMs for better alignment, and devising a strategy of dealing with the opportunities arising out of this uncertainty to increase its market share or add new customers.
The outlook for FY13 looks a bit murky with slowdown in the Indian automotive industry and the Eurozone debt crisis impacting sentiments and demand. However, Bharat Forge is in a good shape with lean Indian operations, strong balance sheet and a balanced business model to weather any uncertainty. BFL believes that its next round of growth will be propelled by creating opportunities through innovation, which can be supported by the strength of its customer relationships.
Over the years, Bharat Forge has invested in new technologies, R&D and solution-providing capabilities. Combining such competencies with the company’s best-in-class, world-scale manufacturing capacities and skills will result in Bharat Forge being an innovation-led, end-to-end solutions provider and a dynamic partner of its customers, forging ahead as always.