Bharat Forge, Restructuring Business Strategy

Bharat Forge: India’s largest forging company has learned the art of making profit with cyclical business strategy, even during slow economic growth. After the 2008 financial crisis that affected the demand of commercial vehicles in developed countries, Bharat Forge adopted a lean cost structure and added new sources of revenue for long term growth prospects.

With the increasing exposure to non-auto business, the company has successfully shown a remarkable growth. Combined impact of high margin from non-auto revenue, lower break-even level and rising share of sales of its value-added products has helped the company to deliver nearly 30% operating profit margin in the current financial year. Bharat Forge is also investing in varied segments such as defence, railways and aerospace. For the existing business, the company is also transforming itself into a powertrain solution provider for electric vehicles. By gradually increasing exposure to the passenger car market, the company is further reducing exposure to the cyclicality of the heavy vehicle business. The share of this segment is likely to improve to 15% from 5% now in the next few.

Bharat Forge has invested an amount of Rs 35 crore in its R&D facility, which is expected to increase to Rs 100 crore in the future, as growth from new sectors becomes visible.With 32 patents and plans to file another 15-20 in the near future, Bharat Forge has successfully added another feather to its cap.

The company has also bagged an order for suppliying flat track for Boeing 737 Max and 777 jets, and expects revenue of $100 million from defence, railways and aerospace for the next few years.

Bharat Forge is also adopting a three pronged approach to participate in the artillery business.