BHARATFORGNSEFebruary 14, 2025

Bharat Forge Limited

5,254words
119turns
9analyst exchanges
2executives
Management on call
Amit Kalyani
VICE CHAIRMAN & JOINT MANAGING DIRECTOR, BHARAT FORGE LIMITED
Kedar Dixit
CFO, BHARAT FORGE LIMITED
Key numbers — 40 extracted
7%
was soft, given the demand conditions in our underlying markets. The top line was lower by about 7% at Rs. 2,096 crores, while the margins were stable at about 28.1%. Europe continued to struggle w
Rs. 2,096 crore
oft, given the demand conditions in our underlying markets. The top line was lower by about 7% at Rs. 2,096 crores, while the margins were stable at about 28.1%. Europe continued to struggle with “anemic demand”
28.1%
The top line was lower by about 7% at Rs. 2,096 crores, while the margins were stable at about 28.1%. Europe continued to struggle with “anemic demand” impacting both CV as well as PV exports. Defen
19%
with our customers. Return ratios continued to hold steady with ROCE net of cash coming to about 19%. The standalone business won orders worth about Rs. 723 crores in this quarter. Talking about o
Rs. 723 crore
steady with ROCE net of cash coming to about 19%. The standalone business won orders worth about Rs. 723 crores in this quarter. Talking about overseas business: A combination of weak demand in Europe and
Rs. 10 crore
erformance of our overseas business. In Quarter 3, the European operations posted EBITDA of about Rs. 10 crores while US operations reduced their EBITDA losses to Rs. 6 crores in this quarter. Talking about
Rs. 6 crore
perations posted EBITDA of about Rs. 10 crores while US operations reduced their EBITDA losses to Rs. 6 crores in this quarter. Talking about Indian subsidiaries: JSA continued to reg
20%
JSA continued to register strong performance. In Quarter 3, it had grown revenue by 20% to reach Rs. 166 crores and margins have improved by 50 basis points to scale up to almost 14%.
Rs. 166 crore
JSA continued to register strong performance. In Quarter 3, it had grown revenue by 20% to reach Rs. 166 crores and margins have improved by 50 basis points to scale up to almost 14%. With significant custome
50 basis point
e. In Quarter 3, it had grown revenue by 20% to reach Rs. 166 crores and margins have improved by 50 basis points to scale up to almost 14%. With significant customer and product diversification achieved over t
14%
by 20% to reach Rs. 166 crores and margins have improved by 50 basis points to scale up to almost 14%. With significant customer and product diversification achieved over the last two years, JSA has
rs,
o almost 14%. With significant customer and product diversification achieved over the last two years, JSA has been able to significantly de-risk its revenue stream. Euro Plus One theme and JSA's stron
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Guidance — 20 items
On the greats
opening
“So, this will be a new accelerant for our aerospace business.”
On the ferrous casting space
opening
“Additionally, we expect to see the margins increase by at least 250 basis points to 300 basis points from where we are in the next two years.”
On the good
opening
“And we are working on significant new opportunities, including participation in the IDEX in Abu Dhabi next week, where we hope to increase our visibility and our market access.”
On the not so good
opening
“You may have seen announcements by two European OEMs in this week, that they will each spend upwards of €1 billion to retool their planned new ICE platforms for hybrid and also full ICE platforms going forward.”
On the not so good
opening
“The fact is cars will be made and I think that in six months we will have a concrete answer on the way forward.”
On the not so good
opening
“As we have mentioned, we are going to focus on returns, we are going to focus on cash flows, and businesses have to be profitable and stand on their own feet going forward.”
On the not so good
opening
“On the India CV outlook, we expect Q4 to be slightly better than Q3.”
On the not so good
opening
“So, I think I will be happy to take your questions and comments, and me and our team will attempt to answer your points.”
Amit Kalyani
qa
“Obviously our attempts will be to try and reduce them.”
Amit Kalyani
qa
“But the contract will be signed in the next, I would say, three to four months, maybe even little sooner.”
Risks & concerns — 8 flagged
A combination of weak demand in Europe and some customer-specific weakness impacted performance of our overseas business.
— Talking about overseas business
With significant customer and product diversification achieved over the last two years, JSA has been able to significantly de-risk its revenue stream.
— Talking about Indian subsidiaries
A combination of weak utilization because of demand reduction in Europe, and also in the US saw a demand slowdown.
— On the not so good
And secondly, with respect to your comment on what is happening in the US and Europe with respect to EV trend reversing, do we see any risk to our aluminum forging business in both US and Europe?
— Jinesh Gandhi
CAPEX slowdown is basically in two areas.
— Amit Kalyani
So, it's very difficult to be able to, what do you call it, to bridge both and to come up with a total picture of where we stand.
— Amit Kalyani
First, I wanted to check, in the domestic passenger vehicles you have been consistently improving the revenues in spite of the demand slowdown, what's going right here for you?
— Pramod Amte
And do you expect the trend to continue in spite of the slowdown?
— Pramod Amte
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Q&A — 9 exchanges
Q
Yes, hi, thanks team for taking my questions. My first question is on the overseas subs, which you pointed out is quite a challenging environment. You do also talk about rethinking your manufacturing presence in overseas business. Could you share more around this? Because it certainly seems that Europe will take a lot longer to turn around than what we were guiding initially. So, how should we think about the losses coming down there, or how should we think about the business restructuring that you talk about in the presentation?
Amit Kalyani
Yes. Hi, Gunjan. So, in a very simple way, let me answer. Right now, there is a lot of uncertainty about policy, about what is going to be the way forward, is it a global world, is it a regional world? So, like I said, we are undertaking a thorough review of our manufacturing footprint. And within six months, we will have a concrete way forward. Okay. And is it fair to assume that the losses that we're seeing roughly about Rs. 90 crores PBT loss in the European business, that sort of stay will remain at elevated levels for another two or three quarters till we find a more lasting solution to t
Q
Yes, hi. I have a couple of questions from my side. One is, your comment on margin expansion of 250 to 300 basis points in next two to three years, that was for JS auto or at a consol level?
Amit Kalyani
That was for the castings business, yes. For the casting business, okay. And this would be primarily driven by operating leverage? Or do you expect that Russian business to come back, which had impacted margin? It was a combination of operating leverage, cost reduction, product mix. Okay, got it. And secondly, with respect to your comment on what is happening in the US and Europe with respect to EV trend reversing, do we see any risk to our aluminum forging business in both US and Europe? No, no because aluminum forging and aluminum, in fact, is going to be common no matter whether it's EV or
Q
Good evening, sir. My question is on export industrial revenues. We have seen a good growth over there. Could you give some color for that? And also aerospace, like any numbers you can give on what is the current revenue and what is the potential of these facilities that we are setting up?
Amit Kalyani
So, like we said last year when we spoke, our aerospace revenues are currently running at somewhere in the region of Rs. 50 crores, Rs. 60 crores a quarter. We expect this to go to triple- digits by next year per quarter. And this new facility that we are adding can almost help us double that capacity. This becomes our path to crossing USD. 100 million going towards USD 150 million, and. 200 million of business. Okay. Thanks. And on the industrial business, if you could give some color because we saw good growth over there. On the industrial business, the only area where we have seen a degrowt
Q
Yes. On Slide 4, we have mentioned that despite CAPEX momentum slowing down and its potential impact on industrial business --
Amit Kalyani
CAPEX slowdown is basically in two areas. One is on infrastructure and the second is on new capital formation in industrial sectors. So, power plants, water projects, there's no big CAPEX that is taking place. Like in '15, '16, the big CAPEXs that were announced, or '14, '15, in these mega power projects, in these mega projects, those have now come to an end. The next set of these mega projects are now yet to start. Understood. And sir, lastly, I just wanted to understand the exposure in case of exports. So, is there export going from Europe to the US for either Bharat Forge or from Bharat For
Q
Yes. Thank you, sir, for the opportunity. And good to see the two more businesses going to touch Rs. 1,000 crores. Sir firstly, just on the previous question, can you help us what was the revenue for oil and gas for this quarter and for nine months, sir?
Amit Kalyani
I will tell you the growth, the growth over last year is almost over 60% to 70%. In nine months the growth is about 30%. And sir, recovery has been driven, I mean, any indication of going ahead how do you see the growth for this segment? See, the oil and gas sector in the US is limited by only one thing and that is the ability to get the gas out of where it is coming out of the ground to where it is consumed or where it is converted into some other product. The only place today where they can do that is Texas where within Texas the oil and gas that is pumped is being consumed, in various diffe
Q
Thank you for taking my question. Sir, the first one is, given in light of what comments also you have made, and with change in the regime in the US, so effectively we had come up with this last man standing strategy in terms of continuity of business. So, in the current context, do you see that the longevity of our business has possibly increased? And could you comment on how you see competitive pressures, etc. as a result of this?
Amit Kalyani
Arjun, I think it's too early to comment on that level of detail, because we do not know. I mean, generally, if you were to ask me, I think the longevity has gone up. But if you want me to specify, I do not think I am able to. Because on one side longevity has gone up, on the second side you have talk of tariffs and other things. So, it's very difficult to be able to, what do you call it, to bridge both and to come up with a total picture of where we stand. I can only say this that we have a strategy where we are able to utilize our assets to do multiple things, and I think it just allows us a
Q
Yes, thank you for the opportunity. And congratulations on the resilient quarter. So, most of my questions have been answered, but I just need a few clarifications. So, for the aerospace business, you have given the triple-digit quarterly revenue guidance. So, can we expect that from Q1 FY '26 or more like --
Amit Kalyani
Not Q1, but in FY '26 we would expect that. Right. And by when would the new facility be operational? This will be operational at '27, towards the end of '27, it takes about 18 months. Okay. And your comment that FY '26 would mainly be flat, so was that just for the CV business or consolidated? Right now, given the pluses and minuses, I would say it's overall. But that does not mean that on a profitability level it will be the same because we are hoping that we will reduce losses in our overseas subsidiaries. Okay, that's helpful. Thank you so much. Thank you.
Q
Yes, hi. Thanks for the opportunity. First, I wanted to check, in the domestic passenger vehicles you have been consistently improving the revenues in spite of the demand slowdown, what's going right here for you?
Amit Kalyani
So, we have new customers and new products. That is what is helping us. Okay. And do you expect the trend to continue in spite of the slowdown? yes, we expect the trend to continue because most of our customers who we have got in the last few years are increasing their mobilization, and that is where we are now supplying a lot of new components, both engine, transmission, chassis, especially transmission components etc. So, that is a big growth area. And looking at this auto expo where there have been series of EVs unveiled by the car makers, and considering your inclusive presence in cars, is
Q
Ladies and gentlemen, thank you very much for your participation and interest. It is always great to have a good dialogue with our investors and analysts. And we look forward to continuing this engagement and keeping you abreast of what is happening in our business. Thank you and have a nice day.
Management
Speaking time
Amit Kalyani
50
Moderator
11
Gunjan Prithyani
9
Jinesh Gandhi
9
Kapil Singh
9
Mumuksh Manlesha
9
Arjun Khanna
5
Nitin Jain
4
Pramod Amte
4
Kedar Dixit
1
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Opening remarks
Amit Kalyani
Good afternoon, ladies and gentlemen, and thank you for attending our Q3 Conference Call. This is Amit Kalyani. I have with me members of our Finance Team, Investor Relations. I will now hand over to Kedar Dixit – our CFO, to take you through the numbers and then I will make a few comments and then we will do a Q&A.
Kedar Dixit
Good afternoon, ladies and gentlemen. I will take you through the standalone business first: Quarter 3, the performance was soft, given the demand conditions in our underlying markets. The top line was lower by about 7% at Rs. 2,096 crores, while the margins were stable at about 28.1%. Europe continued to struggle with “anemic demand” impacting both CV as well as PV exports. Defense vertical also recorded lower revenues as the lumpy nature of the business continued to impact the performance.
Talking about domestic passenger vehicles
The domestic passenger vehicles recorded a sharp rebound in performance driven by better penetration with our customers. Return ratios continued to hold steady with ROCE net of cash coming to about 19%. The standalone business won orders worth about Rs. 723 crores in this quarter.
Talking about overseas business
A combination of weak demand in Europe and some customer-specific weakness impacted performance of our overseas business. In Quarter 3, the European operations posted EBITDA of about Rs. 10 crores while US operations reduced their EBITDA losses to Rs. 6 crores in this quarter.
Talking about Indian subsidiaries
JSA continued to register strong performance. In Quarter 3, it had grown revenue by 20% to reach Rs. 166 crores and margins have improved by 50 basis points to scale up to almost 14%. With significant customer and product diversification achieved over the last two years, JSA has been able to significantly de-risk its revenue stream. Euro Plus One theme and JSA's strong competence are likely to see the business scale up to Rs. 1,000 crores top-line over the next two years.
Talking about Defense Business
The group's defense business posted a revenue of around Rs. 337 crores in Quarter 3. As of nine months this year, the revenue was Rs. 1,488 crores, translating in a Y-o-Y growth of 49%. With order wins of about Rs. 100 crores in Quarter 3, the executable order book now stands as of December 31 is Rs. 5,700 crores. This order book does not include any potential order from domestic or export markets. We would like to reiterate that the translation of order books to revenues is governed by contractual timelines and thus may create some lumpiness in performance when viewed from a quarter-over-quarter standpoint. However, from a two to three- year perspective, the business remains on a solid footing with capabilities across artillery guns, vehicles, and consumables. Talking about consolidated business highlights for the nine months: On a Y-o-Y basis, consolidated revenues were 2% lower at Rs. 11,270 crores, while the EBITDA grew by 9.1% to reach at Rs. 2,087 crores and PBT increased by 50%
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