Bharat Forge has transformed its business from mechanical to electronics and embedded business systems: Amit Kalyani, Deputy MD

Amit Kalyani, Deputy Managing Director, Bharat Forge, talks about Q1FY21 numbers, electric vehicles, and defence orders among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: Bharat Forge’s numbers were better than the street estimates in terms of revenue and margin. What were the important growth drivers in the quarter and did cost control measures helped you in maintaining the revenue and margins?

A: The last quarter was the most difficult quarter for us in the last 20 years because business went down completely across the world due to the lockdown. But there were opportunities in some sectors like infrastructure sector in the US because infrastructure equipment like gen-sets was required for emergency clinics and hospitals which were created. There was a bit more demand in agriculture and infrastructure sector in India. So, despite operating at roughly 28% capacity utilization, I think it was a fair performance. A lot of cost control exercises have been undertaken and its benefit will be seen only next year because cost rationalization or cost restructuring takes many months and quarters to present complete effect. So, you will be able to see it next year only as the cost restructuring will be completed by then.

Q: Do you see green shoots in the automotive sector because you are present and operate globally including in India? 

A: We have two sub-sectors in the automotive sector and they are:

Heavy commercial vehicle sector: It is present in India as well as in the international market. India’s heavy commercial vehicle was at an all-time low and is increasing gradually but in this quarter, it will be less than half of what it was last year in this quarter. But it has grown from what it was in the first quarter. However, the sector is performing well in the US and Europe. It seems that the sector will perform even better in the US because the analysts and industry consultants have upgraded the sector in terms of demand. Europe will remain flat and the US will grow and India will start growing from a low base.
Passenger car segment: Surprisingly, the passenger car segment is performing well at all places. Our performance has been very good in the passenger car segment in India also. We have increased our market through product introduction and offering new products to new customers and existing and new products simultaneously to our existing customers.

Q: Focus is shifting towards electric vehicles and you are already present in the segment. So, update us about your expansion plans in the segment and the activities where Bharat Forge is involving itself? What is your outlook on EVs in India and the international market?

A: Our EV strategy is spread in three horizons

In Horizon-I we can supply products to EVs depending upon the existing technologies and capabilities. For instance, in the US and European markets, we supply the chassis component to existing and new customers.
The horizon-II strategy is where we supply new products such as castings and certain electrical components to new and existing customers’, which are from the power electronics and control electronics domain. We have made investments in these fields so that in next three to four years when electric mobility will come into the mainstream, we can localize and supply unique solutions and proprietary solutions, which are from the electronic domain and embedded system domain to our customers in India and globally.
We are transforming our business as well from mechanical into electronics and embedded system business. We are bringing entire capabilities of our group at a place to make it interactive, where we get knowledge from a domain and replicate in the other to create extraordinary solutions.

Q: You have invested a lot in defence domain and in the recent past you were conducting the final trails of Bharat 52 artillery gun that will be supplied to Indian Army. So, let us know about the orders pipeline that you are envisaging in defence space and what is the outlook in the space?

A: We have conceptualized ourselves as a partner of the Indian defence system to produce components and systems that India needs and using the same capability also to supply similar products to certain global countries. So, we have developed four artillery guns in a different domain altogether. So, we have different manpower and different capabilities. These four artillery gun platforms including two mounted platforms have been developed in six years. The final firing of the Advanced Towed Artillery Gun System (ATAGS) that has been co-developed with DRDO is being done. This a gun which is super design, DRDO has done a fantastic job and I think the quality of the manufacturing is par-excellence and its capabilities are fantastic. This is something that will give to India a big edge because it shoots further; it is far more mobile and has got a lot of automation and all kind of things that makes it robust, reliable and accurate. So, we hope that once all these trails are done the orders will be placed. Defence procurements is a long-drawn process and it is happening from last four-five years. Don’t know how many orders will be placed but I am sure that they will be meaningful and substantial. We are also looking at the global markets for our products.

Q: Can you tell the kind of investments that have been made to-date and how much investments will be made in future?

A: One of the advantages that we have at Bharat Forge is that the products and the segments, we have chosen, such as artillery, a large part of the manufacturing, we already have the capability to do it. In our artillery gun, about 95% of parts are Indian content. We don’t make them but have developed more than 400 MSMEs for the purpose in our supply ecosystem. So, we have developed these products by depending on their strength and capabilities. So, they will also get orders when we will get orders. A lot of industries which are working with us are also from the automotive domain and engineering domain. They all are facing a lot of pressure because their business is down. So, we have mentored them, worked with them and got them to develop products and capabilities that will allow them to supply into our supply chain and thereby get the benefit of also de-risking their business and get a benefit when we get orders