Unlike the commercial vehicle
sector which witnessed positive demand growth in FY 2014-15, the same was not
visible in the industrial sector. Decline in infrastructure-related capex, sluggish
IIP (Index of Industrial Production) numbers through FY 2014-15 impacted the
sector across all major segments. BFL’s presence across many sectors and its
relationship with key marquee OEMs enabled domestic industrial revenues to grow
despite a challenging demand environment, says the company.
The
recent steps taken by the Government to revive the capex cycle in India by way
of allocation of coal blocks, resumption of Iron ore mining, focus on public
sector investment in the Road and Railways sector augurs well for the
Commercial Vehicle sector and also for the resurgence of the capital goods
sectors. Says Amit Kalyani, Executive Director, Bharat Forge Ltd, “ These
measures coupled with the Government’s ‘Make in India’ programme, aimed at
creating a vibrant manufacturing sector and an import substitution market opens
up a potentially huge opportunity for technology-focused manufacturing
companies” .
As a part of the ‘Make in
India’ programme, focused efforts and activities have been undertaken to
address the programmes of the Government in the Rail, Power, Defence and
Aerospace sectors. “BFL’s focus on
technology, innovation along with a strong R&D approach should assist in
positioning it at the forefront to address these new opportunities,” adds Amit
Kalyani.
Amit Kalyani also serves on
the Boards of several group companies such as Kalyani Steels Limited, BF
Utilities Limited, Automotive Axles Ltd., Khed Economic Infrastructure Pvt.
Limited (KEIPL), among others.
Global markets
With
the US auto industry showing signs of revival and the country registering a robust
economic growth, the year gone by has been good for BFL. The class 8 truck (The
Class 8 trucks are those with gross vehicle weight rating (GVWR) exceeding 14969
kg) production volumes grew by around 20pc while the Passenger Vehicle segment
also witnessed growth. In the November 2014 to February 2015 period, a sharp
uptick in Class 8 trucks net orders was witnessed, causing a jump in production
backlog from normal levels of 100,000 units to around 190,000 units.
European
car sales in 2014 rose for the first time in seven years, but the sales gains
were primarily driven by discounting, state-backed incentives, fleet sales and
change in consumer spending pattern rather than a genuine recovery of consumer
confidence as consumers needed to replace their cars regardless of economic
conditions. The overall CV market also showed marginal growth because the
strong growth in the LCV’s was negated by a 7pc decrease in M&HCV volumes.
The auto sector contributes around 50pc of the total exports of BFL. The
revenues from the auto segment in the export markets in FY 2014-15 grew as
compared to FY 2013- 14 mainly on account of new customer addition and a ramp
up in the passenger vehicles orders.
According
to the BFL report, in 2015-16, growth in the auto industry is expected to be
led by the NAFTA region, strong orders, long backlogs, better freight volumes,
a healthy economic outlook, an old playing fleet, rising profitability of fleet
operators and the sharp plunge in crude prices can be the contributing factors
for a sustainable year forward, if not better. Looking ahead, the expected
continuation of Eurozone economic recovery bodes well for the automotive
industry.
“We
expect the Heavy Truck segment volumes to grow by 2-5pc over the next two
years. We expect to continue to grow our export business on the automotive side
by focusing on new product development, working on providing solution such as
light weighting, fatigue enhancement, increasing our market share with existing
customers while simultaneously working on adding new customers and markets,”
says Amit Kalyani.
The
Company’s presence in the international industrial segment extends across three
verticals namely Energy (Oil & Gas, Power across sources), Transportation
(Aerospace, locomotive & Marine) and Materials (Construction and Mining). The
year 2014 was a difficult year for the
oil and gas sector with crude oil prices rapidly declining from peak levels of
US$ 120 per barrel to as low as US$ 55 per barrel in the span of few months.
“The
Company made tremendous progress in its journey of further developing the
industrial business. In the aerospace sector, BFL has achieved all the
requisite approvals. The Company has entered into relationship with four global
OEMs to develop a portfolio of products over the next few years,” says Kalyani.
As part of its latest
acquisition, BFL’s German subsidiary, CDP Bharat Forge GmbH, has acquired 100pc
equity shares of Mécanique Générale Langroise (MGL) for EUR 11.8 Million. MGL,
based in Saint Goesmes, France, is focused on precision machining and other
high value added processes. MGL primarily caters to global Oil & Gas
industry and supplies turnkey components for drilling application. The
acquisition further consolidates BFL position in the Oil & Gas space by
enhancing service offerings and geographical reach.
Innovation and Intellectual Property Rights (IPR)
BFL
strongly believes that the next round of growth will be propelled by creating
opportunities through innovation. “Innovation is at the heart of everything BFL
does. Our in-house R&D team has been committed to work on various projects
including developing technologies to minimise carbon footprint and manufacture
light weight products that result in lower energy consumption. Innovation is a
continuous on-going process in the Company which has helped us explore new
ideas and deliver solutions for transformation consistently. Innovation for new
products is being carried out by the Company not only for products in the
automotive space, but in the non-automotive space as well,” points out Amit
Kalyani.
Bharat
Forge has endeavoured to develop fossil free technologies that aim at providing
greener technologies that its automotive clientele can capitalise on. Innovative
application of latest technologies has helped the Company develop critical and
high value added products for the non-automotive sector. Today, BFL is an
indigenous supply source for some of these products which were largely imported
earlier. “With innovation at its heart, BFL continues its endeavour of
venturing through diversification and manufacturing of high-quality products
that drive change and sustainability,” notes Amit Kalyani.
In his address to shareholders
of BFL, Baba Kalyani says, “...Using our state-of-the-art Research &
Innovation centre, and a talented resource pool, I am happy to inform that in
FY 2014-15, your Company has completed the requisite quality homologation
process to supply forgings. Our progress has been rewarded — your Company has
successfully entered into relationships with four global OEMs. We are working
on developing a roadmap to transform this relationship from single product to a
portfolio of products over the next few years. Goal 2018: 2X 2014 Your Company
has charted out an ambitious plan to double the standalone operations topline
from Rs 3,400 crore achieved in FY 2013-14 to about Rs 7,000 crore by FY
2017-18, a growth of 20pc CAGR over the defined period. Your Company plans to
achieve this through several growth initiatives led by improving market share
and creating a broader product offering in industries we currently serve. Your
Company’s in-house Innovation & Technology Centre will be a key catalyst in
almost all the growth initiatives.
“...Advanced manufacturing
encapsulates a wide spectrum of activities and processes. Your Company’s focus
with regards to advanced manufacturing centres on four key activities namely 3D
printing, Electron Beam Welding, laser welding and nanotechnology. All these activities
will be carried out at our world class Technology Centre, KCTI. I am happy to
share with you that we have already started making prototypes using both
plastic and metal while the other activities are at an early stage and will
ramp up over the next few months and quarters.”
Baba Kalyani’s words are
obviously music to the ears of the company’s shareholders, for they know the
company has in the past weathered many a storm and come out unscathed.