Forging A Global Spirit
1/10/2013 9:02 PM Thursday
Pune-based forging firm Bharat Forge has fast grown in scale to become a truly multi-national name to be reckoned with. A technology leader in its domain, the company has extended its focus from manufacturing auto components to the energy, transportation, mining and construction sectors. Sagar Lele tells you more.
There was a time when India was looked upon as the future auto ancillary hub of the world. But that dream is yet to come to life. It was also exactly at that point in time that Indian companies in this sector were expanding to reach out to auto manufacturers the world over. While many failed to reach where they had expected to, some did manage to create a niche for themselves. Bharat Forge is one such company. Supplying to virtually every global automotive OEM (Original Equipment Manufacturer), Bharat Forge is the second largest forging company in the world today.
But BFL's strength isn’t just about being an auto ancillary company. It has a trans-continental presence in various other sectors including power, oil and gas and construction. With most of its business coming from the international markets, its operations have been global in the true sense of the word. The company has seen major changes over the years including a series of acquisitions and drastic measures for risk mitigation. Adaptability and resilience have been displayed by Bharat Forge over the years, making it a truly dynamic organisation.
Revving The Auto Business
On a standalone basis, Bharat Forge derives 62 per cent of its revenues from the automobile sector. It provides a wide range of safety and critical components for passenger cars, utility vehicles and commercial vehicles. Moreover, its overseas subsidiaries, which account for 40 per cent of its consolidated revenues, are also predominantly operative in the automotive components business. This results in a relatively large exposure to this business.
Acquiring To Grow
To aid the growth of its auto components business, BFL went on a buying spree from FY04 onwards. In November 2003, it acquired Germany based Carl Dan Peddinghus GmbH & Co. KG (CDP), making it the world’s second largest forging company, after ThyssenKrupp AG. This was followed by its acquisition of CDP Aluminium Technik GmbH & Co. KG in December 2004.
In June 2005, Bharat Forge acquired Federal Forge from a bankruptcy court. However, the company, now Bharat Forge America, has still not been able to turn around and is currently undergoing a restructuring programme. BFL had created a provision of INR 70 crore in FY12 towards diminution in the carrying cost of this investment, and a further provision of INR 26 crore was announced at the end of Q2FY13.
The company also acquired Sweden-based Imatra Kilsta AB (and thus, also its wholly-owned subsidiary Scottish Stampings in September 2005) and entered into a joint venture with FAW Corp to establish itself in China in December 2005. This gave it a local presence in that region and a chance to expand in terms of geography and product range.
These acquisitions have led to an increase in consolidated revenues from INR 1993.23 crore in FY05 to INR 6279.06 in FY12, translating into a CAGR of 21 per cent.
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