In Focus: Forging Ahead

Bharat Forge Ltd (BFL) (Idirect Code: bhafor) is on course to hit the $1-billion revenue goal by 2008. The company - which manufactures a wide range of forgings and machined components for the automotive, diesel engine, railway, earthmoving, cement, steel and oilfield industries - has of late diversified its presence in other areas such as finished machined crankshafts, component assembly, sub-assembly of industrial machinery.

The world's second and India's largest forging company has put in place a strategy to take over small forging companies abroad to enlarge its customer base. These buys have given BFL eight manufacturing locations across Asia, Europe and the US.

To further its global ambitions, BFL recently entered China by launching a joint venture with the country's auto giant FAW Corporation to manufacture a range of forged automotive products. The venture - in which BFL holds a 52 per cent stake - is expected to be hugely beneficial for the company as FAW is aiming to become a major player in the global auto space. Like its centre of excellence in Europe, BFL is planning to set up a centre in the US for engineering, research & development and design. The company started its US operations with the acquisition of Michigan-based Federal Forge Inc. The company supplies to Ford, General Motors and Volvo, among others.

The auto components manufacturer is planning to invest Rs 350 crore over two years for setting up a plant to make forgings for the power, mining and aerospace sectors. The company expects to earn Rs 1000 crore in revenues from the non-auto sectors.

The company's decision to focus on non-auto component supplies to sectors such as aviation and energy hold promises as these give better margins as compared to the auto component segment. This business will be a major revenue and profitability driver in the years to come. The company earns 17 per cent of its revenues from non-auto sectors.

It has also signed an pact with the Maharashtra government to jointly develop a multi-product special economic zone (SEZ) in Pune. This SEZ is expected to attract investments of about Rs 250 billion and generate 1,20,000 new employment opportunities. The company announced strong second quarter results with combined revenue reaching Rs 990 crore and PAT of Rs 74 crore, a growth of 42 per cent and 21 per cent, respectively.