Bharat Forge posts record export revenue in Q3, expects double-digit growth in FY24

Pune-based forging company Bharat Forge on Tuesday reported a standalone net profit dropped 14.29 percent to Rs 289.18 crore for the December quarter of FY23 from Rs 337.39 crore in the same period a year ago.

Bharat Forge in a regulatory filing revealed that the company in Q3FY23 registered record revenues of Rs 1,952 crore thanks to 9.4 percent growth in export revenues, its "highest ever". During the quarter, revenues grew sequentially by 4.7 percent while PAT grew sequentially by 8 percent In Q3 FY23.

Baba Kalyani, Chairman and Managing Director of Bharat Forge, in an exclusive interview with CNBC-TV18, said that in terms of “domestic revenue, we are pretty much on track with the industry revenue. Industry revenue has been almost flat or a little low. So that is what is reflected in our domestic revenue. I think going forward, we should see a fairly good increase in our domestic revenue.”

The company’s domestic revenue growth has slowed down to a low single-digit on a year-on-year basis. While its margin is below expectations, EBITDA losses have risen in the overseas subsidiaries. The company’s long-term debt stands at Rs 2,489.4 crore in December as against Rs 2,315.1 crore in March last year.

Sequentially, the revenue was up due to a 9.4 percent growth in export sales. Domestic revenues declined by 1.7 percent due to lower PV production & seasonal weakness in tractors.

Globally, the company’s automotive export revenues saw growth on both QoQ & YoY basis across commercial and passenger vehicle segments. Revenues from the commercial vehicle segment have grown by 5 percent while the passenger segment revenues have grown by 10 percent sequentially.

Kalyani added, “I think on exports we have had the highest ever export revenue for the quarter at Rs 166 crore and we are quite bullish on the exports even going forward.”

The company added that its Indian operations secured new business worth around Rs 265 crore across automotive and industrial applications. "We have around Rs 3,000 crore of cash in our books, the Chairman added.

Bharat Forge’s step-down subsidiary JS Auto Cast Foundry’s (JSA) performance, in Q3FY23, witnessed a sequential growth of 20 percent in top-line and 52 percent in earnings before interest, taxes, depreciation, and amortisation (EBITDA). During the December quarter, JSA secured new orders worth Rs 153 crore.

The company also revealed that JSA has signed a business transfer agreement with Indo Shell Mould Limited (ISML) to acquire its SEZ unit in SIPCOT, Erode. This transaction is expected to be closed by March 2023.

Bharat Forge, along with Kalyani Strategic Systems Ltd. (KSSL), in Q3FY23, secured contracts worth Rs 600 crore, taking the order book to Rs 1,950 crore as of Q3FY22. The fulfilment of these orders along with the export of the Artillery Gun system will commence from the beginning of FY24.

The overseas operations posted an EBITDA loss of Rs 62 crore due to ramp-up related issues of the new Al forgings capacities in Germany and the USA.

While talking about issues that the company is facing due to cost inflation in overseas subsidiaries, Kalyani added "As far as our overseas subsidiaries are concerned… we will take two quarters to come out of our issues of ramping up production. For all the new orders that we have got, our order books are full in the aluminium business.”

“We are also facing a lot of issues regarding cost inflation and we have to recover all these costs from our customers. So that process is going on. But we are very confident that we have a path to profitability on this business in FY24," he added.

Bharat Forge expects Q4FY23’s growth momentum to continue across both the domestic and export markets aided by the standalone performance. The company also expects the new verticals to start registering meaningful contributions at a consolidated level and EPS accretive in FY24.

“If you put defence into it and our JSA casting business into it, we'll have pretty high double-digit growth going into FY24,” said Kalyani, adding “Our total defence orders are currently over Rs 2,000 crore. These are all exports by the way. We are also expecting substantial domestic orders to come in in the next few months. But the execution of these orders will be roughly Rs 1,000-1,100 crore in FY24 and increasing in FY25 and going forward.”

Bharat Forge had re-appointed Baba Kalyani as the Chairman and Managing Director for another 5-year tenure starting from March 30, 2023, to March 29, 2028.