Bharat Forge Ltd, world’s largest auto-forging firm, is trying to further diversify into non-auto components.
The company, a part of the Kalyani group, now plans to make forged and machined components for aerospace, ship building, rail and construction equipment. It will invest Rs350 crore in a new factory in Baramati that will start production next April.
Non-auto components account for 17% of Bharat Forge’s sales, and the goal is to raise it to 25% in 2008-09 and about 40% within five years.
“We are departing from our existing business as a part of de-risking... we are also getting into high-value, niche areas where margins are better,” said B.N. Kalyani, chairman of Bharat Forge.
Bharat Forge has signed on General Electric Co. (GE) and Caterpillar Inc. as clients for products to come out of the new facility, which is close to Pune. “Now we are talking to Pratt & Whitney, and Cummins,” added Kalyani.
GE will buy components for power equipment, while Caterpillar is likely to use the components for large non-auto engines. Pratt & Whitney is in aerospace while Cummins makes equipment for the power sector.
“The company is planning to invest an additional Rs150 crore in expanding the open-die forge facility in Pune. This will further help us to expand our non-auto component business,” said S.G. Joglekar, chief financial officer.
Bharat Forge has already invested about Rs750 crore in its existing Pune plant over the past two years. About 50% of Bharat Forge’s revenues come from exports.
“Besides, we are looking at small and medium-size companies in the non-auto component sector for acquisition,” said Kalyani.
“We have not zeroed in on any company so far, but North Amercia and Europe are the two large markets.”