Mumbai: Bharat Forge Ltd, the world’s second largest forgings maker, has adequate forgings capacity to ride the auto boom in India but will raise automotive machinings production this fiscal, a top official said.
“We will have to expand some machining capacity as we are seeing tremendous demand for some of our machine products,” said Amit Kalyani, executive director of the firm on Monday.
Pune-based Bharat Forge will expand its automotive machining capacity by 20-25% this financial year, spending close to Rs1 billion, Kalyani added.
Machining is a process where raw material is cut to achieve the desired shape while forging refers to compressing material into shape.
The firm is running at around 70% capacity utilization for its automotive operations, Kalyani said.
Bharat Forge, which only lags Germany’s ThyssenKrupp in forgings production, has seen a recovery in its overseas subsidiaries, including those in Europe.
Its exports to Europe rose to Rs1 billion from about Rs800 million a year ago, Kalyani said.
Earlier in the day, the firm had posted a consolidated June quarter net profit of Rs620.7 million compared with a net loss of Rs461.4 million a year ago, bouyed by higher earnings and revenues from overseas units.
Bharat Forge has manufacturing plants at 12 locations, including three in Germany, two in China, and one each in Sweden, Scotland and the US. It runs four plants in India.
It gets a majority of its revenues domestically from supplies to commercial vehicle makers whose sales have been booming in recent months.
The firm is also seeing robust demand from other countries in Asia for both its automotive and non-auto businesses, he said.
“We have very strong performance from China, we have very strong performance in India and we have seen decent demand from our non-automotive business from Singapore and also from the automotive business that we have in Japan,” Kalyani said.
Bharat Forge, which counts top global and Indian auto makers among its clients, gets around 77% of its sales from the automotive business. It aims to raise its higher-margin non-automotive share to 40% by FY12.
The firm, which has an alliance with French nuclear power major Areva to make heavy forgings for the nuclear sector, had in April raised around $134 million through a sale of securities to expand non-auto capacity.
Kalyani said the firm’s facility at Baramati was ramping up its non-auto capacity aggressively.
“We expect to see very strong capacity utilisation by the December quarter. We are seeing very large increase in business in Europe,” from the non-auto sector, he said.
Bharat Forge has bid for several projects in the power sector and hopes to bag substantial orders by September, he said.
In May it won a 450 MW EPC (engineering, procurement and construction) power project worth about Rs19 billion, he said.
Kalyani also said the firm was one of the contendors for a tender from NTPC Ltd for the supply of super crtitical equipment.
Bharat Forge shares ended down 1.6% at Rs326.15 in a weak Mumbai market.