Hyderabad: Bharat Forge Ltd, the world’s largest maker of automotive forgings, is evaluating locations in Andhra Pradesh and Gujarat to set up a forgings plant catering to nuclear and thermal power projects, a senior Andhra Pradesh government official said.
“A team of Bharat Forge officials has visited couple of locations in Nellore and Visakhapatnam districts of Andhra Pradesh, and inspected the sites to examine suitability of these locations for their proposed power forgings project,” said Busi Sam Bob, principal secretary, industries and commerce, Andhra Pradesh. “The chairman of Kalyani Group, Baba Kalyani, has also visited these locations recently.”
Bharat Forge, the flagship company of the $2.4 billion (Rs11,400 crore) Kalyani Group, has proposed setting up a 14,000 tonne a year capacity open die forging press in a joint venture with French nuclear energy firm Areva SA.
Checking feasibility: Kalyani Group chairman Baba Kalyani has visited Nellore and Visakhapatnam districts for the proposed project.
Sunil Kumar Chaturvedi, executive director and chief operating officer (capital goods) at Bharat Forge, said that on the country’s east coast, the firm is evaluating Krishnapatnam, a port town in Nellore district, and Visakhapatnam. On the west coast, it is looking at Dahez and Mundra in Gujarat.
“Geo-technical and marine studies are currently going on, keeping in view the robust marine infrastructure required for handling up to 2,000 tonnes of assembled forgings, both for domestic and export markets,” Chaturvedi said.
He added that the project would involve around Rs2,500 crore of investment in its first phase and that the company is looking at operationalizing it by end-2011 or early 2012. The company will take a decision on the location in the next couple of weeks, he said.
Chaturvedi said the proposed nuclear and thermal power forgings plant would help reduce the company’s dependence on forgings for the auto segment. The company has already diversified to cater to railways, power, steel and aerospace sectors.
“Our focus on non-automotive forgings has got nothing to do with the latest slowdown in the global automotive sector, which is cyclical. We have been consciously spreading into non-automotive forgings for some years now,” said Chaturvedi.
While Bharat Forge’s net profit declined 96% and revenue fell 44% in the June quarter, revenue share from its non-auto business, which commands better margins, improved to 32%, from 28% a year earlier.
“The company expects to generate around 40% of its revenue from its non-auto business in FY2011 (fiscal 2011) on total incurred capital expenditure of around Rs500 crore,” said Vaishali Jajoo, senior research analyst with Mumbai-based Angel Broking Ltd. “BFL is confident of growing its non-auto business faster, which would act as a buffer to the prevailing difficult macroenvironment for its auto business.”
But Jajoo also said subsequent ramp-ups of the company’s non-auto facilities may be hurt by the slowdown, especially in sectors such as construction and mining as well as for marine diesel engines.
“Though the company has order traction in the non-auto segment, the declined levels of business of its clients in various industries has affected a potential ramp-up in utilization levels of new capacities created especially for the non-auto segment. Presently, these facilities are running at under 20% capacity utilization levels,” Jajoo said.