Gunning for growth: Inside Bharat Forge’s defence bets

File photo of Amit B. Kalyani, joint managing director, Bharat Forge (standing) and Baba Kalyani, chairman & managing director, Bharat Forge (sitting). The company’s journey into the arms business began in 2010.
File photo of Amit B. Kalyani, joint managing director, Bharat Forge (standing) and Baba Kalyani, chairman & managing director, Bharat Forge (sitting). The company’s journey into the arms business began in 2010.


  • The auto component major believes its defence pivot is all set to pay off. Will it?

Pune/Chennai: It was late in March 2012. A record 580 exhibitors were displaying their wares at the seventh edition of the biennial DefExpo, India’s biggest defence exhibition, at Pragati Maidan in New Delhi. They included 232 foreign majors, from countries such as the US, Russia, France, Israel, the UK and Germany. All of them were hoping to catch the eye of the Indian defence establishment—the largest importer of weapons in the world then with an arms procurement budget of $16 billion. (India remains the largest importer even today, with an 11% share in global imports and an annual procurement budget of over $20 billion).

In one corner of the expo was the stall of Bharat Forge Ltd, a leading auto component maker with little experience in the defence space. The company proudly displayed its ‘Bharat 52’, a 155 mm, 52 calibre artillery gun similar to those extensively used during the Kargil war.

“Defence ministry officials came, looked at the gun, laughed and walked away," recalled Baba Kalyani, chairman & managing director, Bharat Forge. “No one believed that an Indian company could build a gun," he added.

He was disappointed by the reaction but did not feel slighted. Instead, Kalyani set out to prove that India was capable of making its own weapons. For 12 years, between 2010 and 2022, Bharat Forge invested over 700 crore in designing weapons, guns, armoured vehicles and ammunition with practically no revenue to show.

Things began to change when the National Democratic Alliance (NDA) came to power in 2014 and started looking at indigenizing defence production. Policies that were obstacles to private sector participation were gradually replaced by those that encouraged it. Today, Bharat Forge, having invested in designing, prototyping and developing some cutting-edge products, finds itself in a sweet spot with its defence business primed for growth.

While the defence vertical accounts for only a miniscule share of Bharat Forge’s total revenue today, contributing around 300 crore to its consolidated revenue of 12,910 crore in 2022-23, Kalyani expects that annual contribution to rise seven-fold by 2024-25. “The defence vertical will go faster than our regular business and could be our biggest source of revenue soon," he asserted to Mint.

Bharat Forge’s order book certainly seems to support that projection. The company bagged orders worth 1,100 crore in the second quarter of 2023-24 alone. The total order book now stands at 3,000 crore, to be executed in 24 months.

Kalyani’s optimism also stems from a shift in India’s arms procurement strategy. The government has increased local procurement of arms and ammunition significantly (import of arms and ammunition between 2013-17 and 2018-22 fell by 11%). In fact, exports of defence equipment by Indian players rose sharply in 2022-23 to 16,000 crore.

This explains why many Indian companies, including L&T, the Tata group, the Mahindra group, the Reliance group and Ashok Leyland, are betting big on the defence business.

Bharat Forge, for its part, appears to be ready with an arsenal. “Today we have products across five verticals: artillery, armoured vehicles, ammunition (shells), missiles (anti-tank guided missiles and long-range guided missiles), naval/marine applications (unmanned vehicles and drones)," said Kalyani.

The company has developed those weapons and products with its own proprietary technology. A 150 crore dedicated facility for defence production is close to completion.

Leap of Faith

Bharat Forge’s journey into the arms business began sometime in 2010, after casual conversations Kalyani had with officials in the defence ministry and his friends in the army (he had many, as he was educated in a military school). No company in India wanted to make artillery guns and the country was entirely dependent on imports.

At that time, Bharat Forge was supplying gun barrels to various ordnance factories. Kalyani began wondering if the company, which was recognized as a leading forgings company globally, could give it a shot. “We had the knowledge of steel—how to forge and machine it to various shapes and sizes. And we were anyway making the barrels," he recalled. The ordnance of an artillery gun contains a barrel, a muzzle, a breach and the recoil mechanism.

He visited the Gun Carriage Factory in Jabalpur to see how artillery guns were made. He then went to Cranfield University in the UK, which is known for its excellence in defence education. Professors there helped him understand an artillery gun better. “It became clear to me that making an artillery gun was an extension of what we do day-to-day for auto components. The same laws of physics applied. Just that the parameters for stress, temperature and pressure were different," he said.

In a stroke of luck, the professors at the university also told him that a gun plant belonging to Ruag AG, a Swiss defence equipment manufacturer, was up for sale. The very next day Kalyani landed in Zurich and by evening had signed an agreement to buy the plant. It took another two months to shift the machinery to India.

It was a blind leap of faith. “My father wanted to show the world that an Indian company can make a world-class gun," said Amit B. Kalyani, joint managing director, Bharat Forge. The plunge into gun making had nothing else going in its favour. This was years before Atmanirbhar Bharat became a buzzword. There was no certainty that the Indian army would procure guns locally and if it did so, what type of guns it would want. “As the world’s largest manufacturer and supplier of the crankshaft, a complicated high-precision component, we were confident that if anyone in India could make guns, it was us," recalled Amit Kalyani.

The path less taken

One of the earliest decisions that the company took when it entered defence production was to do everything on its own. “We wanted to own the technology and the intellectual property. That was critical for the global play," said Neelesh Tungar, president, defence, Bharat Forge. Any technical tie-up would have restricted the company’s exports.

It was baptism by fire. The acquisition of the Ruag plant only gave Bharat Forge the machinery. “We did not get the design drawings, details of materials to be used or the technical know-how to make the guns. We had to learn it ourselves," Tungar added.

The challenges were many. “We had to get the right fracture toughness, which is a combination of tensile strength, yield strength and micro-structure of the metal," explained the senior Kalyani. By then, Bharat Forge had established the Kalyani Centre for Technical Innovation and had gained a lot of expertise in metallurgical engineering. “It took us 10 to 12 iterations before we got the right toughness," he added.

The barrel of an artillery gun is typically 8 to 9 metres long. They need to be heat-treated vertically in such a manner they do not bend. “The first time we did that it bent like a banana. We had to come up with ingenious solutions," he recalled, adding, “It took us two years to establish the process and build our first gun, Bharat 52."

Now that the gun was ready, the company realized that there were no rules to test it in India. The army controlled the firing ranges in Pokhran (Rajasthan) and Balasore (Odisha) and there were no procedures in place to test a gun made by a private company. The gun was sent to Rock Island in the US to be test fired. The company got a certificate and a video that the gun fired well.

A couple of months later, while speaking at an army conference in January 2016, Kalyani spoke about the challenges of testing a gun in India. Manohar Parrikar, then the defence minister, who was at the conference, acted immediately and put a new policy in place within weeks.

Between 2010 and 2022, the company invested over 700 crore on product design, development and testing with minimal revenue to show. The entire defence business was brought under Kalyani Strategic Systems Ltd, a wholly owned subsidiary of Bharat Forge.

As India reformed its defence sector, Bharat Forge expanded its product base. Its Advanced Towed Artillery Gun System, or ATAGS, as it is called, was ready in 2017-18. After five years of testing, it is now ready for sale. The company also started making armoured vehicles. Its Armoured Troop Carrier was bought by Sri Lanka. Kalyani M4, a mine-protected, high-mobility infantry vehicle, has been used by the United Nations and the Indian Army. These were small orders, but the company believes it is now ready to rub shoulders with the big guns in the business.

Not a cakewalk

Challenges, however, remain. Despite the government’s ‘Make in India’ push, Bharat Forge has only now started supplying the country’s paramilitary forces.. Many of its products are still caught up in the army’s cumbersome procurement process.

Also, defence orders, unlike Bharat Forge’s other business, come in fits and starts. One year could see a huge order and another could see a drought. At times, orders take years to materialize. “Sales of arms and ammunition is a very different animal and needs a very different approach," said an Indian arms expert, who didn’t want to be identified. Bharat Forge needs to master this approach.

It also has to contend with competition from well-entrenched global defence majors such as the US’s Raytheon and Northrop Grumman; France’s Thales, and UK-based BAE Systems in the domestic and export markets.

“We do not foresee problems as our product range is unique. Unlike bigger players, we follow a modular systems approach—the weapons are designed as multiple modules and can be extensively customized for our customers," said Tungar.

Though there are no export restrictions, the company has to look at the jurisdictions before going ahead. It needs a no-objection certificate from the government and also an end-use certificate from the customer. Also, the art of warfare is changing rapidly, so Bharat Forge will have to keep investing in product development and innovation.

But the senior Kalyani is unfazed. “I would not be surprised if defence becomes the largest revenue generator in a few years," he said. Most analysts agree with him. “It is positive for (Bharat Forge’s) defence vertical as it looks to add more products and markets," Phillip Capital noted in its recent report.

Analysts expect an ATAGs order from the Indian army soon. “The defence segment is poised for significant growth, with execution already underway," Motilal Oswal noted in a recent report.

A technology company

By 2030, Bharat Forge wants to produce cutting-edge hi-tech products. Succeeding in the defence business is therefore critical.
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By 2030, Bharat Forge wants to produce cutting-edge hi-tech products. Succeeding in the defence business is therefore critical.

The company is now setting its sights on new horizons. “We are an engineering company now. By 2030, we want to become a technology company, producing cutting-edge hi-tech products," said the junior Kalyani. Succeeding in the defence business is critical for the company to achieve this aspiration.

To this end, the company is transforming its component forging and industrial business verticals to become a solutions provider rather than be a product supplier. Bharat Forge works closely with customers to design the products. “We have built a technology backbone across all businesses. Our research and development (R&D) investment tops 3.5% of our revenue annually," he said.

The company has entered the aerospace and electric vehicle (EV) businesses too. In the aerospace vertical, it is trying to build products such as aircraft landing gear, transmission systems for helicopters and gearboxes for aircraft. The EV business is into the making of power electronics, e-bikes and re-powering trucks and buses (converting them from diesel engines to battery-powered vehicles). “Today, less than 5% of our products are cutting-edge. We want to take this to 30% in the next few years," said the younger Kalyani. The company is betting on the defence business to achieve this.

In 2022-23, Bharat Forge posted consolidated revenues of 12,910 crore and a net profit of 528 crore. Almost 65% of the company’s output from India was exported. The stock market appears excited by its prospects. Bharat Forge’s share price is just shy of its 52-week high of 1,299.

The father-son duo are confident that consolidated revenues will touch 20,000 crore in the next two years. They are confident that domestic procurement of defence products will soon start growing as the products prove themselves and gain acceptance.

On 15 August 2022, Bharat Forge’s ATAGS were used for the 21-Gun salute at the Red Fort as India celebrated its 74th Independence Day. The firing signalled how far the company has come since the 2012 DefExpo, when its artillery gun caused much mirth.

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