Artillery guns, helicopter rotor blades, components for drones and steel alloys for fighter jets are some of the areas where Bharat Forge is seeing growth in the mid to long term as it expands play in the defense and aerospace sectors to reduce dependence on revenues from the automotive business.
Amit Kalyani, deputy managing director, Bharat Forge said, “I think this (defence business) is the biggest inflection point for our company. A business that has been nurtured by our management and developed over the last 12 years. All the IP (intellectual property) for this is home grown and developed in-house.”
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Kalyani, in a recent post earnings call, added that Bharat Forge has received acceptance of necessity (AoN) for 307 advanced towed artillery gun systems (ATAGS) for the Indian Army. AoN means that the government has accepted the need for the equipment and is the first step of the procurement process after field trials and testing.
Recently, the Pune-based, Baba Kalyani-led company forged partnerships with US-based energy and defense corporation company General Atomics to make main landing gear components, subassemblies and assemblies of unmanned aerial vehicles.
In February state-owned Hindustan Aeronautics (HAL) partnered with Bharat Forge for procuring steel alloys which are used in making fighter aircraft. This was followed by South African-based defense equipment maker Paramount Group signing an MoU with Bharat Forge to develop and produce mission systems, store management systems for medium-lift choppers having rotary wing platforms.
“We are confident that the goal we had set of getting to ₹500-600 crore on an annualised basis for aerospace is now within reach in a few years with very profitable business,” Kalyani.
Market watchers say that Bharat Forge’s push for business from the defense sector will help it offsetting the cyclical downturn in the global commercial vehicle market. Brokerage firm Nomura sees a sharp ramp-up in defense revenue for Bharat Forge in FY24 and FY25 as both Indian and export defense orders start to come in.
“Besides ATAGS and an export order book of ₹2000 crore, we have significant orders on protective vehicles, deterrence systems and components and consumables across the board both in India and abroad. This business will hopefully cross $100 million in this year and move to significantly higher annual numbers going forward with the very solid profitability and return ratios,” Kalyani added.
A new mega plant for defense by Bharat Forge is coming up and should become operational in January-February next year. So, by March-April ’24, the facility will be ready for production and that will be a quantum jump in our capacity. We will have almost three times as much capacity as we have today,” Kalyani added.
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Having three operational verticals, Bharat Forge is adding a fourth unit to its core defense segment. This will look into marine, unmanned systems and C4ISR which stands for command, control, communications, computers (C4), intelligence surveillance and reconnaissance (ISR).
“The defense business is seeing good momentum in exports and orders are expected from the Indian government as well. Outlook for newer verticals (defence, aerospace, light weighting and electric vehicles is good. The diversification should also result in reduced business risk over the medium to long term,” said a report by PhillipCapital (India).