BHARATFORG - Bharat Forge Ltd Share Price

Q&A Section of Bharat Forge's Q3 Earnings Transcript

1. Question from Gunjan (Bank of America):
"How do we think about the scale-up of the defense business in the next two to three years given the recent product capabilities expansion?"

Answer (Amit Kalyani):
We view our defense business similarly to our overall operations. Our aim is to diversify beyond any single vertical and include multiple sectors, such as unmanned systems and drones, which present substantial opportunities. We anticipate a substantial range of product values, from a few crores to millions of dollars. Overall, our capacity and focus on network-centric warfare will support this growth trajectory.

2. Question from Gunjan (Bank of America):
"With defense currently at 10-12% of revenues, where do you see it in the next few years?"

Answer (Amit Kalyani):
Realistically, we see potential for defense to grow to 18-20% of our total revenues as we capitalize on global opportunities. With European defense budgets expanding significantly, and India's 21% increase this year, the sector's growth is promising. If all goes well, we could even aim for higher percentages.

3. Question from Gunjan (Bank of America):
"Can you provide color on how the tariff deal affects your position in the supplier ecosystem?"

Answer (Amit Kalyani):
The tariff deal improves our competitiveness relative to countries facing higher tariffs. The removal of punitive tariffs enhances our market position, enabling renewed confidence in product development across our customer base. So overall, it creates a more favorable environment for our operations.

4. Question from Gunjan (Bank of America):
"Any update on the restructuring in Europe?"

Answer (Amit Kalyani):
I cannot disclose specific actions beyond what I've previously stated. Our objective remains to ensure profitability, and we are diligently evaluating all options available to us. The situation is fluid, and we aim to make informed decisions based on ongoing assessments.

5. Question from Amyn Pirani (JP Morgan):
"What value does Premji's investment in JS Auto bring to Bharat Forge?"

Answer (Amit Kalyani):
We can operate independently without this investment; however, additional perspectives and global connections can enhance our growth trajectory. This partnership allows us to focus on fast-tracking both organic and inorganic growth without additional capital concerns.

6. Question from Kapil Singh (Nomura):
"Will defense profitability match that of the auto business over time?"

Answer (Amit Kalyani):
Yes, I expect defense profitability to align with our auto business on an EBITDA basis, and potentially exceed, given lower capital requirements. This sector will also provide continuous MRO and support revenue, enhancing overall profitability.

7. Question from Kapil Singh (Nomura):
"On the global truck business, when do you foresee the upcycle beginning?"

Answer (Subodh Tandale):
We've observed a positive trend in incoming orders for Class 7 and 8 trucks recently. Given the clearing uncertainties of the previous year, we anticipate an improved outlook, leading to steady growth in the upcoming year.

8. Question from Abhishek Shah (Valcore Capital):
"Can you clarify the INR 17,000 crore project in Odisha involving Kalyani Group?"

Answer (Amit Kalyani):
The project includes a specialty steel plant by Kalyani Steel, a super alloy plant by Saarloha, and a potential forging facility. Bharat Forge plans to allocate up to INR 3,000 crores for this initiative, which would unfold post necessary approvals and is not tied to immediate timelines.

9. Question from Nitin Jain (Fairvalue Equity Advisory):
"What is the current status of your defense order pipeline?"

Answer (Amit Kalyani):
Our order book has grown significantly with contracts like the CQB carbine and institutional orders. We are optimistic about future bids materializing due to the ongoing procurement reforms and the supportive government push for indigenization of defense production.

10. Question from Aakash Javeri (Time & Tide Advisors):
"How is the acquisition of American Axle performing?"

Answer (Amit Kalyani):
The acquisition is performing well, with margins improving by approximately 200 basis points. We expect this segment to continue thriving, especially as we secure new business from Indian OEMs, marking it as a beneficial acquisition for the company.