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BL Research Bureau

The cyclical nature of the auto industry and the slowdown experienced in the last one year has prompted many auto component makers to find alternative means of driving growth.

Bharat Forge’s recent decision to foray into the manufacture of ultra heavy forgings for the power sector is a continuation of this trend.

The company, in a bid to diversify its client base and shield against a slowdown in the auto sector, has actively been trying to build its business in the non-auto component segment. In February, it entered into a joint venture with NTPC (National Thermal Power Corporation) to manufacture forgings, castings, fittings and high-pressure pipings, condensers and heat exchangers for the power sector.

At that time, the company was mulling manufacturing power plant equipment as well.

Such a foray not only brings in diversification, but also the advantage of higher margins, as the non-auto business entails manufacture of high-value products and may allow greater pricing power than is possible with automobile makers, which are currently in the grip of a slowdown.

The fact that they expect to earn about 40 per cent of their total revenues from the non-auto segment in the next three-four years, from about 20 per cent now augurs well for the company’s top and bottom line.

The company has already secured orders worth Rs 50 crore from power, wind, oil and gas, marine and capital goods sectors. The company is also said to be in talks with Rolls Royce, the aviation engine maker for a possible alliance.

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