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Bharat Forge sees strong export demand to sustain its growth momentum, notwithstanding concerns over rising fuel prices and interest rates.
“FY 2011 saw the company come back on the growth path with strong momentum for the operations within India and exports business and significant improvement in performance of overseas subsidiaries. Despite some signs of softness in the domestic automotive market, we are confident of continuing the growth trajectory in the coming year on the back of strong global demand, said Mr Baba N Kalyani, Chairman and Managing Director, Bharat Forge.
On rising commodity prices, Mr Kalyani said steel was the major input in forging and contractual obligation permitted its pass through. On other costs such as conversion and energy, it was addressed by improvements in productivity. The strategy was to go in for value addition and focus on the non-auto space.
The Indian operations registered strong performance across sectors and geographies during the year. Domestic revenues grew 50 per cent in FY2011 to Rs 1,728 crore while exports grew 73 per cent to Rs 1,219 crore on the back of recovery of commercial vehicle market in Europe and North America.
Overseas operations witnessed a strong revival in CY10 in correlation with the increase in automobile production globally. The overseas subsidiaries registered a topline of Rs 2,163 crore for the year, up 45 per cent and registered a profit of Rs 11 crore against a loss of Rs 188 crore in CY 2009.
The non-auto business (such as engine components for marine and railways) has become one of the major drivers and become the single largest business segment for India operations. The non-auto contribution to the standalone business increased from 30 per cent in FY2010 to 37 per cent in 2011.
On Tuesday, the company's scrip closed 6.19 per cent down at Rs 304.40 on the BSE. An analyst said unlike other forging companies, the company failed to acknowledge that forging prices were softening. This apart, raw material prices too were going up which would result in margin contraction.
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