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Leading auto parts maker M M Forgings Ltd is planning to invest ₹300 crore to ramp up capacity and tap emerging growth opportunities.
The Chennai-headquartered company ended FY22 with the highest-ever turnover of ₹1,123 crore against ₹747 crore in FY21 and a profit after tax of ₹92 crore (₹47 crore), supported by robust sales in the medium and heavy truck segment.
While the demand in domestic commercial vehicle segment is expected to improve further on the back of revival in economic activity, led by construction, cement and allied sectors, M M Forgings is also expected to benefit from the cyclical upswing in US Class-8 trucks.
Commercial vehicle segment makes up about 85 per cent of the company’s revenue, followed by the passenger vehicle segment at 10 per cent and others at 5 per cent.
Indian market accounts for 46 per cent of the total revenue and the Europe and the US account for 20 per cent each, while the remaining 14 per cent comes from South America.
“The company plans to invest upward of ₹300 crore in this fiscal and a good amount of that will come from internal accruals and some additional borrowing,” Vidyashankar Krishnan, Vice Chairman & Managing Director of the company said during the Q4FY22 earnings call.
The proposed capex includes ₹200 crore for increasing the machining capacity and ₹100 crore for de-bottlenecking, which will further increase its capacity from 1.2 lakh tonnes to 1.3-1.35 lakh tonnes.
The company has projected 80,000-90,000 tonnes of production for FY23 against the production of 61,000 tonnes and sales of 62,000-63,000 tonnes in FY21.
“Our machining component share stood at 51 per cent of sales in FY22. It has steadily risen over the 43 per cent level of the previous year and we would expect this number to reach 60-65 per cent in the future. For FY23, we expect to produce and sell close to 80,000-90,000 tonnes which would mean that we register an increase of anywhere around 30-50 per cent so that we would end FY23 at about ₹1400-crore in turnover,” Krishnan added.
Of the incremental production target of about 30,000 tonnes, around 15,000-20,000 would be for newly developed products, while the rest will be to ramp up capacity in the existing components segment.
Business expansion
The company has also announced that it will manufacture automation and robotic products for self-use and sale to third parties.
Accordingly, it will focus on the development, manufacture and sale of automation products and systems, including industrial automation products/systems and home robotic products.
“It is important that the company continues to expand its product offering for growth, enabling predictability and enhanced earnings,” M M Forgings said in its 76th annual general meeting notice.
The company is also planning to develop IT software and systems for its own use and commercial exploitation.
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