Bharat Forge , a leading Indian forging company, reported a 2.7% year-on-year decline in standalone revenue for the first quarter, amidst global uncertainties and tariff-related challenges.

Financial Performance

Bharat Forge's standalone revenue for Q1 stood at Rs 2,105.00 crores, down from the previous period. The company's standalone EBITDA also saw a 6.5% decrease to Rs 588.00 crores, primarily due to low utilization and a different product mix. Notably, the company absorbed Rs 14.00 crores in tariff-related expenses during the quarter.

On a consolidated basis, the company fared slightly better, with revenue increasing by 1.5% to Rs 3,909.00 crores. The consolidated EBITDA reached Rs 682.00 crores, maintaining a healthy margin of 17.4%.

Business Highlights

Despite the challenging environment, Bharat Forge secured new business worth Rs 850.00 crores across its segments. The company's management cited several factors affecting performance, including tariff uncertainties, a pause in emission norms implementation, and seasonality in the aerospace business.

US Operations

The company's US aluminum operations showed improvement, with a second consecutive quarter of positive EBITDA at 6.1% margins. Current utilization levels for the aluminum business are at approximately 70% of Phase-1 volumes.

Outlook

Bharat Forge expects Q2 to be weaker, primarily driven by US exports. However, the company anticipates a stronger second half compared to the first half. The recent acquisition of American Axle's India CV Assets is expected to contribute significantly, adding approximately Rs 1,000.00 crores to the consolidated revenue, with consolidation beginning from Q2.

Management Commentary

During the earnings conference call, Mr. Amit Kalyani, Vice-Chairman & Joint Managing Director of Bharat Forge, stated, "We put up a fairly decent show given the current circumstances, which continue to evolve as we speak. Tariff-related uncertainty is definitely something that nobody has ever experienced before, and it's something that we are engaged with our customers in finding a resolution to."

Mr. Kalyani also highlighted the company's diversification strategy, saying, "In India, a wide portfolio across steel forging, ferrous, and aluminum casting is helping us increase our content per customer across sectors and geographies."

Future Prospects

Bharat Forge remains optimistic about its long-term prospects. The company expects its aerospace business to continue its 20% plus annual growth. Additionally, with a strong RFQ pipeline in the defense business, Bharat Forge anticipates some orders to be finalized in the current fiscal year.

As global markets navigate through uncertainties, Bharat Forge aims to leverage its diverse portfolio and strategic acquisitions to maintain growth and profitability in the coming quarters.

Bharat Forge Limited , a leading Indian multinational corporation, has announced a significant restructuring move in its defence business operations. The company has entered into a Business Transfer Agreement (BTA) with Kalyani Strategic Systems Limited (KSSL), its wholly-owned subsidiary, for a transaction value of ₹4.50 billion (approximately ₹4,533.00 million).

Key Details of the Agreement

The agreement, approved by Bharat Forge's Investment Committee (Defence Business), involves the transfer of identified assets and other related obligations of the company's Defence Business to KSSL. This transfer will be executed on an itemized sale basis. Additionally, Bharat Forge and KSSL have entered into an Intellectual Property Rights Licensing Agreement as part of this restructuring.

Strategic Implications

This move represents a significant step in Bharat Forge's internal restructuring efforts, particularly focusing on its defence sector operations. By transferring its defence business to KSSL, Bharat Forge aims to streamline its operations and potentially create a more focused entity for its defence-related activities.

Financial Impact

The transaction, valued at ₹4.50 billion, is expected to have a notable impact on Bharat Forge's financial structure. However, it's important to note that as KSSL is a wholly-owned subsidiary of Bharat Forge, this transaction will not affect the consolidated financial results of the group.

Market Position and Future Outlook

Bharat Forge has been actively expanding its presence in the defence sector. As of the latest available data, the company's defence order book stood at ₹9,463.00 crores. The management expects to secure new orders in the current fiscal year, which could generate more revenue visibility for future years.

Quarterly Performance Context

While this deal marks a significant development, it's worth noting Bharat Forge's recent financial performance. For the quarter ended June 30, the company reported:

The company secured new orders worth ₹847.00 crores during the quarter, including ₹269.00 crores in the defence sector.

This strategic move comes at a time when Bharat Forge is navigating challenging market conditions, particularly in its export markets. The company remains cautious about the outlook for its US export business for the remainder of the fiscal year, citing recent tariff announcements and changes to emission regulations in North America.

As Bharat Forge continues to adapt to market dynamics, this defence business transfer to KSSL appears to be a strategic step towards optimizing its business structure and potentially enhancing its competitiveness in the defence sector.