Bharat Forge Limited has emerged as a significant player in India's defence manufacturing sector, transforming from a traditional automotive components manufacturer into a diversified industrial conglomerate. The company's defence segment has shown exceptional growth, rising from ₹410 crores in FY23 to ₹1,772 crores in FY25, representing a fundamental shift in its revenue composition.

Strong Financial Performance in Q2FY26

The company delivered robust financial results for Q2FY26, demonstrating consistent growth across key metrics:

The company has achieved impressive long-term performance metrics over the past five years, including a revenue CAGR of 13.00%, profit CAGR of 21.00%, and price CAGR of 20.00%. With a return on equity of 11.60% and return on capital employed of 12.20%, the company maintains a debt-to-equity ratio of 0.71.

Defence Segment Emerges as Growth Driver

Bharat Forge's defence operations, primarily managed through subsidiary Kalyani Strategic Systems Ltd (KSSL), have transformed from prototype development to high-volume manufacturing capabilities. The defence revenue trajectory shows remarkable acceleration:

The company has secured an executable defence order book worth ₹11,000 crores as of January 2026, providing revenue visibility over the next five years. A landmark contract includes the ₹1,662 crore order for 2.55 lakh Close Quarter Battle (CQB) Carbines from the Ministry of Defence, featuring indigenously designed, developed, and manufactured weapons.

Automotive Segment Faces Headwinds

Despite defence growth, the automotive business remains significant, accounting for 53.00% of standalone revenue. The segment is divided between commercial vehicles (35.00%) and passenger vehicles (18.00%). However, the automotive sector experienced challenges in recent periods:

The decline primarily stems from weakness in the U.S. Class-8 truck export market. Industrial segments, including power, oil & gas, construction & mining, rail, and marine applications, contributed 47.00% of standalone revenue in FY25.

Operational Infrastructure and Capacity

The execution of defence contracts is expected to significantly increase capacity utilization at Bharat Forge's defence and aerospace facilities in Khed and Baramati. The company's overseas operations show mixed performance, with European operations maintaining PBILDT margins of 2.00% to 4.00%, while U.S. operations have achieved profitability following the aluminium forging facility ramp-up.

Market Positioning and Valuation

Bharat Forge trades at a market capitalization of ₹68,988.19 crores, with shares closing at ₹1,443.00, down 0.76% from the previous day's close of ₹1,454.10. The company's current P/E ratio stands at 65.30x, significantly higher than the industry average of 29.80x, reflecting market expectations for the defence segment's growth potential.

The defence order book now represents approximately 70.00% of the company's total standalone revenue for FY25, positioning this segment to offset automotive market volatility. The structured nature of defence contracts, with technology co-developed with DRDO, ensures intellectual property retention and margin stability within the company's operations.

Bharat Forge has entered into a strategic partnership with Germany-based Agile Robots S.E. through a Memorandum of Understanding signed on January 9, marking a significant step toward advanced industrial automation. The collaboration focuses on jointly exploring AI-driven robotics and intelligent automation solutions across multiple high-growth sectors.

Strategic Partnership Overview

The Indo-German partnership targets several key industries and markets with comprehensive automation solutions:

Technology and Capabilities Development

The MoU outlines ambitious plans for joint capability development in cutting-edge automation technologies. The partnership will combine Bharat Forge's domain expertise with Agile Robots' advanced robotics capabilities to create customized solutions for the target markets.

Key technological objectives include:

• Development of state-of-the-art vision-based robotics solutions
• Implementation of AI-based automation systems
• Creation of fully autonomous manufacturing facilities, known as "dark" factories
• Deployment of bespoke, modular, and intelligent automation solutions

Management Commentary

Amit Kalyani, Vice Chairman and Joint Managing Director of Bharat Forge, emphasized the strategic importance of this collaboration. He stated that the partnership reinforces Bharat Forge's ambition to provide state-of-the-art intelligent robotic and automation solutions across multiple industries while driving manufacturing efficiencies domestically.

Kalyani highlighted the growth trajectory of Indian manufacturing, expressing excitement about deploying customized automation solutions across various sectors through the partnership with Agile Robots.

Market Performance

Despite the positive strategic development, Bharat Forge shares experienced a decline in trading:

This partnership aligns with broader global trends toward industrial automation and reflects Bharat Forge's strategic focus on integrating advanced technology into manufacturing processes. The collaboration is expected to strengthen the company's position in the rapidly evolving automation and robotics market across India and Southeast Asia.