We've undergone significant transformation in the past two
decades, from just an auto components supplier to a reliable & dependable components
supplier for auto & industrial applications, solutions provider to defence industry
and developing solutions for e-mobility.
It is my privilege to present to you our Integrated Annual Report for
FY2024. This has been an exceptional year for Bharat Forge on many fronts. Our performance
in the core forgings business has been strong, the defence vertical has taken off in a
meaningful way, and the Indian subsidiaries continue to deliver strong results. While the
overseas operations are showing signs of stability, there is still a long way to go before
we reach there. The most heartening aspect of the year has been the slow but steady
progress in the E-mobility business. I will touch upon all these points in more detail
later in my letter.
A THRIVING OPERATING ENVIRONMENT
The macroeconomic volatility and geopolitical tensions have dominated
the global economic environment during FY2024. Against this backdrop, India's growth
continues to be resilient, underpinned by strong public capex, booming industrial and
manufacturing activity, and robust private consumption. India's Gross Domestic
Product (GDP) grew by 8.2% in FY2024, making it one of the fastest-growing economies in
the world.
The global automotive industry has demonstrated resilience despite
macroeconomic challenges, such as higher inflation, supply chain disruptions, and rising
raw material costs. Demand momentum continued in CY 2023, with the easing of supply chain
issues and inventory restocking. Growth was primarily led by the North American and
European automotive markets with sustained demand for fleet replacement and personal
mobility.
The Indian automobile industry delivered a robust performance in
FY2024, propelled by strong economic growth and favorable government schemes. Improved
vehicle availability, higher production, and the launch of newer, premium models
contributed to a positive consumer sentiment and growth in the Passenger Vehicle (PV)
segment. The domestic Commercial Vehicle (CV) segment was marginally impacted by a shift
towards higher tonnage trucks with greater payload capacity.
A YEAR OF STEADY PERFORMANCE AND PROGRESS
FY2024 was a year of performance supported by all business verticals.
The standalone business achieved revenue of '89,686 million, reflecting a growth of 18.4%.
EBITDA was up 28% to '24,686 million and PAT grew by 36% to '14,249 million. The export
business surpassed USD 580 million in revenue owing to a sharp increase in the PV export
segment, which grew by 33% to '12,694 million. A deeper dive into the financials will
reflect how de-risked the revenue stream has become, potentially reducing the impact of CV
cyclicality.
For the year, the return ratios witnessed a sharp improvement with
ROCE% inching towards 20% mark, ROE% closer to 17% and D/E (Net of cash) of 0.20.
Our consolidated revenue grew by 21.5% to '156,821 million while PAT
increased by 79% to '9,102 million.
The consolidated balance sheet remains strong with cash of '31,800
million on the books and D/E (net of cash) at comfortable levels of 0.6.
During the year, we secured new businesses worth nearly '63,000
million, across automotive, industrial, defence and industrial casting businesses.
Our strategic focus and investments have yielded exponential growth in
the defence business. This segment has taken off in a very meaningful way. With robust
execution of export orders, we have achieved a strong revenue of '15,610 million, with
more than 90% being export-driven. Overall, the defence vertical secured new orders worth
'44,940 million.
Our industrial castings business, acquired in July 2022, has begun to
deliver on its promise.
In its second year post-acquisition, this segment significantly
contributed to our overall growth. J S Auto Cast ended FY2024 with a revenue of '5,667
million representing an impressive growth of 29.4% and an EBITDA of '755 million, marking
a growth of 80%. We are working on several initiatives to enhance operational efficiencies
and expand capacities including new product development, which will translate into
stronger performance in the future.
The overseas aluminum operations faced a challenging period due to both
internal and external headwinds. A steadfast focus on improving capacity utilization, cost
optimization, and cost recoveries will deliver the performance envisaged during the
project conception stage. In FY2024, our European operations posted an EBITDA of '1,410
million, while the US operations reported an EBITDA loss of '953 million. The aluminum
assets will capitalize on the megatrends of lightweighting and new mobility technologies.
The products produced in the EU and NA are powertrain agnostic with supplies to both ICE
and EV platforms.
BUILDING A STRONGER ENTITY FOR THE FUTURE
We've undergone significant transformation in the past two
decades, driven by the belief that the industry will increasingly shift towards emerging
technologies and benefit from the booming domestic economy. We have established the
necessary levers and executed meaningful investments to lay the groundwork for a robust
future.
Our evolution from a manufacturer of critical auto components to a
supplier of critical components and products/systems across multiple sectors has led to
exceptional outcomes over a period. We have focused on creating opportunities in our areas
of strength: material science, metallurgy, and metal forming and leveraging our customer
relationships. With these as our foundation, we aim to move up the product and system
value chain across various verticals, with an emphasis on technology and innovation.
We've strengthened our core business and expanded capabilities
across automotive, defence, industrial, and aerospace segments through the introduction of
new products, technological advancements, and acquisition of marquee customers. We have
also enhanced our execution competencies with a combination of dedicated plants and a
strong human resource pool, positioning Bharat Forge for sustained growth.
The Defence business represents a critical pillar in our growth
strategy. It's a sector which we seeded in 2013 and has taken 10 years to bear fruit.
With a comprehensive range of world-class products, including towed, mounted, and
ultra-light guns, as well as protected vehicles and unmanned systems incubated through
indigenous technologies, we are well-positioned to meet the diverse needs of global
markets. Our commitment to innovation and excellence has led to the development of nine
platforms in the artillery segment. We are now building the capability to manufacture over
250 guns and 1,000 vehicles per annum. Our manufacturing ecosystem will be structured to
exceed this capacity should the demand rise. Since inception, we have been categorical
about the activities we will not undertake as part of the defence business, which includes
all weapons and systems banned by various UN and other international conventions. In
FY2025, the defence vertical will transition entirely into our 100% owned subsidiary,
Kalyani Strategic Systems Limited (KSSL) once the new facilities are fully commissioned
and licenses are transferred.
The defence business will not venture into businesses barred under
various UN Conventions including those which ban manufacture and use of cluster munitions.
Our industrial castings business has demonstrated remarkable progress
since its acquisition in June 2022. This business has enhanced our overall capacities and
capabilities, enabling us to deliver high-performance castings to a broad range of
industrial and automotive applications. Leveraging advanced manufacturing techniques and
focusing on quality has positioned us as a trusted supplier in this sector. Given
JSA's strong reputation, accomplished management, and a superior talent pool, we
expect robust growth in the coming years. With its ability to deliver high-quality complex
castings, we anticipate JSA will become one of India's top three casting suppliers.
Our aerospace business is on the cusp of a significant breakthrough.
Investments in cutting-edge technology and facilities have enabled us to become a key
player in the aerospace supply chain for global leaders, aligned with the Atmanirbhar
Bharat initiative. We are developing advanced components that meet the stringent
requirements of the aerospace industry, ensuring safety, reliability, and performance. Our
continued efforts in this segment are set to yield substantial growth, driven by
increasing demand and our ability to innovate continuously.
The overseas business has significantly graduated from steel to
aluminum forgings. Our priority remains to achieve sustainable profitability in our
overseas business. The European operations are already in the black, and we expect our US
operations to achieve operational stability in the coming year. We anticipate robust
performance from our overseas subsidiaries in FY2025, driven by strong demand for drive
train-agnostic components.
As we endeavor to stay future-ready in an evolving technology
landscape,
I am pleased to inform you that we have inaugurated a state-of-the-art
digital center with advanced capabilities in AI/Machine Learning and IoT applications.
These investments will help us make our manufacturing process more competitive and enable
us to incubate future technology capabilities and talent development.
Our investments in e-mobility are showing promise. We continue to build
capabilities and competencies aligned with the needs of the end consumer. All our
endeavors in this space will be organic in nature, utilizing our own technology and
know-how.
As our new, high-potential verticals gain traction and become
profitable, we expect capex intensity to reduce and return ratios to improve. A stronger
foothold in less cyclical sectors and diversification across B2B, B2G, and B2C customer
segments will translate into consistent revenue generation. We are confident that our
dedicated efforts, strategic pivots, and focus on technology and innovation will fortify
our core and drive our success.
CONTRIBUTION TO SUSTAINABILITY
Sustainability is an integral part of our business, and we remain
committed to advancing sustainability across operations. We aspire to lead ESG in the
manufacturing space and have set bold targets for the same. Accordingly, we have
institutionalized an ESG framework at the Board level. This framework acts as a guide for
all our decisions. Consistent progress has been made in the areas of stakeholder
engagement, resource efficiency, climate change, supply chain sustainability, customer
engagement, risk management, ethics, and compliance. Our unwavering commitment towards
reduction in emissions, increased use of secondary raw materials, optimal use of
resources, and enhanced use of green energy remains on track. As a testament to our
efforts, Bharat Forge's ESG score has seen significant improvement over the previous
year. While maintaining a laser-sharp focus on implementing ESG initiatives, we ensure
that the outcomes are intertwined with our business priorities, ensuring sustainable
growth.
We continue to prioritize R&D, quality, technology and engineering
excellence, and sustainability in operations which positions us on a stronger footing.
THE BIG PICTURE
Bharat Forge is a company in constant evolution and in value creation
mode. At the core, we remain focused on innovation, indigenization, and customer
satisfaction. As the new verticals grow in scale, size, and reputation in their respective
domains, we expect the financial profile of the parent company to massively transform into
a cash-generating entity focused on incubating newer businesses and verticals. Exciting
times are ahead as we focus on execution, creating a very vibrant and dynamic talent pool.
The Bharat Forge of circa 2030 will be an engineering conglomerate spanning various
sectors and applications.
ACKNOWLEDGMENT
I extend my gratitude to all our employees, customers, supply chain
partners, investors and the Government of India for their continued support. Looking
ahead, the opportunities before us are abundant. We have cemented our position as an
eminent player in the industry with large capacities, high-end technologies, operational
excellence, and a talented workforce. Now with our ambitious plans, we are well-positioned
to continue our journey of growth and innovation. Our strategic investments, technological
advancements, and unwavering commitment to quality and customer satisfaction will propel
us into the next orbit of success.
I remain dedicated to our continued success and look forward to working
with each one of you to take Bharat Forge to greater heights and create value for all.
Warm regards,
B N Kalyani
Chairman and Managing Director