Davos 2019: Two Pillars Of Bharat Forge’s Double-Digit Growth Strategy

I have little to do with stock prices. While the orders on class 8 trucks are lower, the backlog is so large that next year could still be a good year. Besides the class 8 trucks, we also have new growth coming from passenger car sector and many other sectors that we were incubating from last few years. Notwithstanding catastrophic (events), we should have a good year next year.

We're focussed on creating new capabilities in order to supply components and solutions that we haven't been doing at scale of what the potential is today. We have set up the light weighting centre. In India, we have expanded aluminum forging business. We've expanded our aluminum forging business in Europe, and we'll do the same in the U.S. This will add significant quantum increase in those businesses and provide new platform for growth going forward. We see the light weighting business potentially, today, is about 100 million which could easily become in range of 400-500 million in five-six years. In passenger car sector, we are predominantly present in engine components. We have now developed jazzy components, new engine component value added products.

We are now creating products for electric vehicle sector. EVs have lot of structural, mechanical, electrical components which we never used to do. We have developed technologies to make products for this sector. These are things which come on line in next two-three years.

We are targeting electrification of industrial products and control systems for it. We have been doing initial work on it for last two years. We are broadening our base, adding new capabilities. That's how we will grow our business by growing content per vehicle and getting into sectors that we have not been present in.

There is nothing wrong with the Indian economy. It's just a hangover of the bad mood coming from all the global cues and uncertainty about what is happening globally, some major events coming up in India. People have gone from let's do things now to let's wait and watch. That's the kind of thing we are seeing. There are some issues around the IBC (insolvency and bankruptcy code) process which should have been expected to happen more expeditiously. Only few of them have panned out. So, lot of things which came as outliers which have mood effect in India.

We work with derived demand in this business. We talk about our demand based on what our customers tell us. The Indian automotive sector is supposed to grow at double digits domestically. Our global business should also grow at double digit. Overall, we are in a strong position. In Indian sector industrial side, the investments will start again. Like power, they will start seeing investments again.

Not yet. The capacity utilisation has gone up. Lot of old plants have to shut down and new plants have to come up. Across sectors like steel, cement, power, we are on the cusp of a large capex cycle starting in the next 18-24 months. I have seen capacity utilisation and that is what giving us the sense.

Our operating margins are upwards of 28.5 percent. They have not softened. We have a raw material pass through which inflates your topline and raw material cost. Our operating margin per product is at the levels we have, more or less same or even higher if you have to account for inflationary impact of price increases. They will remain stable between 28-29 percent.

This is a very strong level of margin to operate as you have new business coming up and all kinds of things. I would like to keep this in ballpark. There may be times when it could be slightly higher or lower. If you look at the whole year, it will remain at that level.