Bharat Forge Limited

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ABHISHEK PRITY APOORVAMAYANKDEEKSHA GOVIND

Presented by:

Global ScenarioGlobal forging industry

Products

Custom forgings

Captive forgings

Catalog forgings

$6 billion – Annual sales for Custom forging

250 - No. of custom forging plants in North America

Global Market segmentation by end users

$52.4 billion – Automotive industry

$24.6 billion – Non-automotive industryAerospace industry is the second-largest end-userHigh-pressure applications in the oil and gasindustry

Geographical Segmentation

APAC

• $46.8 billion (2015)

• 60.8% of the

global output (2014)

• China is the leader

Americas

Valued at

$15.6billion(2015)

EMEA

• Valued at $14.6billion(2015)

• Germany is the largest end user

• Accounts for 50% of total production in Europe

Drivers• Benefits of forging over

casting• Commercial jet production • Wind and hydel power

plants

Challenges

• Increase in Variable Cost

• Stagnant growth in

automotive industry

Indian Scenario

The Forging market in India

was valued at $3.1 billion in 2013 and is expected to

reach $4.5 billion by 2018,

growing at a CAGR of 7.29% during the forecast period.

Major Players

Amtek Auto

Bharat Forge

MahindraCIE

Automotive

Ramkrishna

Forgings

Bharat Forge : An IntroductionMission

• To implement projects with entire customer satisfaction

adhering global norms of Quality, Environment, Health & Safety.

• To be a significant player in the field of roads & highways,

industrial & utility projects.

• To achieve an order booking of INR 25bn by FY 2017 – 2018

• To promote work culture that fosters individual growth, team

spirit & innovation to overcome challenges & attain goals.

• To be committed to Integrity, openness, transparency,

teamwork & performance orientation.

Vision:We’re building India’s economic backbone, strengthening national

capabilities and ensuring a bigger global imprint–for ourselves

and our country.

Bharat Forge Limited (BFL), the Pune based Indian multinational is atechnology driven global leader in metal

• Part of Kalyani Group - a USD 2.5 billion conglomerate with 10,000 global work force;

• World's largest forging company• Operates through seven business units

AutomotivePower

Oil and gasLocomotive

MarineAerospace

Construction and mining

Core Objectives

To be committed to listening and responding to the needs of our

customers, associates and business partners and honouring their

individual value.

To be committed to an entrepreneurial spirit that fuels the growth

of our companies and increases shareholder value.

Bharat Forge : Milestones

1961 - Incorporation of Bharat Forge Ltd.

1966 - Joint VCommercial Production begins. Forge Shop - Hammer

Technology

1990 - Technology Up-gradation at Bharat Forge.

1998 - Joint venture with Carpenter Technology, USA to produce high alloy

Steel

2001 - BFL acquired Order Book of Dana Kirkstall.

2003 - BFL reported highest ever figures for sales, exports and net profit

2003 - India's largest auto-component exporter

2003-05 - Bharat Established Global Manufacturing Footprints across India,

Germany, Sweden and China.

2007 - Centre for Advanced Manufacturing takes shape at Baramati

2008 - Bharat Forge inaugurates its Heavy Forge Division II at its Mundhwa

Plant

2015 - Joint venture, Alstom Bharat Forge Power

CDP Bharat ForgeBharat Forge Aluminiumtechnik

Bharat Forge KilstaFAW Bharat Forge

Global Manufacturing

Footprint

2003-2005

Critical Success factors

123

54786

910

Product

Quality

Good

People

Advanced

Technology.

Strategic

Alliances.

Flexibility

Business

ReputationDistribution

Networks.

Market

Knowledge.

Innovativeness.

Relative

Product Cost

Quality : Focus on quality excellence and customer satisfaction, Won the prestigious TIME

India Global Manufacturer for the Year 2017, Focus on using six sigma methodology,

Compliance with the latest automotive quality system standard, TS 16949 etc.

Cost: Manufacturing side is on par with best anywhere in the world and at a cost that is

lower by almost 20-25%, Implementing new technologies to drastically cut costs,

Restructure finance costs, manage manpower costs, efficient operations etc.

People: Invest in developing team to sharpen their capabilities, Encouraging more people

from our team to take up fundamental research , Tie-ups with leading academic institutions,

Cross functional teams , Actively involve the departmental managers

Technology and Innovation: 12 patent applications were filed in FY 2015-16, bringing the

number of patents filed till date to 22, In house R&D, Light weighting programs, focus on

Industry 4.0, Kalyani centre for technology and innovation

Partnerships: Lot of alliances, ventures, technical agreements and mergers in the past for

technology and cost superiority, Aerospace and defence: Partners Israel's Rafael for defence

manufacturing, Swedish defence and security major Saab to form Joint Venture for air

defence solutions

Change Management: Flexible capacity to accommodate any incremental demand, Cultural

integration and capturing synergies for newly acquired businesses, Cater to market demand

11 Information

Systems

Product PortfolioAutomotive: Largest exporter of auto components from India and leading chassis components manufacturer in the world for passenger cars, LCV,HCV,MCV - Power train components: Crankshafts, connecting rods, Chassis components: Front axels, steering knuckles and Transmission parts

Power : Windmill shafts, turbine rotors and blades, retaining rings and gas engine components

Oil & Gas : Valves, drill bits, surface flow and sub-sea equipment

Rail : Wheel sets, truck frames and rail components - Forged Rail Crankshaft , Machined Rail Crankshaft, Portal Axle, Connecting Rod, Claw (Clamp) Locks, Aluminium Piston Body

Marine: Supplies various products to global ship builders, including key products like crankshafts, connecting rods and propeller shafts.

Aerospace: Airframe, structural and engine parts for the aviation sector - Wheel Lever Forging, Fan forging ,Main leg forging

Construction and Mining: Track link, Front Spindle ,Machined Crankshaft

Geographical PresenceTranscontinental Manufacturing operations

across ten locations and six countries

2 in India,

3 in Germany and

1 each in Sweden, Scotland , UK, USA &

China.

29 state-of-the-art fully automated press lines ranging from 1600 MT to 16000 MT

Customer base ranges from the world's largest OEMs to tier-one automotive & non-

automotive suppliers

41 automotive customers include all most all major automobile manufacturers across

the world

71 industrial customers across varied sectors like defence, aerospace, rail,

construction , oil and gas etc.

Facilities are strategically located across the

world close to the customers

Mundhawa -Forging and machining facility

Satara: General

engineering division

Baramati: Forging and machining facility

Chakan: Machining facility

Financial Performance

3,744.973,243.06 3,449.55

4,569.25 4,396.41

0.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

In C

rore

Rs

Year

Revenue From Operations [Standalone]

Total revenue declined by 5.3% in FY16, driven by continued weakness in the industrial sector across both, domestic and international markets and unexpected slowdown in the North American Class 8 truck market

26.66 25.6128.78

31.29 32.11

0

5

10

15

20

25

30

35

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

EBDITA Margin(%)

Despite top-line challenges, EBITDA margins expanded by 110 bps driven by focus on cost control and supported by benign commodity prices

0.79

0.640.54

0.470.4

0

0.2

0.4

0.6

0.8

1

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Total Debt/Equity (X)

D/E has significantly reduced, it stands now at 0.40. The debt repayment is progressing smoothly as per the Company’s plan to be net debt free by FY 2017-18

48

36

16

CONSOLIDATED REVENUE DISTRIBUTION FY 2016 (%)

Commercial Non-Auto Passenger

39

36

23

2

CONSOLIDATED GEOGRAPHIC REVENUE FY 2016 (%)

Europe India US Asia Pacific

For FY15 the domestic market share was 32% , the increase by 4% is owed primarily to Make in India initiatives aimed at reviving the manufacturing sectorFocus on mining, transportation, aerospace and the defence sector in the domestic market.

87% growth in Passenger Vehicle export Business in FY 6 – due to focus on increasing presence and penetration in the passenger vehicle segment during FY15 - long-term contracts with Global OEMs

0

200

400

600

800

1000

1200

1400

19/Mar/12 19/Mar/13 19/Mar/14 19/Mar/15 19/Mar/16

Stock Price Movement

JV with Israel Aerospace

Entry intoRailway business

Acquisition of MecaniqueGenerale Langroise and budget effect

Weighed down by lower demand

LoksabhaElection Results 2014

SWOT AnalysisStrengths

Strong Financials High profitability and revenue Comfortably placed to pay for its short term

obligations Can meet its debt obligations without any

difficultyAggressive leadershipSkilled and updated workforceWide distribution and sales networkTranscontinental PresenceBarriers of market entry for competitors

Weakness

ThreatsMacroeconomic UncertaintyGeopolitical and other risksRaw Material Prices Currency Risk

OpportunitiesIncrease product portfolio in commercial vehicle segmentEnhance presence in passenger vehicle segmentIncrease presence in transportation sectorGrow aerospace businessMake in IndiaIndustry 4.0

Slow growth rate in terms of revenues (CAGR 8.8% in last 5 years)Total revenue declined by 5.3% in FY16Company operates with high level of debt and is not placed well to withstand economic slowdowns

Porter’s five forces

Vendors are highly dependent on metal suppliers, without which the entire process is futile. Hence, the bargaining power of suppliers is high.

The bargaining power of buyers is low, as most of the vendors are vertically integrated.

Bargaining power of suppliers

There are substitute processes to metal forging such as casting and stamping. However, forging is more reliable and efficient than substitute processes. Hence, the threat of substitutes is moderate.

Threat of substitutes

Most vendors use captive manufacturing operations for metal forging. Market opportunities for new vendors are limited

Threat of new entrants

LOW

LOW

HIGH

Threat of rivalry

MODERATE

Competition among vendors is moderate because of

captive consumption operations.

Bargaining power of suppliers

MODERATE

Strategies adoptedContinuously expanded and upgraded capacity through technical collaboration with foreign players, acquisitions and agreements.

Improved productivity

Recruiting fresh white collar employees

System driven management

Optimizing operations

Customer Acquisition Strategy

Heavy investments to modernize operations in order to woo abroad customers by adapting latest technologies

Performed extremely well on all parameters of cost, quality and delivery

Remove any apprehensions that the customer had for offshore suppliers – resident engineers were posted

Flexible capacity to accommodate any incremental demand

Aggressive decision making

Diversified its product-market portfolio to cater to more and more customers

Improved its speed to market by establishing delivery centres throughout the world

Risk Mitigation Strategy

Manage financing costs, mobilizing international debts with lower interest rates, currency risks were mitigated using exports,

improved ROCE by reducing exposure to financial assets which gave lower returns

Growing exports and enhance global presence to mitigate risks related to economic downturns

The way aheadFocus on new product development Expand its footprint in the global aerospace and defence value chain New products for the automotive sector Developing a new product portfolio under Make in India

Leveraging R&D capabilities Develop a highly differentiated portfolio of technology-driven products Research of new exotic materials and new additive manufacturing processes

Focus on quality excellence and customer satisfaction: Establish a comprehensive purchasing and quality control ecosystem

Investment in technologies: Optimize the different manufacturing processes and gain significant operational efficiencies

Focus on key sectors: Railways, Aerospace & Defence

Industry 4.0 Digital transformation of the manufacturing sector to create a fully integrated, automated and optimized

manufacturing system Increase manufacturing productivity, improve efficiency, shift economics and foster industrial growth

Thank You