Bharat Forge is expecting revenues of USD 100 million from its aerospace vertical over the next 2-3 years, the company’s Executive Director Amit Kalyani told CNBC-TV18.
He expects a double digit growth in overall revenues this year given strong order book in North America and back home, robust growth in the passenger car segment.
Kalyani expects the company’s local operations to generate Rs Rs 7000 crore of revenues by FY17-18, an increase of around 50 percent.
Below is the verbatim transcript of Amit Kalyani's interview with Sonia Shenoy & Reema Tendulkar on CNBC-TV18.Sonia:You have mentioned in your presentation that the outlook for quarter one is muted because of the lower than anticipated recovery in the Indian medium and heavy commercial vehicles sector (MHCV). This quarter you saw a 15 percent year-on-year (YoY) growth in the India business. How much do you think it could slow down to, in the quarters to come?A: It is not a question of slow down, this is a yearly phenomenon that Q4 is always the strongest and Q1 is always the weakest. So, you are always going to have this lag effect in Q1 and then build up again in Q2. Typically what we experience is somewhere between 55-60 percent of the revenues of the MHCV, 55 percent probably happens in the second half and 40-45 percent happens in the fist half.Reema: We have noticed a slow down in the North America truck orders in the month of April. It was down nearly by 10 percent. Are you sensing a slowdown in the truck orders in North America and could it impact your order inflows?A: No, we are seeing a pretty strong order book in North America not only for this year but also for the next year. In fact we have one significant new order and we won a new customer this year, which will start ramping up from quarter 2 once the balancing facilities are put in place. This will provide value added exports form India and that will also contribute towards over all growth.
Sonia: When you say strong order book from the North America region, can you give us some numbers? What is the outlook as far as the order inflow is concerned?A: Our outlook is still pretty strong, we expect a double digit growth and profits to grow even better. We see tailwinds coming from the commodity or energy sector that will add to the over all positivity. We have seen tremendous growth coming from the passenger car sector where we are ramping up new programs, so that will continue growing quarter-over-quarter (QoQ).We are starting to see shipment to the aerospace industry so that will also continue to grow. The final leg of the growth which we are very hopeful about on the medium to long-term is the whole Make In India initiative. As I mentioned, it is medium to longer term opportunity.Reema: Could you help us with some numbers, perhaps in the order inflows or even about the financials of the company going ahead?A: Sorry, but we do not give numbers or those kind of quantified guidance as a company. Let’s just say that we expect double digit growth overall and also in the exports for the year.Sonia: FY15 has been a very strong year for you, revenues have risen about 14 percent or so coming in at more than Rs 7,600 crore. Do you think this strength can be replicated in FY16 and what would be the triggers for it?A: We have stated an objective that our standalone India operations will generate Rs 7,000 crore of revenues by FY17-18 which is with minimal incremental capex of around Rs 1,000 crore cumulatively in that period of time. So, if we are in FY15 we have already done Rs 4,500 crore by FY17-18 we expect to do Rs 7,000 crore or may be at least that much. That should give you more than 50 percent growth in a next 2-3 years.
Reema: You have spoken about weakness in the oil and gas segment in your presentation. What are the key concerns plaguing the sector and how much could it affect your own growth in this particular vertical?A: The weakness in the oil prices is affecting the exploration and production side of oil and gas, especially the rig counts are going down on shore. Your off shore drilling is also slowing down. However, there is replacement demand and safety demand which keeps the sector going. Some of the shale demand has come down so as a whole on certain parts of the oil and gas business we will see a drop. On the other sides we will see less of a moderation and certain other parts we will see flat demand. Over all at this price level of oil we will see a small de-growth in the oil and gas sector between 10-15 percent.Sonia: Shipment tonnage went up by about 18 percent or so in the quarter gone by. What kind of shipment tonnage growth would you expect in the next couple of quarters?A: Let us look at revenues and not at tonnage. Our whole focus is on revenue. How do we generate the most revenue from our asset based and the most value addition from our asset base?Reema: Talking about the medium-term, what will be the key growth drivers for the company?A: There are going to be three massive triggers going ahead. One is going to be the expansion in our aerospace business. We have clearly said that we want to achieve a USD 100 million revenue in aerospace. That is the area where it will go from almost nothing to that kind of a figure in the next 2-3 years.Another area on the passenger car sector, where not only traditional products but new products are going to grow our business more than 2-3 times. The third is in a lot of non-traditional areas and the whole Make In India opportunity which in itself is a huge opportunity. Make In India could be another big vertical for us like the non –auto vertical has become and could be worth several thousand crore in a few years. So that is another big opportunity that we are pursuing.Sonia: Any particular hindrances on growth which could impact these triggers that you spoke about?A: There are no hindrances, the first two which is the aerospace and the passenger car is all about us and global customers. The third one is mainly to do with India's demand and how much of Indian manufacturing goes into Indian supply chain rather than being imported from abroad in a variety of sectors.
Reema: Your global revenues were flat on QoQ basis, Do you expect a pick up over there or what is the outlook?A: The only area where the global market is slow right now is on commodity driven sectors such as energy and mining etc. These are the areas where demand is soft.Sonia: Do you see that slowdown in global market will be impacting the company’s growth going ahead?A: The demand is not going to become zero. However, compared to the way we were growing in those sectors previously, that kind of growth level is difficult to achieve given the current commodity price level. Therefore we have to make-up for that growth from some other areas.
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