The Covid-19 pandemic has caused a delay of 4-5 months in testing of Bharat Forge products targeted at the defence sector. A dearth of cash for budgetary support and lack of physical interactions with buyers are the reasons behind the delay, a top company official said.
“We have had several very successful artillery and vehicle trials. However, because of Covid-19, there has been at least a 4-5 month delay in tests because people have not been able to meet and actually go and test products as frequently as needed,” Amit Kalyani, Deputy Managing Director, Bharat Forge, told analysts over a conference call.
Pune-based Bharat Forge is following what it calls a three-horizon strategy. Horizon One has products such as artillery guns, some armoured vehicles, and some speciality vehicles. Horizon Two also has speciality vehicles. Horizon Three has electronics and high-end technology.
In August, Kalyani had said that one of four Bharat Forge artillery guns had reached the final stage of testing with the Indian Army. All four guns were at various stages of trials. Kalyani did not specify if the artillery guns were facing delays.
Bharat Forge is set to benefit hugely from the reform initiative kick-started by the Ministry of Defence, wherein restrictions have been imposed on import of 101 weapons and military platforms. The initiative, announced on August 9, includes artillery guns.
“We have not had any physical meetings with any of the buyers. There is an acute lack of cash in the system to provide budgetary support for procurement. So, these are the two issues plaguing the system. But I think the government is well pleased and we are on track to seeing, in the next 6 to 8 months, at least some orders coming through,” Kalyani added.
Setback for aerospace business
Bharat Forge is one of the leading suppliers of components from India to the aerospace industry. The company makes airframes, structural, aircraft turbines, fan blades, landing-gear components, compressors and engine parts for the aviation sector.
Following a complete clampdown on global and regional air travel due to the pandemic over the last several months Bharat Forge’s aerospace business has also suffered a setback.
“Aerospace is an area where we had planned to see significant growth, but due to the overall aerospace market softness, this growth will not be as anticipated, and we continue to work on developing a lot of new products. This will take a little more time, but I think we are still making positive progress on aerospace,” added Kalyani.
No capital expenditure
Bharat Forge is in a league of a few companies that have decided to either make minimal or no capital expenditure during this financial year. The company will incur a capex of just 250 crore for the entire year, which is less than half of its spend last year.
“We have almost no capex plans. In the first half we did about Rs 200 crore of capex and I don’t think there’s anything more that we will do in the second half — maybe Rs 50 crore or so, nothing more than that. Last year, we did Rs 550 crore, so I think between last year and this year, Rs 800 crore capex is more than what we need,” Kalyani added.
JK Tyre and Industries, one of India’s largest tyre producers, declared earlier that it would not have any capital expenditure this year in light of the sluggish and uncertain market conditions.
However, following a better-than-expected surge in demand, some auto companies, including TVS Motor Company, Tata Motors, Mahindra CIE and Ceat Tyres, have decided to partially reverse the cut in capex that they had announced in earlier months.