Bharat Forge is focusing on making artillery guns, armored vehicles, protected vehicles & missiles"We are likely to have meetings on this month with the MOD and I think things will start getting clearer once these meetings happen," added Kalyani
In an interview with ET Now, Baba Kalyani, CMD, Bharat Forge, gives his take on the company's strong show this quarter. Edited excerpts:
Congratulations on a strong show this quarter. What were the key growth drivers for you?
Baba Kalyani: I think it has been largely based on the revival of the CV market in North America, the industrial market both in North America as well as in India. We have been doing a lot of work on industrial markets in India and we have seen huge growth here. We have gained market shares in the CV business in the domestic market, so we have not had a downturn that the whole industry has seen. So all in all good. We have maintained our productivity efficiency, contained cost and therefore maintained our margins at a pretty decent level. We are very happy with what has happened in the first quarter and we look forward to fairly strong year for us going forward.
As I understand it was primarily the exports business that has managed to aid the earnings in the quarter gone by. Could you tell me exactly what the division and the breakup was both in terms of North America as well as Europe in particular and which are the segments which are driving the exports for you?
Baba Kalyani: The larger growth has come out of North America - export - because that is where we have seen growth in the truck market. We have seen growth in the industrial market, especially oil and gas where we are engaged ,and now we are beginning to see growth in the entire construction industry, the industrial machinery activity, the mining related businesses. We are seeing almost an all round growth and which is beneficial for us because we are present in all these markets and these are the areas where we had lost out in the last two-three, two-and-a-half, three years and it is nice to see these markets coming back and nice to see that we have a great opportunity.
What about your domestic business? When I look at the domestic markets when you are expecting to see the recovery if you did see one from GST, the impact that GST had?
Baba Kalyani: Impact of GST as far as the vehicle industry is concerned and in our case the larger impact is on the medium and heavy duty truck market in India. Yes, there was fairly sharp drop in the sales of medium and heavy duty trucks in Q1, it was almost I think close to 58,000 as against everybody expected it to be closer to 1,00,000. But I think from quarter two onward, we should start seeing the growth coming back but in spite of that big drop, we did not lose much of the business because we gained lot of market share in this segment and we had a very short drop of about 4%. We are quite fine and we hope to see even greater growth as we go forward in quarter two and quarter three and hopefully quarter four too.
Also if you could tell me about the maiden order that you have received from the Ministry of Defence. Please tell us what the order details are all about? The government now has finalised plans for private firms in defence manufacturing what kind of growth are you looking at once this comes into play?
Baba Kalyani: I think the government is very serious about getting defence hardware manufactured in India. This is of course a small order not a very big order for us, but it is a great beginning I mean you know it is much better than zero so for us it is a great beginning and I think we are working on many programs with the Ministry of Defence, with DRDO in India. I think in the next couple of months and next one or two years we should see many of these programs getting converted into orders and actual production and sales at our end so I am quite optimistic that this will happen.
The Ministry of Defence has also come out with the policy of strategic partnerships has been approved by cabinet. Is that something that you are considering at all when you are making this defence play? And the uptick from the US class 8 truck business - any recovery that you have seen, what is the growth and outlook there?
Baba Kalyani: Let me answer the US truck business first I think that has recovered quite well and it is continuing to do well and we see the US truck business numbers up in 2017 and also in 2018 going forward next year. I am talking about calendar year so I think we are going to see some strong two or three years in the US truck market. As far as defence and strategic partnership is concerned yes we are amongst the four or five companies in India who are strong in this sector and being a company involved with metallurgical products, metallurgical components at least in sectors which involved these kind of products I think there is hardly anybody else who can come close to our capabilities so we are quite hopeful that we will be there in that game in something or the other.
So what you are saying that you should have a leadership over others so which segment is it from the six that have been identified for the strategic partnership for the benefit of your shareholders and viewers watching, which is the one segment that you like and have you struck any talks as yet with the foreign player to make this partnership for a strategic one in defence?
Baba Kalyani: No, everybody is talking to everybody right now so and I think nobody is very clear about the whole process. We are likely to have meetings on this month with the MOD and I think things will start getting more clearer once these meetings happen and the overall direction of how the implementation of strategic partnership is going to take place becomes a lot more clearer.
So you think you have an edge over the likes of let us say M&M or L&T or TATA Motors?
Baba Kalyani: Well it is very difficult they are all big companies so it is very difficult to sit here and say I have an edge, but all I can say is all of us have their own strengths, they have their own strengths, we have our own strengths and clearly each one is going to play on their strengths and we will play on our strengths so we will see what happens.
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