At Bharat Forge Limited, we drive growth through investment in state-of-the-art manufacturing facilities and technologies, and prudent optimization of surplus funds. Using our financial capital to build excellence and cash reserves, we ensure uninterrupted value creation for all stakeholders and long-term business sustainability.
We generate financial capital from surplus arising from our business operations and through financing activities. We undertake measures like prudent selection of fundraising either through debt, equity, or a combination as per market conditions and also have a robust internal strategic planning process for maximizing financial capital. The surplus available after addressing all the requirements of current operations or new initiatives is paid out as dividend to shareholders in line with the dividend policy.
Given the cyclicality of our operations, we ensure optimization without any significant inventory build-up within the Company premises or at our customer end, thus preventing capital from being locked up. Through our robust financial planning process, we strike the right balance between cash conservation and business investment.
We strive to reduce debt and debt cost by continuously evaluating our capital position and undertaking initiatives to improve liquidity. This includes evaluating the option of repaying matured loans or replacing them with lower cost debt while maintaining a flexible capital structure in line with business needs. Given that a significant part of business is exports, we manage foreign exchange risks with adequate hedging. Our focus over the past decade has been to deleverage our balance sheet through internal cash flows, resulting in leverage (Net of Cash) declining from around 1.07 in FY 2010 to around 0.25 in FY 2020.
We also allocate sufficient funds for strategic investments in subsidiaries / new ventures and investments in capital assets. Surplus funds are invested in fixed deposits with premium financial institutions and safe liquid instruments with a focus on safety over yield. This ensures the financial sustainability of our business.
FY 2020 was a challenging year for the Company with demand declining across major geographies and segments due to structural and regulatory changes in the automobile industry, such as the switch to higher emission standards and vehicle electrification. This had an adverse impact on profitability and other key parameters for the year.
In spite of the challenging macro-economic and industry scenario, our prudent financial capital management and strong business model enabled us to strengthen the balance sheet further and maintain excellent gearing ratio.
In FY 2020, we tied up USD 40 Million through external commercial borrowings to meet the capex requirement in India. We have judiciously availed government schemes and policies during the year, which led to lower tax charge and outgo due to rationalization of corporate income tax rates from 30% to 22%.
Our India operations performance was adversely impacted by the rapid decline in global demand in end markets across sectors. The credit rating agency ICRA has retained its existing credit rating of the Company. However, based on the prevailing situation, the outlook has been revised to ‘Negative’.
Registered Address: Bharat Forge Limited, Pune Cantonment, Mundhwa, Pune - 411 036. INDIA, +91-20-67042777 +91-20-26822387