The strong revival in consumer demand post pandemic alongside the supply chain constraints has triggered a greater challenge of hyperinflation with sharp price increase in all major commodities including food items. The central banks of many countries have raised the interest rates to control the scenario.
The year gone by has been a mixed one for the automotive industry. On the one hand, the demand was fairly strong, yet on the other, supply side challenges made it difficult to fulfill them. Globally, sales were impacted because of the semi-conductor crisis and the waiting period only got longer as production was constrained.
FY 2022 performance of the Indian Automotive industry looks healthy, given the low base of COVID-impacted FY 2021. However, the industry’s production in FY 2022 is still down more than 25% when compared to peak volumes registered in FY 2019. Hopefully the coming years hold much better prospects for the industry as a whole.
Reflecting back through the events of FY 2022, firstly, I take this moment to express gratitude to our team globally who have done a commendable job to ensure that the Company delivers on the commitment made to our customers globally.
The financial performance has been impressive: 71% growth in topline, a trebling of bottom line, two acquisitions in India focused on Industrial sector; all this while, maintaining a robust balance sheet. This is despite the fact, that our commercial vehicles and the Oil & Gas business, the backbone of our business traditionally, is still significantly below the previous peaks achieved in 2019. This gives an indication of how much your Company has evolved and diversified.
The year also saw us make progress in various aspects of our business. We saw a sharp improvement in the performance of our overseas subsidiaries while simultaneously strengthening their presence in the Aluminum forgings space. The Defence and E-mobility business are starting to witness meaningful traction with successful firing trials of the ATAGS and the receipt of maiden order for supply of power electronics to a leading Indian CV manufacturer. We strengthened our presence in the Industrial space with the acquisition of JS Auto Cast, setting a foundation for multi-year growth in our industrial business.
Overall, we are quite happy that we have been able to deliver a good year in spite of all the external challenges.
In the backdrop of strong recovery across all key segments and geographies, the Company has recorded sharp jump across performance parameters. Our standalone revenue increased 71.3% to ₹ 62,546.12 million. If not for the supply chain related issues which impacted OEM production, we would have closed the year with topline close to or surpassing the record FY 2019 levels.
Buoyed by an improvement in capacity utilization, EBITDA grew 128.6% to ₹ 16,798.16 million and PAT by 245.4% to ₹ 10,778.06 million in FY 2022.
On a consolidated basis, the revenues increased 65.1% to ₹ 104,610.78 million in FY 2022 and EBITDA by 129.5% to ₹ 19,810.02 million.
FY 2022 turned out to be an important year for our overseas subsidiaries. For the past many years, we were working towards improving their financial performance and the same is now bearing results. A combination of product and cost rationalization, focus on productivity and investment towards a more favorable product mix will hopefully result in sustainable 10%+ margins going forward. Historically, this stood at an average of 5%. In CY2021, we achieved over 10% margin and expect this to improve in the medium to long term.
We also commercialized a new greenfield facility in North Carolina, US. With this, we now have two facilities (one each in North America and Germany) to cater the aluminum forgings requirements for global marquee OEMs. These facilities will play a key role in enhancing the Group’s presence in the EV transition globally. Interestingly, we are witnessing higher inquiries than originally, which while signaling healthy growth, will necessitate more investment in capacity. We are cognizant that the new facility will report EBITDA level loss because of low utilization levels in the 1st year of operation.
At Bharat Forge, diversification to adjacent sectors/process has been an important focus area. We have always done so from a position of strength and see it as adding new layers to offer more solutions to our customers and create value for our stakeholders.
Continuing with this, we have now diversified into the industrial castings space through the acquisition of JS Auto Cast. This Company gives us a platform to address a huge untapped market across wind energy, hydraulics, construction mining among others, both in India and globally. We are confident that this business will help in taking our industrial business to the next orbit. As a Company philosophy, we want to be #1 or 2 in any segment we enter or focus on.
India under the leadership of the Honorable Prime Minister Narendra Modi, has made significant strides towards self-reliance in Defence manufacturing. With the concept of positive indigenization list, there is a time-bound limit to import of products/equipment’s. Since the notification of the first and second lists, contracts for 31 projects worth ₹ 53,839 crore have been signed by the Armed Forces, Acceptance of Necessity (AoNs) for 83 projects worth ₹ 177,258 crore have been accorded. Additionally, cases worth ₹ 293,741 crore will be progressed in the next five-seven years.
The Government’s policies are in the right direction and the journey towards self-reliance is getting stronger. The entire Russia-Ukraine conflict has only made this determination even greater; underlining the fact that India cannot depend on imports. We have to produce ourselves.
Bharat Forge is well-positioned and making progress in this space, though not necessarily at the pace which we had originally expected. But we are steadily getting there. We are getting repeat orders for our armored personnel vehicles and recently supplied vehicles to the Indian Army. Besides, many other products and platforms are now playing out and impressing the armed forces, including artillery platform where we successfully completed final army trials. We expect things will start falling into place in the coming 12-24 months.
The defence activities will be undertaken by KSSL, a 100% subsidiary of BFL. They will always be guided by “ETHOSS” Principle. It will be an “Ethical Organization” with focus on “Societal Sustainability”. KSSL will not engage in developing, manufacturing or distribution of controversial weapon systems prohibited by various international treaties or conventions.
E-mobility is an area that we have kept under the radar so far, not wanting to make much noise, just like the EVs themselves. I am confident that the tremendous progress made in the last year as well as our products will speak for themselves. What pleases me the most over the past year has been the organic work we have done in our R&D center and the build-up of the organization structure. The coming years will see these bear fruit, starting as early as FY 2023 itself.
Tork Motors has successfully launched their e-motorbike KRATOS with a 2,000 strong order book. Before effecting deliveries, Tork is taking added precautions in terms of safety testing.
All our E-mobility related investments are now consolidated under our 100% subsidiary, Kalyani Powertrain Limited.
In another significant development, we have been declared as a successful applicant under the component production linked incentive (PLI) scheme of the government. So, the intent from here is to make necessary investments towards becoming the key manufacturers of E-mobility components for both domestic and global customers.
The inevitability of shift to E-mobility is slowly becoming a reality. I am confident that FY 2023 should mark the maiden year of revenue contribution from our E-mobility vertical.
One thing that we are essentially proud of is our ability to fund growth without disturbing the strength of the balance sheet. In the last few years, we have made significant investments in organic and inorganic opportunities. We have invested in international operations, new businesses, new technologies, strategic stake acquisitions and even acquisitions. In spite of these, our balance sheet remains strong.
At a low net debt equity of 0.20 and strong cash position of ₹ 24,818 million as on March 31, 2022, we have significant headroom to keep our engines running at full steam. This is an under-appreciated strength, especially in the present times when uncertainty is at an all-time high.
ESG is an important focus area and we are embedding it into every aspect of our business for a sustainable development. We have been doing many things over the years. 100 villages have been adopted across Maharashtra where we are driving holistic long-term development through focused interventions in education, health, livelihood and infrastructure development. And the success stories there have been inspiring. Several investments have been made towards responsible operations including minimizing resource consumption, reducing emissions and entering green business areas of light-weighting and E-mobility.
The intent now is to step up. As I write, a decarbonization roadmap is being prepared within BFL and our Group companies, which involves enhancing the share of renewable energy, planting trees and modernizing plants where required. We also target to achieve zero water discharge/solid discharge and 100% recycling to create a circular economy.
Bharat Forge has secured and expanded its core business over the years, and this continues to be part of our strategy going forward. While we do that, we have also diversified into several new markets. Some are adjacent markets and some are markets where we see good synergy with our core strengths. By doing this, we have built a nice, diversified portfolio focusing on several different global growth markets. To ensure sharp focus on our end markets, we have reorganized our internal structure over the last few months. We now have five vertical business units focusing on these end customer markets – Automotive, Industrial, E-mobility, Defence, Aerospace & Turbomachinery. These business units are fully equipped with the infrastructure and organization to serve their respective markets. Given the unique pace, nature and requirements of these markets, the business units will have the flexibility to organize themselves in such a way that they can serve their customers well. We believe this market-focused structure will help us to be more in sync with our customer needs and be more responsive to the shifts in these end markets. This in turn will help us get our fair share of the growth opportunities in these markets.
This year I complete 50 years at Bharat Forge. It has been a very exciting journey which has seen your company grow from less than USD 1 million sales in 1972 to USD 1.4 billion today. I would like to thank all my colleagues and ex-colleagues who have been a part of this journey, and our Customers for their belief and constant support, our Investors & Financial institutions for their unwavering trust and finally to the authorities at the State & Center for enabling our dream of ‘Making in India for the World’ a reality.
Every decade had an inflection point which made us stronger. The 90’s was about setting up 16,000T automatic press line, 2000's was about organic growth and global M&A to speed up customer access, 2010’s was about Industrial business. The 20’s are about EV, Defence, Al forgings, Industrial business. This journey of small steps to bigger strides has not been without its fair share of challenges, but this journey has been made possible because of a strong foundation of technology, manufacturing and innovation along with talent creation and the strong commitment and performance of Team BFL.
I think we are positioned well because we have the capacity, we have invested in people for the sunrise sectors, developed products, and because we believe India's manufacturing is going to see significant tailwinds arising out of the crisis globally. I see no reason why the country will not be able to reach the USD 5 trillion GDP mark in the next few years.
We are confident of a stronger and sustainable performance over the medium to long term. I thank all stakeholders for believing in us through the journey. We seek your continued support as we look to maximize value creation for all.
Warm regards,
Chairman and Managing Director
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