3 weeks ago
Bharat Forge posts Rs 90 crore loss despite revenue growth
Bharat Forge is a very large Indian company that makes heavy metal parts, such as parts for cars, trucks and defence equipment.
During the last quarter, the company lost about Rs 90 crore, which means it spent more money than it earned.
The company says this happened mostly because it had to pay a lot of money to restructure a factory it owns in Germany.
Restructuring means big changes, and here it included paying employees to leave the company.
The leaders call this loss a temporary problem, not something they expect to last.
Even while losing money, the company sold more products than before — its revenue went up by 18.7 percent.
It also won many new orders, especially for defence equipment.
The company now plans to spend Rs 1,800 crore on new factories and technology for areas such as defence and aerospace.
It also got approval to collect Rs 2,500 crore from investors to help pay for these plans.
Company leaders expect things to get better in the coming year.
Bharat Forge reported a consolidated net loss of Rs 90 crore for the June quarter, compared with a Rs 284 crore profit a year earlier.
The loss was driven by restructuring of German subsidiary Bharat Forge CDP GmbH, including Rs 330 crore in manpower-reduction-related expenses.
Consolidated revenue rose 18.7% to Rs 4,640 crore, while EBITDA margins fell 160 basis points to 16.2% on higher energy and input costs.
The board approved raising Rs 2,500 crore through equity and Rs 1,800 crore of capex, targeting defence, aerospace, energetics, large engines and semiconductor businesses, including an energetics plant in Andhra Pradesh.
Indian operations won new orders worth Rs 1,352 crore, including Rs 681 crore from defence, and the outstanding defence orderbook stood at Rs 11,196 crore.
- Who
- Bharat Forge (BFL), the engineering company whose chairman is Baba Kalyani and vice chairman and joint managing director is Amit Kalyani.
- What
- Posted a consolidated net loss of Rs 90 crore for the June quarter and announced Rs 1,800 crore in capital expenditure and a Rs 2,500 crore equity raise.
- Where
- India — including Pune, where its defence production facility at Jejuri is located, and Andhra Pradesh — and Germany, where subsidiary Bharat Forge CDP GmbH is being restructured.
- When
- June quarter, with the investor call held on a Monday; management gave a positive outlook for FY27.
- Why
- The loss stems from restructuring costs, mainly Rs 330 crore in manpower-reduction expenses at the German subsidiary, while the investments aim to build capacity slightly ahead of demand in defence, aerospace and other sunrise sectors.
Management's bullish view
Concerns reflected in the numbers
The Rs 90 crore net loss
Management's bullish view
Management calls the loss a 'blip' and says margins will return, expecting a better performance in the second half of FY27.
Concerns reflected in the numbers
The swing from a Rs 284 crore profit to a Rs 90 crore loss, with EBITDA margins down 160 basis points due to rising energy and input costs, shows real near-term pressure on profitability.
Spending and growth strategy
Management's bullish view
The Rs 1,800 crore capex builds capacity 'slightly ahead of demand' and targets sunrise sectors expected to become revenue accretive.
Concerns reflected in the numbers
Raising Rs 2,500 crore in equity and heavy spending carry execution risk, and the German entity will cease to exist once the restructuring ends.
Key facts
- Net loss (June quarter)
- Rs 90 crore (consolidated)
- Year-ago profit
- Rs 284 crore
- Consolidated revenue
- Rs 4,640 crore, up 18.7%
- EBITDA
- Rs 752 crore, up 10.3%; margin 16.2% (down 160 bps)
- German restructuring costs
- Rs 330 crore manpower provision; Rs 23.59 crore already spent
- Planned capex
- Rs 1,800 crore over the next 12-18 months
- Equity raise approved
- Rs 2,500 crore
- Defence orderbook
- Rs 11,196 crore
Quotes
Amit Kalyani
Vice chairman and joint managing director of Bharat Forge Ltd.
“We are building capacity slightly ahead of the demand”
financialexpress.com
Sources
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