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Bharat Forge to focus on small forgings market -- PBT down in first quarter

Our Bureau

PUNE, July 10

PUNE-BASED Bharat Forge Ltd (BFL), flagship of the Kalyani Group, has recorded an increase in net sales for the first quarter of the current financial year. The company has recorded a net sales of Rs. 151.95 crores as against Rs. 139.78 crores for the pr evious corresponding period, Mr. B.N. Kalyani, Chairman and Managing Director, has said.

Profit before tax has decreased to Rs. 14.51 crores as compared to Rs. 16.07 crores in the previous corresponding period.

Addressing newspersons, he said the company, over the next few years, would look at six key areas, including penetration into the small forgings market. With the focus on exports, BFL is estimating an increase in its presence in the domestic market, whic h was less than 10 per cent, over the next three years. It is aiming for a market share of 25 per cent.

Small forgings are used in automobiles, both two- and four-wheelers and engineering-based industries.

Mr. Kalyani said that as part of its expansion programme, the company is looking at the oil and gas sector, construction equipment and high-pressure valves. Currently, it has developed two products catering to high-pressure valves and would be developing about 10 more products to complete the family.

He said BFL is targetting a turnover of $10 millions from this sector within the next three to four years.

The company would place its thrust on export markets, increasing customer base and spreading geographically and bringing in a turnover of $30 millions.

The company is currently integrating the supply chain with SAP R/3 enterprise resource planning. By August 1, most of the supply chain would be part of ERP and by November this year, it plans to have the entire back-end ERP in place. Other modules are in various stages of implementation. Information kiosks are being set up throughout the company for the workers to log on to the company's intranet, extranet and eventually VPN (virtual private network).

The Chairman said that to make BFL a global company, it proposes to reconcile accounts with the US Generally Accepted Accounting Principles (GAAP). From 2001-02, it would start reporting account with the full US GAAP accounting. The company is also negot iating with consultants to restructure the balance sheet.

Stake in Kalyani Lemmerz divested: With the restructuring initiatives, BFL has divested the majority stake in Kalyani Lemmerz for Rs. 68 crores. It may be recalled that it had concluded the merger of Kalyani Seamless Tubes Ltd with the Indian Seamless Me tal Tubes Ltd. These measures, coupled with moves to de-emphasise financial services activities, has led to a decline in proportion of its financial assets as a percentage of total assets, he said. These now stood reduced from 51 per cent in 1996-97 to 3 1 per cent in 1999-2000. The company is estimating a total reduction during the current financial year.

Announcing the results at Annual General Meeting held on Monday, he said the company had achieved a manufacturing sales of Rs. 567.7 crores for the year ended March 31, registering an increase of 24 per cent as against the previous corresponding period.

Total income touched Rs. 585.3 crores, a 20 per cent increase over 1998-99. Return on net worth stood at 15.6 per cent, up from 9.1 per cent. Exports increased by 49 per cent to touch Rs. 110.8 crores (Rs. 74.3 crores in the previous corresponding period ).

BFL is now a major supplier of automotive engine and suspension components in the domestic market and currently manufacturers about 10 lakh crankshaft and 3,50,000 front axles for trucks per annum, he said. It has a market share of 55 per cent in the US for front axles and heavy trucks and has become a `preferred supplier' to Meritor Automotive of the US.