For Bharat Forge, defence a winner, but auto a sore spot

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Subscribe to enjoy similar stories. Bharat Forge Ltd’s growth engine appears to be chugging along, though not without a few bumps. While its defence business is on a good footing, the auto segments, particularly overseas, are fighting an uphill battle.

Bharat Forge’s defence segment has an impressive order backlog of ₹5,400 crore in exports, offering earnings visibility for the next three years. Global demand for replacement artillery, including India’s requirement for guns, are crucial defence drivers. So, the company is scaling its production capabilities.

Moreover, a domestic order worth ₹4,500 crore is expected to kick off soon, with Tata Advanced Systems sharing the benefits. Conversely, its commercial vehicle and passenger vehicle businesses are navigating turbulence. Bharat Forge’s management is optimistic that domestic demand for commercial vehicles will pick up in the just-begun financial third quarter of 2024-25, aiding growth for the year.

But commercial vehicle exports, particularly in the US and Europe, are facing headwinds due to economic downturns and changing emission rules. Bharat Forge, India’s largest exporter of auto components, anticipates a muted performance in these regions for the next two years. As for passenger vehicles, rising inventory levels have constrained domestic growth, while exports have slowed due to weak demand in Europe and Brazil.

However, management expects a rebound in exports by FY26 as new orders materialise. Bharat Forge’s overseas subsidiaries, particularly in Europe and the US, are grappling with weak demand, especially in the steel forgings segment. The company is focusing on improving productivity and expects a recovery in the US by the fourth quarter, though a complete