Financial Daily from THE HINDU group of publications
Sunday, Dec 12, 2004
Financial Daily from THE HINDU group of publications Sunday, Dec 12, 2004 |
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Corporate
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Outlook Bharat Forge draws revenue plans for German outfit Our Bureau
Mumbai , Dec. 11 BHARAT Forge Ltd (BFL) plans to increase the revenues of the Rs 200-crore CDP Aluminiumtechnik GmbH & Co KG (CDP AT), by nearly 50 per cent. The company acquired CDP AT on Friday, further strengthening its position in the market for passenger car forgings but more importantly, gaining a toehold in the aluminium forgings segment. "We believe we can increase revenues by close to 50 per cent without additional investments," Mr Amit B. Kalyani, Executive Director, BFL, said. He declined to assign a timeframe for the cited revenue improvement, but said CDP AT had been a strategic acquisition. Aluminium components have seen rising use in high-end passenger cars abroad. Though raw material cost as percentage of sales is 55 per cent in that segment against the 42-43 per cent in steel forgings (it moved up from 33 per cent due to rising steel prices), aluminium parts are higher priced. Given higher price as revenue driver in aluminium forgings and the fact that volumes are typically less than that in conventional forgings, Mr Kalyani did not fix an installed capacity for CDP AT. The company, promoted by the erstwhile owners of CDP Bharat Forge (BFL's first acquisition in Germany), has existing clients such as BMW, Audi, Volkswagen and Ford. It is located near Dresden, home to the SUV plant of Porsche and BMW's new plant. The targeted revenue increase follows steps that yielded similar dividends at CDP Bharat Forge, which, acquired at break-even stage has since returned robust performance with a turnover of Rs 561 crore (PBT of Rs 40 crore) for January-September 2004. While there has been no shifting of processes or assets to India from CDP Bharat Forge and manpower employed has only gone up by a further 40, Mr Kalyani said the higher income was effected through better utilisation of fixed assets, an investment of five million euros to de-bottleneck operations and product mix rationalisation. CDP Bharat Forge's capacity is 1,10,000 tonnes, while BFL's own capacity will rise to 2,40,000 tonnes once its Rs 350-crore capacity expansion plan is near complete by mid-2005. Related machining capacity will be commissioned through February-October, 2005. Despite these capacity additions, Bharat Forge would still trail Thyssen Krupp, the global leader in forgings. "Our goal is to be the customer's most preferred source for these parts. Being number one or two should be a by-product of that effort," Mr Kalyani said. The company's China plans (it had exports of Rs 100 crore last fiscal to China, mainly to FAW and Dong Feng) are reserved for the medium-term, but its US plans may bear fruit earlier. As in Europe, likely acquisition in the US would seek a facility that fetches both manufacturing and design expertise. According to Mr Kalyani, the level of design engineering, which Bharat Forge has entered through CDP and seeks to have in the US, is of the co-development category and requires working closely with OEMs abroad. It is possible to have back-end support from Pune but the work itself cannot be shifted citing lower cost. "Front-end design engineering work has to happen where the customer is," he said. BFL wants its proposed US facility to cater to passenger cars and engine components.
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