Chairman, Bharat Forge
In Discussion With The Indian Army For Artillery And Mounted Guns Orders: Bharat Forge | CNBC TV18
‘In discussion with the Indian Army for artillery and mounted guns orders. The opportunity will be Rs 3000-5000 cr,’ says Baba Kalyani of Bharat Forge Ltd. Tells Prashant Nair, Sonia Shenoy & Nigel D'Souza that the co aims to become ‘the artillery house for the world.
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About Baba Kalyani
Baba Kalyani, chairman and managing director of Bharat Forge, said in June 2026 that the company is working to enter the semiconductor equipment supply chain, targeting a business area he described as being in the billions of dollars. He stated that the company is collaborating with three of the five major firms in that supply chain. Kalyani also projected 25% growth in the company's automotive and industrial segment and 50% growth in its defense business for fiscal year 2027. He noted that the company is using artificial intelligence and digital technologies to reduce product development time in defense from two-to-three years to less than one year. Kalyani praised Prime Minister Narendra Modi's policies, stating that Modi had "re-industrialised India like no one else" and that his government had transformed the manufacturing landscape by opening the defense sector to private industry. He called for further improvements in ease of doing business and for policies that encourage domestic intellectual property and scale, particularly in electric vehicles. Kalyani also announced that Bharat Forge is setting up an energetics plant in Andhra Pradesh to produce explosives and propellants for shells, rockets, and space applications, and that the company is no longer pursuing the acquisition of Premier Explosives.
Transcript (23 segments)
✨ AI-enhanced transcript with speaker attribution
I
Interviewer0:00
We have Bharat Forge which is at a fresh 52-week high after reporting a solid set of Q1 FY24 earnings. The company witnessed strong growth in two verticals: defense and aerospace. The total defense export orders are now at over 2300 crore rupees. The passenger vehicle exports and the domestic non-auto business also saw stellar growth this time. To discuss more on this, we're joined by Baba Kalyani, the Chairman and Managing Director at Bharat Forge. Mr. Kalyani, always great speaking with you. Hope you are in the best of your health. I want to start by asking you about the defense business because after many years of being in this incubation period, finally we've seen the defense business grow quite a bit and you have an order book in excess of 2300 crores. Tell us what is the revenue visibility like for the next couple of quarters and what kind of sustainable growth can you see in the defense vertical?
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Baba Kalyani0:52
See, most of our defense business today, I would say 80 percent of this currently is all exports, which is a big surprise to us because we see huge demand coming from different countries for different products. One of the reasons why we are getting so much business is all these products have been designed and developed by us, the IP is owned by us, so we are not dependent on some technical collaboration or tie-up or joint venture or something like that. I think that's a good strategy that we have pursued for the last 10 years in defense. On the domestic side, there is a huge pipeline of orders which are under the whole process. The process is quite complex. We are very confident that our defense vertical will show stellar results quarter after quarter.
I
Interviewer1:56
Can you give us some numbers on the domestic side? I do understand that things in India work differently from the export market, the timelines are a bit stretched out. On the domestic side, what is the quantum of the defense orders that you're looking at currently? Any ballpark number and in terms of a timeline?
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Baba Kalyani2:14
If you look at artillery guns, there is already a discussion going on for 307 guns of ATAGS. There is another RFP for mounted guns which is also of a similar number. So between the two, you're looking at something like... and on the ATAGS, there are two players, Tatas and us, so you get divided. On the mounted guns, there may be more than two players, but ultimately it will get divided into players. So we are looking at least in these two areas, the opportunity in the next one year of getting an order is from anywhere between three to five thousand crores.
I
Interviewer3:07
Wow, that's a big number. Tremendous potential you're sitting on a good order book as well. But what's the execution going to be like for the defense vertical itself? In the first quarter, defense contribution was 250 crores. For the year, what kind of revenue can you do from this vertical?
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Baba Kalyani3:24
We are targeting this financial year to get to somewhere around 1200 crores. That will be almost like 800-900 crores of exports and then the remaining domestic. Next year we would like to double this number.
I
Interviewer3:47
Good morning. As you said, the ATAGS is for 300, the mounted guns is again 300, and the order value accrual to Bharat Forge could be between three to five thousand crores. Is that correct?
B
Baba Kalyani4:03
Yeah, the opportunity for the company is between three and five thousand crores. These are the programs that we are working on.
I
Interviewer4:16
For ATAGS, by when will we see an award this year?
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Baba Kalyani4:20
Before December, that's the plan of the Indian Army.
I
Interviewer4:25
For the mounted guns, you said it's an RFP stage?
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Baba Kalyani4:30
Maybe one quarter after.
I
Interviewer4:35
You gave us some numbers for the revenues that you expect from the defense vertical as a percentage of overall numbers. Is there an internal target in mind? What do you plan to get to in the next one year or so?
B
Baba Kalyani4:54
I've always said many years ago that Bharat Forge will strive to become an artillery house on a global basis. That was based on our strategy that we will develop these products ourselves, we will create the IP ourselves, and we will create the best products on a global basis. I think we're beginning to see the fruits of that. 60 to 70 percent of the world today uses artillery products which were designed 60 years ago.
I
Interviewer5:43
These are optimistic estimates that you're putting out. The stock is surging as we speak. You're saying 1200 crores revenue in the defense vertical in FY24, looking at around 2500 crores in FY25, so that's doubling over there. I want to understand what this would do to your margin profile over the longer run. In the standalone business, you've been steady state at 25% margins for three consecutive quarters now. Is there scope overall, both for standalone and consolidated, to grow margins further?
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Baba Kalyani6:16
Consolidated is a little difficult question to deal with because for overseas I cannot generate a 25% margin. But if I look at the India business, what we manufacture in India, I would see a steady increase in our margins of 25% or more, right up to 29% in four years.
I
Interviewer6:47
Since you said that in the consolidated business it's a bit hard, you've also been working to reduce your losses in the overseas subsidiaries. I was going through the numbers. From a loss of around 150 crores in Q3, overseas subsidiaries losses are now less than 100 crores. At what point do you think you can turn into the black?
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Baba Kalyani7:08
I think by the end of the year. I've said that in our quarterly update that by end of the year we will turn these companies around. Europe is already turning around. The challenges are in the US because it's a greenfield operation. Unfortunately, we did it during the COVID period and with all the problems that you can get with people and delays, it's been a challenge.
I
Interviewer7:41
I have one last question on the earnings. Since defense is such a big opportunity and you are in the thick of things at the moment, is there any more capex that you will need to put on board, any more debt that you would have to take on in order to get this defense plan running? And from the government's end, what needs to be done to streamline this process further?
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Baba Kalyani8:05
Let me answer your second question first. As far as the government is concerned, I have never seen a more helpful government process right now for us to get our defense act together, especially on exports. They have been going out of their way to make things happen. We are very happy with the kind of support we get from the Government of India, the Ministry of Defense, the Ministry of External Affairs. Everybody is involved in this process. The Honorable Prime Minister has put a target for exports on defense and I think that's being pursued pretty seriously by the system. As far as capex is concerned, I just said in our first quarter review that we will spend roughly about a thousand crores in capex in three areas. A large part of that will go in our existing business because we are following a strategy of Last Man Standing and we are inundated with business in our existing business.
I
Interviewer9:28
That's a great way to end the discussion, Mr. Kalyani. You're inundated with business in the existing business. It's always a good place to be in. Thanks a lot for joining us.
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Baba Kalyani9:39
In the last, the third area where we are working very hard is to create a new industrial business. As India's overall economy grows and the GDP grows, the industrial side of India's business will increase at a dramatic pace. Right now, most of the industrial products are imported. We've just bought some companies that make castings. We are now converting them from components to products. There is a whole strategy in place of creating a fairly substantial industrial business in the next three, four, five years.
I
Interviewer10:21
All the best with that, Mr. Kalyani. Thank you as always for joining us and speaking to CNBC TV18. That's a very optimistic Baba Kalyani looking to double their revenues in the defense business from 1200 crores to 2400 crores by FY25. Big targets there. The stock is up and about.