Offensive Defence

Baba Kalyani on how Bharat Forge stays relevant in disruptive times

When we spoke last after Q2 numbers, you were not optimistic but were confident of recovery. Has your confidence translated into reality or would you say that the recovery is getting delayed?

The last time we met, I had said the next six months would be difficult and I think that is what is showing up. The Indian market has been in a difficult situation. The demand side is extremely weak right now and we are a demand-led business. As demand picks up, we should see a strong recovery. We foresee the next quarter also as a weak quarter as we had said last time. But starting FY21, we should start seeing recovery taking place. We are already beginning to see the end of the trough and step by step demand will start going up.

Is it safe to say that the worst is over in Q2 as well as Q3?

Yes, the worst is behind us in terms of demand. But the problem is that the demand is at a low level and picking up from a low level, it is not like going back to 2018 numbers that we saw in the CV business. That was probably a peak year for us as well as the world over in this business. We are seeing a slowdown in demand. In India, it has slowed down by almost 50-60% but the worst is behind us. We are now beginning to see a small incremental growth in demand. We believe FY21 should be a better year compared to FY20.

Just looking at how domestic, as well as export revenues, have been, there has been a big contraction there — higher than 30%. Have you reached a cyclical trough? Would tonnage volumes start recovering from FY21 or is the end market demand likely to remain weak?

I believe FY21 will be better than FY20 but I do not think it will come back to FY19 levels which were probably the peak level in all the markets. The Indian CV market was at 461,000-470,000. It is currently running at 250,000. So, in order to get back to 470,000, it will take a little time. We certainly see an uptick in the market. FY21 should be a better year. Even internationally, we expect FY21 to be a slightly better year than FY20. FY20 is the end of the trough.

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