Chairperson, Kalyani Group & Former Chairperson & Managing Director, Bharat Forge
Bharat Forge is likely to see growth in 2017 as they continue expansion into various new sectors and also because of the opening up of new opportunities in Indian defence manufacturing, says Kalyani.
Bharat Forge has been one of the earliest private sector companies to enter the domain of defence manufacture in the country. The company has already developed platforms for artillery guns and is also actively engaged in manufacturing parts for aircraft. In an interview with Biz@India, chairman Baba Kalyani outlines the strategy for the company going ahead as well as the economy in India and around the world.
What is the outlook for the global economy in 2017?
It is difficult to predict the outlook for the global economy. Going by all the financial sector cues and stock market, people are reasonably positive. But with a new government in the United States of America (US), Brexit and many upcoming elections in Europe, there is some amount of uncertainty and volatility. The direction will be clear once the new US administration settles in and happenings of Brexit become clearer. The Chinese presidency today has set a certain direction, which the Chinese leadership would like to see in the world; basically growth in global economy. So overall pluses and minuses put together, it is a volatile situation but on the whole cautiously optimist.
What about the Indian economy?
Indian economy will rebound very quickly after the demonetisation. We will see good growth in the coming year. I am a lot more confident that Indian economy will grow pretty well. Despite the fact that the crude prices could rise this year? We have seen crude prices of USD 110-120 per barrel. It went down for a while, which was a lucky bonanza for India. I expect Indian economy to rebound very quickly. I am very optimistic about it.
And the outlook for Bharat Forge?
Bharat Forge should see growth. We have already bottomed out our downturn of last few years. We have also changed the business model to meet with this entire headwind, volatility, challenges and the opportunities that it brings.
What’s the significant change in business model?
We now have many more sectors that we operate in like aerospace. We now supply components for aircrafts and defence sector. We have good business coming up in railways. In India, many investments are going on in the rails and transportation sector. So all this together looks good.
Do you see any big contracts coming your way in defence?
Well I can’t say I see contracts coming our way. But we are participating in many programmes. As and when these decisions get made, we are quite hopeful of being in some of them.
Which of these projects are you most confident of?
It’s difficult to say. But we are participating in many.
Are you happy with the pace of defence acquisition or could it be faster?
Defence acquisition everywhere takes time. It would be unfair to say the pace of decision-making is slow. It’s a process you have to go through. There is a lot of trial, you have the users and then you have the Ministry of Defence. You have all kind of agencies that have a say on approving the process. So all over the world it takes a fair amount of time.
Do you see a real shift from past?
Yes. The biggest shift is that India’s private sector is now participating very well. It is also participating with the defence research organisation. There are a lot of public private partnership happening. The government is encouraging it, which bodes well for India as a country. What we, as a company, have done in the past 3-4 years is that we have been able to make more platforms of artillery. This has never been done before in India that an advanced artillery system like ours could be built in such a short span of time. Two of them have been tested successfully.
How significant would defence be as part of the total business mix for Bharat Forge?
It’s a very huge opportunity, not only for Bharat Forge but many other private companies, Indian or foreign. As the government has eased private investment in defence manufacturing, we expect home-made defence goods to be a much larger part of the total equipment acquisition programme of the Indian armed forces. For instance, the Ministry of Defence forecasts, on its own website, that 4,000 guns are required in the next 20-25 years. Clearly, you need more than one manufacturer for that and we are going to be one of them. There are many other activities that are pertaining to armoured vehicles and ammunitions. Wherever we see gaps, which we can fill up with our technology or joining hands with companies who can provide us the technology, we will get involved in that.
What’s your plan in the aerospace business?
We want to keep growing our business. There are a lot of opportunities for people like us who make metal components in super alloys, titanium and all those new materials. There is a lot of offset obligation that aerospace companies have because India buys many aircraft for civil aviation.
Are you planning to come to the Paris Air Show this year?
I may not come personally but the company will be there.
What will your focus be in Paris?
We are a component supplier. So our focus is to meet all the large Original Equipment Manufacturers (OEMs) and showcase our capabilities in terms of our components and processes in time.
Are you planning to get into manufacturing of any particular products besides components?
No. We are happy being a component company.