Bharat Forge Ltd — Interim / Quarterly Report 2020

Jun 29, 2020

BHARAT FORGE

June 29, 2020

To,

BSE Limited,

National Stock Exchange of India ltd.

1st Floor, New Trading Ring, Rotunda Building, P.J. Towers, Dalal Street, Fort, Mumbai - 400 001 BSE SCRIP CODE - 500493

'Exchange Plaza', Bandra-Kurla Complex, Sandra (East) Mumbai- 400 051 Symbol: BHARATFORG Series: EQ

Dear Sirs,

Re: Earning Update for Q4 FY 2019-20

Please find enclosed herewith Earning Update issued by the Company for Q4 FY 2019-20.

Thanking you,

Yours faithfully,

For Bharat Forge Limited

Tejaswini Chaudhari

Company Secretary & Compliance Officer

Encl.: As above

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KALYANI GROUP COMPANY

BHARAT FORGE LIMITED, MUNDHWA, PUNE 411 036, MAHARASHTRA, INDIA. PHONE : +91 20 6704 2777 FAX : +91 20 2682 0699 (Export). 2682 2387 (Soles/Mktg) 2682 2163 (Materials) Website : www.bharalforge.com CIN No. L25209PN1961PLC012046

BHARAT FORGE I ltALYAIU �

BHARAT FORGE LIMITED Analyst Update - FY 2020 Results

BFL 12 MONTH REPORT

"The unprecedented events over the past few months and the subsequent lockdown has completely reversed the positive momentum we had started witnessing across some of our key verticals especially in India. On the heels of robust growth over past 3 years, a routine cyclical correction in CV markets in US and Europe was forecasted for CY 2020. This was further accentuated with the Covid lockdowns from early March 2020.

The full year performance, especially H2 was impacted by the severe slump across sectors in India & globally as well. Despite the weak operating performance, we have continued to maintain a strong balance sheet which will further strengthen going forward.

All our facilities in India and globally have resumed operations in a phased manner since early May 2020, however, with utilization at sub-optimal levels. We continue to support our customers demand globally while also ensuring the safety and well-being of our employees.

FY21 has started on a difficult note with the lockdown impacting demand. Automotive production across Commercial & Passenger Vehicles Globally have been severely impacted. However, we expect the PV business to outperform underlying markets. We expect to see good demand traction in several industrial segments barring Oil & Gas sector. We are hopeful that sequentially things will start to improve from H2 FY21, as economies open up & stabilize. Although the current scenario is very different from what we have ever seen before, we are very confident that the company will come out from these difficult times stronger than before.

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Throughout FY21, the company will concentrate efforts on being nimble yet addressing dynamic demands of our customers, but, with a razor sharp focus on Cash, Cash flow, winning new business and structural cost optimization across, both - fixed and variable costs. The cost optimization initiatives are over and above the steps taken in FY20, benefit of which will be visible from Q2 FY21 onwards. We have used the lockdown to accelerate the process of digitalization across the plant which will result in sharp productivity improvement as we get back to normal production levels.

Over the past few years, the company invested over Rs 1,300 Crores in setting up new capacities across forging and machining. Our focus will be on filling up these capacities and generate Free Cash Flow which will be utilized for bringing down gross debt levels over the next 3 - 5 years.

B.N. Kalyani, Chairman & Managing Director.

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BHARAT FORGE I ilALUNI (

STANDALONE FINANCIAL HIGHLIGHTS FY 2020

TABLE 1					Rs. Million
Pariculars	Q4FY20	Q3FY20	Q4FY19	FY 2020	FY 2019
Shipment Tonnage	40,173	46,998	62,690	201,586	265,952
Domestic Revenue	3,703	4,079	6,577	17,818	26,268
Export Revenue	4,896	6,353	9,626	26,502	37,258
Other Operating Income	213	335	483	1,319	1,674
Total Revenue	8,812	10,767	16,686	45,639	65,200
EBIDTA	1,482	2,394	4,849	10,398	18,760
EB/OTA%	16.8%	22.2%	29.1%	22.8%	28.8%
Other Income	315	398	501	1,609	1,661
PBT	535	1,613	4,214	7,108	15,931
PBT%	6.1%	15.0%	25.3%	15.6%	24.4%
Exchange Gain/ (loss)	(379)	(38)	323	(244)	299
PBT	156	1,575	4,537	6,864	16,230
Profit After Tax	207	1,278	2,995	5,674	10,713
Exceptional Items	(939)			(939)
Profit Afer Tax	(732)	1,278	2,995	4,735	10,713

• The performance for Q4 & FY20 has been impacted by the lockdown in the last week of March. We estimate that sales loss was to the tune of Rs 2,000 million and impact on profitability of Rs. 900 million.

• Total Revenues declined by 47.2% in Q4 FY20 to Rs. 8,812 million as compared to Rs. 16,686 million in Q4 FY19. For the full year FY 2020, the company recorded total revenues of Rs. 45,639 million, a decline of 30% as compared to FY 2019.

• PBT before Exchange gain/ (loss) for Q4 FY20 declined by 87.3% to Rs 535 million as compared to Q4 FY19, while for FY 2020 the same declined by 55.4% on a yearly basis.

• Exceptional item of Rs 939 million consists of Rs 890 million towards impairment of investments in Tevva Motors & Rs 49 million towards VRS.

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BHARAT FORGE I KA.I.YAHi ,.,.

KEY FINANCIAL PARAMETERS: STANDALONE

TABLE 2		Rs Million
Pariculars	March 31, 2020	March 31, 2019
Long Term Debt	18,351	15,722
Working capital & Bill Discounting	14,084	16,220
Equity	53,551	53,982
Cash	18,821	17,252
D/E	0.61	0.59
D/E (Net)	0.25	0.27
Long Term D/E (Net)		(0.03)
ROCE	9.5%	21.2%
RONW	8.8%	19.8%

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BHARAT FORGE
I ,._ ALYANI
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REVIEW OF INDIA BUSINESS

» Automotive

FY20 was expected to be a year of growth, driven by expectation of pre-buy ahead of change in emission norms from BS IV to BS VI. This expectation was not misplaced given the experience in other geographies which have witnessed emission change.

However, the deterioration in the fundamentals of the economy through the year, led to a sharp decline in demand across both Passenger & Commercial Vehicles. The OEM's started to curtail production and focus on liquidating BS IV inventory in the system. The M&HCV sector was the most impacted. Full year production was down 47% as compared to FV2019. BFL's revenues from CV space in FV2020 declined by 53%.

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M HCV Production
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• FY 2019 • FY 2020
1,14,882 1,15,311
Q1 Q2 Q3 Q4
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The outlook for the domestic automotive sector in FV2021 is uncertain in the backdrop of Covid 19 impact on various factors which influences demand off-take. Any government intervention will go a long way in reviving sentiment.

In the passenger vehicle segment, the company continues to perform better than the underlying market. BFL's revenues from Passenger Vehicles declined by 4.6% as against an industry decline of 15% on back of new customer addition and increasing market share.

In the near term, it is difficult to predict the traction from the domestic automotive market while we are confident of increasing our content per vehicle in the medium to long term.

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BHARAT FORGE
I .AL.Y�HI JI'..
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Industrials )ii-

The industrial sectors we address (Construction & Mining, PSU including Defense & Power, engineering sector) have a significant linkage to government spending on infrastructure and defence. Clearly, the past 12 months have seen some slowdown in activity levels and the same is visible in our industrial business performance. Recent Government initiatives like the Sagarmala project, National Infrastructure Pipeline (NIP), opening up of coal mining, the space sector to private entities do provide a big fillip to the activity levels and also provide long term visibility. We expect the industrial space to remain subdued in the near term.

INDIA REVENUES

TABLE 3 Pariculars Q4FV20 Q3 FV20 Q4 FV19 Commercial Vehicles 983 1,109 2,273 Industrial 1,773 1,934 2,877 Passenger Vehicles 542 610 672 Others 618 761 1,238 Total 3,916 4,414 7,060*	TABLE 3 Pariculars Q4FV20 Q3 FV20 Q4 FV19 Commercial Vehicles 983 1,109 2,273 Industrial 1,773 1,934 2,877 Passenger Vehicles 542 610 672 Others 618 761 1,238 Total 3,916 4,414 7,060*	TABLE 3 Pariculars Q4FV20 Q3 FV20 Q4 FV19 Commercial Vehicles 983 1,109 2,273 Industrial 1,773 1,934 2,877 Passenger Vehicles 542 610 672 Others 618 761 1,238 Total 3,916 4,414 7,060*	TABLE 3 Pariculars Q4FV20 Q3 FV20 Q4 FV19 Commercial Vehicles 983 1,109 2,273 Industrial 1,773 1,934 2,877 Passenger Vehicles 542 610 672 Others 618 761 1,238 Total 3,916 4,414 7,060*	Rs. Million	Rs. Million	Rs. Million
Pariculars	Q4FV20	Q3 FV20	Q4 FV19	FV 2020	FY 2019	V-o-Y(%)
Commercial Vehicles Industrial Passenger Vehicles Others*	983 1,773 542 618	1,109 1,934 610 761	2,273 2,877 672 1,238	5,182 8,058 2,263 3,634	10,948 10,133 2,373 4,488	-52.7% -20.5% -4.6%
Total 3,916		4,414	7,060	19,137	27,942	-31.5%

~~*~~ Others include other operating income, sale of manufacturing scrap etc.

REVIEW OF INTERNATIONAL BUSINESS

Automotive )il>

The Class 8 truck market from CV 2016 to CV 2019 has grown from 228,347 units to 344,558 units, a CAGR of 14.7% on back of a strong economy and solid freight demand. As per ACT research, CV2020 was expected to be the start of a down cycle with volumes declining by 30% to around 240,000 units. However, post Covidl9, the expectation now for CY2020 is a sharper decline of >50% to around 160,000.

The passenger vehicle segment continues its positive growth trajectory with the segmental revenues growing by 4% despite the lockdown towards the later part of the quarter. We expect the passenger vehicle business to contribute more going forward as we continue to expand our presence in this segment by increasing our product portfolio, moving up the value chain and adding new customers.

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BHARAT FORGE I � 4LUNI

)," Industrial

Over the past decade or so, we have worked hard at diversification of portfolio. This market and product expansion is helping in the current crisis.

The Oil & Gas industry in North America has been the most impacted sector because of the pandemic and the subsequent closure of economies across the globe. Drilling activities have come to a standstill and its impact on our business has been very adverse. The revenues from this segment from a peak of> Rs 1,000 crores in FY2019 is now down to < Rs 500 Crores and we expect it to come down further in FY2021. We are seeing stable demand in the high horsepower engine as well as construction & mining segments.

The pandemic has also severely impacted the aviation market with possibility of change in travel behavior going ahead. This has led to a sharp rise in cancellation of aviation OEM company order book. This will have an adverse impact on our Aerospace business for the existing products in the near term. However, we continue to make good progress in new customer penetration including a steady expansion of product portfolio. This will not only help us sustain period of low overall demand, but also create a solid platform for growth and potentially a platform for customer expansion. We are confident of registering YoY growth in this segment.

Additionally, we remain focused on developing and winning new products & pipeline including new customers in the Industrial segment - both in India and globally.

INTER NATIONAL REVENUES

TABLE4 Pariculars Q4FY20 Q3 FY20 Q4 FY19 Commercial Vehicles 2,388 2,956 4,061 Industrial 1,403 2,248 4,210 Passenger Vehicles 1,105 1,149 1,355 Total 4,896 6,353 9,626	TABLE4 Pariculars Q4FY20 Q3 FY20 Q4 FY19 Commercial Vehicles 2,388 2,956 4,061 Industrial 1,403 2,248 4,210 Passenger Vehicles 1,105 1,149 1,355 Total 4,896 6,353 9,626	TABLE4 Pariculars Q4FY20 Q3 FY20 Q4 FY19 Commercial Vehicles 2,388 2,956 4,061 Industrial 1,403 2,248 4,210 Passenger Vehicles 1,105 1,149 1,355 Total 4,896 6,353 9,626	TABLE4 Pariculars Q4FY20 Q3 FY20 Q4 FY19 Commercial Vehicles 2,388 2,956 4,061 Industrial 1,403 2,248 4,210 Passenger Vehicles 1,105 1,149 1,355 Total 4,896 6,353 9,626	Rs. Million	Rs. Million	Rs. Million
Pariculars	Q4FY20	Q3 FY20	Q4 FY19	FY 2020	FY 2019	Y-o-Y(%)
Commercial Vehicles Industrial Passenger Vehicles	2,388 1,403 1,105	2,956 2,248 1,149	4,061 4,210 1,355	12,702 8,753 5,047	15,912 16,471 4,875	-20.2% -46.9% 3.5%
Total	4,896	6,353	9,626	26,502	37,258	-28.9%

TABLE 5 Rs. Million Pariculars Q4 FY20 Q3 FY20 Q4FY19 FY 2020 FY 2019 Y-o-Y(%) Americas 3,396 4,508 7,075 18,673 26,022 -28.2% Europe 1,426 1,652 2,233 6,842 9,912 -31.0% Rest of World 74 193 318 987 1,324 -25.5% Total 4,896 6,353 9,626 26,502 37,258 -28.9%	TABLE 5 Rs. Million Pariculars Q4 FY20 Q3 FY20 Q4FY19 FY 2020 FY 2019 Y-o-Y(%) Americas 3,396 4,508 7,075 18,673 26,022 -28.2% Europe 1,426 1,652 2,233 6,842 9,912 -31.0% Rest of World 74 193 318 987 1,324 -25.5% Total 4,896 6,353 9,626 26,502 37,258 -28.9%	TABLE 5 Rs. Million Pariculars Q4 FY20 Q3 FY20 Q4FY19 FY 2020 FY 2019 Y-o-Y(%) Americas 3,396 4,508 7,075 18,673 26,022 -28.2% Europe 1,426 1,652 2,233 6,842 9,912 -31.0% Rest of World 74 193 318 987 1,324 -25.5% Total 4,896 6,353 9,626 26,502 37,258 -28.9%	TABLE 5 Rs. Million Pariculars Q4 FY20 Q3 FY20 Q4FY19 FY 2020 FY 2019 Y-o-Y(%) Americas 3,396 4,508 7,075 18,673 26,022 -28.2% Europe 1,426 1,652 2,233 6,842 9,912 -31.0% Rest of World 74 193 318 987 1,324 -25.5% Total 4,896 6,353 9,626 26,502 37,258 -28.9%	TABLE 5 Rs. Million Pariculars Q4 FY20 Q3 FY20 Q4FY19 FY 2020 FY 2019 Y-o-Y(%) Americas 3,396 4,508 7,075 18,673 26,022 -28.2% Europe 1,426 1,652 2,233 6,842 9,912 -31.0% Rest of World 74 193 318 987 1,324 -25.5% Total 4,896 6,353 9,626 26,502 37,258 -28.9%	TABLE 5 Rs. Million Pariculars Q4 FY20 Q3 FY20 Q4FY19 FY 2020 FY 2019 Y-o-Y(%) Americas 3,396 4,508 7,075 18,673 26,022 -28.2% Europe 1,426 1,652 2,233 6,842 9,912 -31.0% Rest of World 74 193 318 987 1,324 -25.5% Total 4,896 6,353 9,626 26,502 37,258 -28.9%	TABLE 5 Rs. Million Pariculars Q4 FY20 Q3 FY20 Q4FY19 FY 2020 FY 2019 Y-o-Y(%) Americas 3,396 4,508 7,075 18,673 26,022 -28.2% Europe 1,426 1,652 2,233 6,842 9,912 -31.0% Rest of World 74 193 318 987 1,324 -25.5% Total 4,896 6,353 9,626 26,502 37,258 -28.9%
Pariculars	Q4 FY20 Q3 FY20		Q4FY19	FY 2020	FY 2019	Y-o-Y(%)
Americas Europe Rest of World	3,396 1,426 74	4,508 1,652 193	7,075 2,233 318	18,673 6,842 987	26,022 9,912 1,324	-28.2% -31.0% -25.5%
Total	4,896	6,353	9,626	26,502	37,258	-28.9%

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BHARAT FORGE I j/1111""_ AlTANI

» Overseas Operations

Performance of international subsidiaries have been sup-optimal and course correction measures were being implemented. These included major fixed cost reduction and re-aligning the product portfolio towards Aluminium forgings etc. There were signs that things were improving with losses reducing sequentially.

While most of the plants were closed in April 2020, subdued level of operations have resumed in May / Jun. However, Covid19 pandemic has caused a significant impact on demand across the European market. As per ACEA, PV & CV sales are down >40% till May 2020 as compared to the same period previous year. In light of such severe demand drop, despite cost reduction initiatives and aid from various government to take care of partial wage cost, the overseas operations are expected to post a Cash loss of about EUR 5 million in Jan - Jun 2020.

We are committed to our investments and growth plan for Aluminum business. However, in the current scenario, we are reevaluating the demand from our customers for the Aluminium forging business in North America and are planning our capacity expansion accordingly. We are also looking at possibility of utilizing the existing capacity in Europe to address the immediate demand requirements.

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BHARAT FORGE , I lt4LYANI

CONSOLIDATED FINANCIALS

TABLE 6 OVERSEAS MANUFACTURING OPERATIONS

TABLE 6OVERSEAS MANUFACTURING OPERATIONS Rs. Million
Particulars	CY 2019	CY 2018
Total Revenue EBITDA EBITDA% PBT before Exchange Gain/(Loss) Exceptional Item PBT PAT	27,861 845 3.0% (912) (264) (1,230) (1,138)	32,321 2,075 6.4% 559 559 267

Exceptional item of Rs. 264 million pertains to redundancy payment to employees.

TABLE 7 INDIAN SUBSIDIARIES		Rs Million
	FY 2020	FY 2019
Total Income	840	1,318
EBITDA	(5)	94
Profit Before Tax	(40)	79
PAT afer minority Interest	(33)	60

TABLE	8	BFL+ BFIL		Rs. Million
			FY2020	FY 2019
		Total Income	51,857	67,818
		EBITDA	10,548	18,115
		Profit Before Tax	7,028	15,193
		PAT	4,670	9,995

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