The agency has affirmed the company’s short-term rating at 'CARE A1+’.
CARE Rating stated that the reaffirmation of the ratings assigned to the bank facilities and instruments of Bharat Forge (BFL) continue to factor its established market position as India’s largest manufacturer and exporter of auto components, consistently healthy profitability in the Indian manufacturing operations and long-standing relationship with global automotive original equipment manufacturers (OEMs) and Tier-I suppliers, particularly in the commercial vehicle (CV) segment.
The rating has positively factored the robust order book position in the defence segment, ramp-up of the greenfield aluminium forging capacity in North America and the funds raised through qualified institutional placement (QIP), which will be largely utilized towards debt repayment/pre-payment.
The rating strengths are constrained due to working capital intensive operations and volatility in end-user sectors.
Despite diversification, even today, a large proportion of its revenue is derived from the automotive segment, thereby exposing the company to inherent cyclicality of the automobiles industry.
The ratings are further constrained on account of the susceptibility of the operating margins to commodity price risk and forex risk.
Turnaround in the performance of overseas operations and any large-sized unanticipated debt-funded capex or acquisitions leading to deterioration in the capital structure and debt coverage metrics from the existing levels would continue to remain the key rating monitorable.
Bharat Forge (BFL) is the flagship company of the Kalyani Group providing engineering solutions for diverse automotive and industrial applications. It is India’s one of the largest forging company with forging-based engine and chassis components with focus on crankshafts and front-axle beams, largest exporter of auto components and amongst the leading manufacturers of industrial components. It has a diversified global customer base including the top five CV and PV manufacturers in the world.
The scrip rose 0.88% to currently trade at Rs 1,291.05 on the BSE.