Bharat Forge China Venture to Post First Annual Profit

Bharat Forge Ltd., India’s biggest automotive forgings maker, expects its China venture to post an annual profit for the first time since it began four years ago.

“The Chinese joint venture has turned around completely,” Amit Kalyani, executive director at the Pune-based company, said in an e-mail interview. “We are looking at expanding its product portfolio and increasing the customer base.”

Bharat Forge’s billionaire chairman Baba Kalyani aims to tap demand for auto parts in China where car sales may climb by as much as 15 percent in 2011, according to estimates by General Motors Co. and Volkswagen AG. Next year, sales in the world’s largest automobile market may reach 20 million vehicles, according to Booz & Co. and Nomura Holdings Inc. analysts.

“Going by recent performance, I expect significant improvement in the profitability of the venture as future demand in China will continue to be high,” Suprit Nayak, a Noida, India-based analyst at Religare Technova Ltd., said by phone.

Sales of passenger cars to dealers in China increased 29.3 percent in November from a year earlier to a monthly record of 1.34 million units, according to the China Association of Automobile Manufacturers.

Bharat Forge, which makes parts for Toyota Motor Corp. and General Motors, has climbed 37 percent in Mumbai trading this year, outperforming the 14 percent gain in the Bombay Stock Exchange’s Sensitive Index. The shares fell 0.8 percent to 373.35 rupees at the 3.30 p.m. close of trading in the city.

Venture’s Loss

Faw Bharat Forge Changchun Co., 52 percent owned by the Indian company, posted a loss of 315 million rupees ($7 million) in 2009. The venture started operations in 2006.

“The China operations will make a profit for the full year,” said Bharat Forge spokesman, S. Rajhagopalan. “This is due to increase in capacity utilization, restructuring and improvement in efficiency parameters.”

The venture’s profits will be announced in May when Bharat Forge reports its full-year earnings, he said.

India and the Asia-Pacific region contributed 47 percent of Bharat Forge’s sales of 33 billion rupees in the year ended in March, Kalyani said.

“This is expected to increase on the back of strong growth in the domestic automotive market,” he said, without elaborating.

India’s domestic passenger car sales rose 21 percent in November from a year earlier, according to the Society of Indian Automobile Manufacturers. Rising incomes may help boost annual car sales to 3 million vehicles by 2015, according to the government’s estimates.

Bharat Forge also makes components for the power, oil and gas and construction industries. The company plans to double revenue from its non-automotive business to 40 percent by March 2012, Kalyani said.

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