What is your view on Bharat Forge reporting a net loss for Dec-20 quarter?

For the Dec-20 quarter, Bharat Forge reported a net loss of Rs-209cr largely on account of exceptional losses during the quarter, which are one-time in nature. In terms of the top line, Bharat Forge reported a -5.9% fall in gross revenues for the Dec-20 quarter at Rs.1,723 crore. There was revenue pressure across most of the verticals, as we shall see.

In the core forgings segment of the company, the revenues were down about 5% on a yoy basis. This is the principal business contributor of Bharat Forge. The miscellaneous segment also saw a fall of around 10% in revenues resulting in overall fall in revenues. While auto industry has picked up substantially, some of the key markets including the US truck market are yet to pick up. The US truck market is the key to the growth numbers of Bharat Forge.

Operating profits for the Dec-20 quarter were up smartly by 33.5% at Rs.123 crore and this surge was largely helped by better working capital management and lower employee benefits costs, leading to operational efficiencies in a big way. As a result, OPM improved from 5.03% in Dec-19 quarter to a much improved 7.13% in Dec-20 quarter.

The Dec-20 quarter saw Bharat Forge dip into a net loss of Rs-209.21cr but that was largely on account of an extraordinary write off in the quarter. Bharat Forge provided Rs.299 crore as an exceptional loss in the quarter on account of the German Federal Cartel Office concluding the settlement with the German subsidiary of Bharat Forge worth Rs.274 crore.

This amount needs to only be paid over a phased manner in the next 5 years but the entire amount has been written off in the current quarter itself. This led to Bharat Forge reporting a net loss in the current quarter as compared to a net profit of Rs.41.79 crore that the company reported in the quarter ending Dec-19.