Baba Kalyani used the economic slowdown as a test bed for an entirely new plan to take Bharat Forge to the big league
In October 2008, even as the world reeled under the collapse of the financial system, Baba Kalyani called a meeting of his senior managers at his Pune-based company, Bharat Forge, to take stock. The meeting included his son and the firm’s executive director, Amit Kalyani. Their worry, however, was different. There was a backlog of orders from automobile companies around the world and they needed their managers to speed up supplies. They brainstormed and scripted a detailed plan to meet the robust demand. Two hours later, a satisfied Amit Kalyani left for a holiday in Maldives.
When he returned, bad news awaited him. The world had turned topsy-turvy in a matter of just four days. The financial markets were collapsing and business houses were shrinking. Bharat Forge, a maker of stuff like axles and crankshafts for big truck manufacturers in the US and Europe, was staring at a flurry of order cancellations. The fear of his customers of a bleak sales outlook would prove correct very soon. The backlog was just a memory. “We didn’t know how to react for a couple of days,” recalls Amit Kalyani.
For the quarter ended December 2008, the company posted a consolidated loss, its first one in a long time. Capacity utilisation fell to an all-time low of 20 percent and the company’s factories operated only a few days in a week. Baba Kalyani looked around and saw other automobile companies scaling down plans, firing workers and go into near hibernation.
The doyen of India’s automobile parts industry, the 32nd richest Indian according to Forbes, had the same choice. But Baba Kalyani had other plans.
Two years later, Bharat Forge has still not come back to its peak annual revenue $1 billion plus seen in March 2008, but the unfolding of an exciting new chapter in its history is unmistakable. Having used the slowdown as a test bed for an entirely new growth plan, Baba Kalyani is now moving into mission mode and fast-tracking investments in a new range of manufacturing businesses. He has also earmarked Rs. 1,500 crore over the next three years to build more factories.
The audacious plan will see Bharat Forge enter areas offering bigger opportunity but also higher risks. Kalyani will make metal parts for energy, oil and gas and construction sectors and take on — for the first time — much larger firms like Larsen & Toubro and Bharat Heavy Electricals. It will also compete against multinationals like Siemens and a rash of nimble-footed players like Reliance Energy.
By 2012, Kalyani expects that all his new trysts will enable his non-automotive businesses to grow to 40 percent of sales from around 20 percent currently. “Our aim is to capitalise on India’s economic growth in areas like power and on the other hand, mitigate risk [that comes] by just focussing on the automotive business.”
Changing Tack
At his Pune factory, Kalyani is well-known for his impatience. His S-Class Mercedes would drive in for meetings at the campus much before others in the executive suite. No wonder, then, that he loves fast cars and fast bikes; and that his business plans are being implemented at breakneck speed.
But the company kept communication lines open. As it shared the growth plans and also a part of their profits in 2006-07, the unions were more flexible when the crisis hit in 2008.
(This story appears in the 10 September, 2010 issue of Forbes India. To visit our Archives, click here.)