Ladies and gentlemen, good day and welcome to the Q2 and H1FY 2026 Earnings Conference Call Hosted by Bharat Forge Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Kalyani, Vice Chairman and Joint Managing Director, Bharat Forge Limited. Thank you, and over to you, sir.
Yeah, hi. Thank you. I'm joined here. First of all, a very warm welcome to all our friends in the analyst community and the investor community. Thank you for joining our Q2 investor call. We are joined here, I'm joined here by our finance, investor relations, and global business development teams. I will first have Mr. Kedar Dixit, our CFO, take you through our numbers, and then I'll take you through a short overview, and then we'll do a Q&A. Go ahead, Kedar.
Thank you, and welcome to Bharat Forge conference call. Talking about standalone business highlights for the quarter and H1FY 2026, the standalone revenues were at INR 1,947 crore, which was a quarter-over-quarter degrowth of 7.5%. The rapid degrowth in North American CV market, coupled with inventory restocking, has impacted our export performance, and that is the main reason for the drop. CV exports to North America are down 48% on a sequential basis and about 67% on a year-over-year basis.
Passenger vehicle and other industrial segment has shown resilience, limiting the impact on the profitability. Standalone EBITDA in this quarter was at INR 545 crore with 28% margins, which was lower by about 7.3% sequentially. This includes INR 24 crore on account of tariff charges. Talking about the H1 performance, revenues were at INR 4,052 crore and EBITDA margin at 27.9%.
From a consolidated revenue perspective, the quarterly revenues were INR 4,032 crores and EBITDA margins were 17.7%. Steady performance in overseas subsidiaries and strong execution in defense has helped the bottom-line performance. Quarter two numbers also include first-time consolidation of KDrive Mobility, which was the American Axle India manufacturing business which we acquired. The integration progress is on track. Talking about the six months, the consolidated revenues were INR 7,941 crores with EBITDA margin of 17.6%, and we had cash of about INR 2,300 crores on a consolidated basis.
During H1 of this fiscal, the company had secured new business worth INR 1,582 crores across all key businesses, which includes Bharat Forge component and industrial business of INR 823 crores, defense INR 559 crores, and our casting business of INR 200 crores. Talking about overseas subsidiaries, the European aluminum operations were stable amidst the stock demand due to holiday season.
Utilization levels in Q2 were about 60%-65. During the quarter, European operations recorded EBITDA of INR 32 crore. US aluminum had a winning quarter given the sentiment in the North American passenger car market. The US operations recorded EBITDA of INR 16 crore for this quarter. The current utilization level is about 65%. Hello? Yeah. The current utilization level of aluminum business in the US was about 65%. We continue to evaluate restructuring options for our European steel operations, and we will update the progress by the end of this fiscal. Now, I hand over to the call.
Yeah, good afternoon, ladies and gentlemen. I'll just share some observations and outlook with you. The reality on the ground is that 2026 is turning out to be a very interesting year because of demand uncertainty in the North American market due to the trade policies and the kind of constant changes we are seeing in it. European exports do look weak as we sit in November, but they should show signs of recovery because at this point in time, there's a lot of destocking taking place due to the deceleration in the production numbers.
Let's say the supply side rate from our side is significantly lower than the build rates. There are a few more important aspects of our performance. Our balance sheet remains strong with a consolidated cash of about INR 2,300 crore. Our Indian manufacturing, which is our Indian forging, defense, casting, plus axle aggregates, now accounts for about two-thirds of our consolidated revenues across our global business, and it is well diversified across segments and geographies.
Aerospace now accounts for about 13% of our industrial exports, and we expect this business to grow at a very healthy rate going forward as well. We have secured new orders and new business in the last quarter as well. There are clearly some weak spots in our overall business portfolio, which we are working to sort out, which mainly includes our overseas steel business and, to some extent, our EV business in India.
Our concern endeavors to diversify our business mix, and this has proved to be very relevant and paid off, as you can see, that we are weathering the storm far better than companies that are directly playing only in one or two sectors. While the cyclical businesses will rebound at some point down the line, there are many new businesses which will start to generate revenue and growth going forward in the next one to two to three years.
As the cash flows from the businesses increase further, strengthening the balance sheet, please expect that we will look at doing more acquisitions in India. We are raising some funds right now. This is all debt. It will be a combination of debt plus NCD, and this is both for organic growth plus for inorganic growth in India. We've taken an enabling approval of up to INR 2,000 crores, and we will action this depending on when the timing is right.
What I'd really like to say is that we will continue our focus on our customers, products, and opportunities globally, but we are going to double down on India as most companies in the world are because it's the fastest-growing global market with the most headroom for growth. We have created a strategy that will allow us to get a stronger piece of the action in India, and we're going to take some very fundamental steps to implement a growth strategy that allows us to get a larger share of this business.
In terms of second-half outlook in defense, we should see the momentum pick up for defense as execution improves. Aerospace for the full year, aerospace will record strong growth over last year. The recent tie-up of orders with global aero engine majors for existing and new programs offers good long-term visibility. On JS Auto, we are seeing continued growth. We should see better top-line and EBITDA performance in second half. JS continues to receive strong business inquiries and traction in export markets as well.
Our Q2 sales growth for JS was about 26% and EBITDA growth of about 44%. Clearly, even the profitability of the business is improving. New additions like KDrive Mobility offer significant long-term opportunities on the product side. Our focus is on our Indian manufacturing portfolio across steel forging, ferrous, and aluminum casting is helping us increase our content per customer and also to move at a platform level with our customers. As global MNCs increase their sourcing from India, our Indian manufacturing business is geared to tap into this demand.
On the steel Europe, we will have a roadmap in place outlining the shape and form of the proposed restructuring of the steel business by the end of this fiscal. To sum up, the near-term outlook for the North American market is still a question mark. It depends on a lot of underlying factors. However, with multiple growth engines like aerospace, defense, and JS Auto, this decline should get offset.
In the medium term, we are in the midst of increasing our capacities in India to address opportunities in many new sectors, including aerospace and engineering, and this will be supplemented by the inorganic route in India, where we believe we can generate significant synergistic benefits and get to markets faster than organic. That's really all I wanted to say right now, and now I'm happy to take your Q&A, and me and my colleagues will be happy to answer your questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question.
We also request all to restrict your questions to two per participant. In case of more questions, kindly come back in the queue. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Binet from Morgan Stanley. Please go ahead.
Hi team. It's a good quarter. You managed it well in this challenging environment. I'll just go back to our Q2 commentary where we talked about Q2 being the toughest quarter in the year. Now, would you still maintain that the full impact of tariff slowdown, especially on the export side, is already built in, that destocking is done, or do you expect that to trickle into Q3 as well?
I would say Q2 and Q3 should be similar, and hopefully by Q4, we should see an uptick.
On the export of non-auto, we've seen a nice jump sequentially. Could you talk a little bit about what drove that? Because if I look at your aerospace numbers, it seems largely flat quarter- over- quarter. What are the other segments that drove that?
It's multiple sectors. It includes power gen. It includes construction, mining, and aerospace.
Sustainable in that sense.
Yes.
Lastly, just on gross margins, very impressive gross margins. I think it is one of the highest that we have done in recent times. Could you help us break down into factors that are driving it, and how sustainable is this?
We have done a lot of cost reduction work. When the quarter started and it looked really bleak, we took a lot of block shutdowns, etc. We are trying to do more value addition in-house, improve our product mix. It is a combination of all these factors.
Great. Thanks, team. I'll come back in the queue.
Thank you. Our next question is from the line of Kapil Singh from Nomura. Please go ahead.
Yeah, hi sir. Sir, on the defense order book, I just wanted to clarify. There was a carbine order as well. What is the size of that order? I believe it's not.
Carbine order is not included in this.
Yeah. What is the size of that order, sir?
Yeah, it's about INR 1,400 crore.
Okay. What would be the execution timeline for that?
First, we're to sign the order, then FOPM. From the time the order gets signed, I would say about 9-12 months.
Oh, so the entire order can be executed in 9-12 months?
No, no. Start.
Okay. Okay. I mean, I was trying to.
It's usually over a four-year period because it's 2 lakh order weapons.
Understood. Sir, there was a mention in the commentary that there were some INR 24 crore tariff charges. What is it related to, and where is it accounted for?
What? This is the tariff charges, the sharing of tariff, the US tariff, what we have for our US exports.
Okay. Where is it accounted?
This is in sales.
Okay. Okay. So I mean, as things stand, is this the peak, or should we expect that there will be a further impact because the tariff seems to have gone up, right?
I think it's a very dynamic situation. It's difficult to comment with any amount of certainty.
Sure, sir.
It's a little bit of a comparative information issue, so I don't think I want to talk about it very publicly.
Understood, sir. And sir, on the.
Kapil, sorry to interrupt. We request you to please rejoin the queue if you have further questions. Thank you. Ladies and gentlemen, you are requested to please restrict yourselves to two questions only. You may rejoin the queue if you have further questions. The next question comes from the line of Gunjan Prithyani from Bank of America. Please go ahead.
Yeah, hi. Thanks for taking my question. Just quick clarification. On this tariff, there is no, this was only for a month or two. It was in quarter one. It was only INR 14 crore, but partial period, right? This is for the entire period. Is that the correct way to look at it? Entire quarter had a tariff implication.
This was for the quarter. I don't want to say anything more than that.
Okay. Got it. No worries. Just going to the defense business. Now, with the new order, we will be roughly at, whatever, INR 11,000-odd crores sort of order book. How would you think we think about the revenue or execution timeframe of this? I am just trying to assess what sort of growth we think on the defense business over the next two years. More addition, new wins? What is the growth that we make it from the current level?
We will definitely continue to have new wins and additions, but our execution will also start because I think ATEX execution should start in maybe about six to nine months, and then that will continue ramping up. That is a big order. Other orders, what I mentioned on the carbine, once the order is signed, then the FOPM, and then nine to twelve months after that, it will start.
The 10,000 crore order book, which is there roughly right now, it's fair to assume that three-year sort of timeframe is a good timeframe to work with in terms of execution, or it could take longer than that?
No. It will take longer than that. Realistically, in this business, from the time an order is signed, you cannot expect revenues to start in less than 12 months unless it's a revenue item, okay? If it's a revenue item, then it can start much sooner. In capital items, it definitely will take time.
Okay. Got it. Second question is on aerospace. I mean, you do talk about a lot of wins. Can you also give us some perspective on how to think about the revenue stream there? What is it right now? How does that scale up based on the visibility you have over the next couple of years?
Aerospace for last year, for the full year, was in the ballpark of about INR 250 crore. Okay? I think this year should be in excess of INR 350 crore. We are growing at that kind of rate or higher.
That rate should continue.
Gunjan, sorry to interrupt. We request you to please.
That rate hopefully should continue for the next three, four years at least.
Okay. Got it. Thank you so much. I'll join back the queue.
Thank you. Our next question comes from the line of Nitin Jain from Fair Value Equity Advisory. Please go ahead.
Yeah. Congrats on a decent quarter. I joined the call late, so apologies if my questions are repetitive. Last quarter, the management had guided that Q2 will mostly be the bottom of this down cycle for the overall business. Now, given the geopolitical situation between India and the US, it is still not resolved, and we do not know when it will be resolved. Do we still stand with that commentary, or will we see some more pain going forward?
Clearly, when we spoke last time, we were more hopeful of a quicker resolution to the issue. If you see the statements coming out of the US, it seems like there is a solution which is very close to finalization. I think we would have hoped for it to have happened a little earlier, but I would expect that hopefully in this quarter, it should happen. I would say quarter three will be on a similar line as quarter two.
Right. Okay. That's good.
As of now.
Okay. Can you provide some color on what kind of revenue opportunity we have in the server manufacturing business over the next two, three years, and what kind of margins can we expect here?
It's a very small, it's a business that we're trying to evaluate because we see that as a very large new opportunity. We see the whole data center space as a big opportunity. Server manufacturing is, I don't know if it's an end in itself or a means to an end because we want to understand the whole product level and the system level architecture complexity and understand where opportunity for us lies.
I don't think looking at server manufacturing as a very big opportunity right now because we are only learning this business, okay? I think in six months from now to nine months from now, we'll have a better idea of this business. Clearly, that's the whole area that we're interested in, but it's too early to talk about what size and scale and margins.
Okay. That's helpful. Thank you so much.
Thank you. Our next question is from the line of Rishi Vora from Kotak Securities. Please go ahead.
Yeah. Yeah. Thank you for the opportunity and congrats on a good set of numbers. My first question is, in the presentation, you'd highlighted that the defense assets transferred to KSS . So was there any impact on the standalone revenues on account of this, or the revenue booking remains the same?
Yes. The revenue booking remains the same. It's only the business that we have transferred from Bharat Forge to Kalyani Strategic Systems. More of the assets have moved and all the new orders that we will get, those would be on Kalyani Strategic Systems.
Understood. But the ATEX would be a part of standalone?
Yeah. So currently, the order is on Bharat Forge Limited.
Understood. If you win a carbine order whenever, that would be a part of a subsidiary, basically.
That would be still Bharat Forge.
The orders that we have RFPs that we have responded to prior to this.
Understood.
In Bharat Forge, will always be executed in Bharat Forge.
Understood. My second question.
Strategic Systems is a 100% subsidiary of Bharat Forge. It really doesn't matter.
Just from an accounting perspective, nothing else. Yeah. Just second question on the tariff situation, just wanted to understand a little better because today, there is a PV component tariff which we have. Then there is another CV component tariff. On top of it, there is metal tariff, and then there is a reciprocal tariff.
For the US business, can you just bifurcate what percentage of business is linked to this kind of tariff? Because whenever the deal happens, we just want to understand which business or which segments does get positively impacted and where there is no impact. Any broader color that you could.
If you break our tariff down in that way, you have an outlook on our overall business, okay? You know how much of our business goes to the US, how much goes to Europe. I think we should just leave it at that. There's one thing, actually, I wanted to mention, which I couldn't earlier because the paper is on my—because it hadn't been sent to the stock exchange. Just give me one minute. Where is it?
Okay. I have it here. I have it here. We just wanted to make one announcement that yesterday, our defense business won an order from the Navy, and this business—you can see it on the BSE website also. Kalyani Strategic Systems secured a business of more than INR 250 crore for the supply of underwater systems. This is for basically unmanned marine systems for the Navy.
You may be aware that the underwater domain is a key focus area for us. With India's huge coastline and interesting neighborhood that we operate in, we have to protect and secure our Navy and coastal facilities. This is one of the first orders that we have won, a second order that we have won for this, but a bigger order. This was just won yesterday, and this will be delivered from our facilities in Pune.
When does it start, an executable period for the same?
This is within one year. All this has to be delivered within one year.
Understood. It will start in this year?
Yeah. It has to be delivered within one year of yesterday.
Okay. Okay. Thank you and all the best.
Thank you. The next question is from the line of Pramod Amte from Incred Capital. Please go ahead.
Yeah. Thanks for the opportunity. So first thing is, if we go to the defense subsidiary, there is some improvement in margins to a double digit. Is it more of a product mix? How sustainable is it?
Yeah. Look, it's a product mix issue, and it will keep improving as our mainline products come on stream and revenue ramp up.
Okay. The second one is with regard to American Axle. Now we were through with a couple of quarters on this acquisition. In terms of broader strategy, how do you see where are the easier routes to come through, and what is the medium-term plan in terms of product profile expansion and costs?
The whole LCV and ICV business is a big opportunity in India, as is the SUV sector when it comes to the on-highway market. You also have a large off-highway and specialty assets business. We will focus on these two areas and grow our business.
Are there any non-compete clauses for it in terms of exports?
There are geographies like in North America that are non-compete, but everything is only for a period of five years.
Okay. Is there a scope to improve margins in the short term, considering the overheads and all, or you feel that not?
Yes. Absolutely. We are very focused on that.
Okay. Are there any set rules you want to play over the next three, five years? For example, first margins, then product mix, how to look at this entity where you will see three years, five years on the line?
We will play Horizon One, and we have a separate team for Horizon Two. Horizon One team will focus on existing products, existing markets, and improvement in financials for those sectors. The new team will also focus on Horizon Two.
Any broader top line, bottom line, CAGR you'll be looking at?
Let's talk about it in six months, but clearly, we have an aggressive growth plan.
Sure. Thanks for making all the rest.
Pramod, just one correction. This was the first quarter of consolidation.
Okay. For the KDrive Mobility?
Yeah. For American Axle India business.
Oh, yeah. Okay. Yeah. First quarter. Okay. Understood. Thank you.
It wasn't full quarter. It was full quarter. Yeah.
All right. Thank you. The next question comes from the line of Raghunandan N L from Nuvama Research. Please go ahead.
Thank you, sir, for the opportunity. Congratulations on strong numbers. Firstly, any update you can provide on your upgrade structuring? Have your customers approved your initiative?
Whatever we had to talk about, we've already mentioned in the update. I already mentioned that before. I don't have any more comment.
Got it, sir. Secondly, post the GST cuts, how do you see the India MHCV production outlook?
Yeah. Industry. As you've seen, the sales of PVs and all that have been strong, but also due to the festive season. Now that the festive season is over, we'll need to monitor it for another month or two. Hopefully, it should be—the momentum should continue, is what we think.
On the MHCV side, sir?
MHCV, the broader expectation is it should remain flat. I mean, not a very significant growth or degrowth.
Got it, sir. Lastly, on BSISL , there has been a growth. There is also margin expansion to 14%. How do you see the growth ahead in terms of order book and also?
What are you talking about?
BSISL, which is JS Autocast.
Yeah. JS Autocast, we're already seeing improvement in margins, and we are quite bullish that we will continue to improve our margins, improve our top line, and product mix as well.
Got it, sir. Thank you very much.
Thank you. The next question is from the line of Mohit Jain from Tara Capital Partners. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Just wanted to ask the fundraise that you're doing with you that would be used for inorganic as well as organic purposes. If we do an inorganic sort of a thing, would it be related to the current lines of businesses, or can it be in a completely different area?
Right now, it's in areas that are very related to what we're doing and areas where we see opportunities for growth in India.
Okay. I mean, are we comfortable doing, let's say, only some bolt-on sort of an acquisition, or are we comfortable doing some large ticket acquisition as well?
It really depends on—it depends on the opportunity and the circumstance. I think we're trying to define the animal without knowing what it looks like.
Okay. Fair enough. Thank you. Thank you a lot.
Thank you. Our next question is a follow-up from Binay from Morgan Stanley. Please go ahead.
Hi, team. When I look at defense revenues for next year, there should be a very sharp scale-up, right? Like your ATEX, you are saying the scale-up has not started. The carbine order comes in, and then this marine order thing. Any revenue number that you would sort of see? Like basically fiscal year 2027 defense revenues.
It would be better than this year for sure.
How many years shall we build the ATEX order for? Because next fiscal year 2027, you said the ATEX order.
It will start execution from calendar year 2026.
Over how many years?
At least it will take about three years.
Right. Yeah. I think when that ends up, the scale-up should be quite sharp with that for you in the coming years. Great, great, team. Thanks. I'll come back. That's all from my side.
Thank you. To ask a question, ladies and gentlemen, you may press star and one. Our next question is from the line of Rakesh Roy from Boring AMC, Omkara Capital. Please go ahead.
Hi, sir. My first question is regarding defense. Can you shed light on the US scope of business for the ATEX project?
Sorry to interrupt, sir. Your line is not very clear. If you could please check the mode that you're using of your device.
Yeah. Now it's clear?
Please go ahead.
Yeah. My first question regarding, sir, can you give me a scope of business for our AMCA project?
That's like Horizon Three. That's still far away. Let me explain maybe in a very general way. India wants to be self-sufficient in many key areas. One of the areas is as much as possible in aviation, especially for defense. Right now, we have the capability of certain systems and components. We definitely have capabilities on the arms and ammunition that go into the aircraft.
On aircraft manufacturing at a component level, system level, subsystem level, India does not have any established large-scale players. Bharat Forge is already a supplier of rotating components to jet engines, high-temperature components, structural components, and landing gears. These are all the kind of capabilities that we will leverage to create an opportunity for ourselves in the AMCA program along with our partners.
Right. Next question regarding, sir.
Okay. Yeah. My next question regarding, sir, recently, Bharat Forge inked back with a UK based company for UAV. So can you light on this one, sir?
No, it's all in the public domain, yeah. See, UAVs are a very large opportunity, okay? UAVs will go from birds that cost a few thousand dollars to birds that cost tens of millions of dollars. We are looking at opportunities across the spectrum because some of these opportunities and some of these products will also work with our existing products. That is where we see a lot of opportunity.
Thank you. The next question is from the line of Disha Shah, an individual investor. Please go ahead.
Hello. Thank you for the opportunity, sir. I have two questions. One is regarding the order book. Regarding the defense order book especially, you said earlier that it will take longer than three years for that to materialize into revenue. Further to that, my question is, what would be the?
It will take three years. No, I'm sorry. I didn't say three years.
More than three? Yeah.
No, no. That's not what I said. I said ATEX order will get executed in three years from the time the delivery starts.
Okay. Okay. Okay. How long will it take for that order book to convert? What is the conversion ratio or what is the conversion time frame to recognize it as revenue?
I don't understand your question, quite frankly. As I mentioned, there is a process called FOPM that has to take place, after which, within six to nine months, we will start deliveries. First year, we will deliver maybe about 15 or so guns. After which, we should increase our rate of delivery. In all, we have to deliver 187 guns. I think we should deliver 187 in something like four years.
Okay. Okay. Okay. To that, the next question would be, what would be the key challenges or dependencies in converting the defense pipeline into deliveries? If it might be any, just to shed some light on that.
No. None.
None. Okay. So I have one more question.
It's in the same location. That's all.
Okay. Okay. Perfect. I have one more question. What is the expected margin trajectory, especially as the product mix shifts towards defense and industrial verticals?
It's very difficult to give that because the product mix within defense also is not fixed. I think our goal is going to be to balance return on capital employed, cash flow, top line, bottom line on an overall basis.
Thank you. We have no further questions, ladies and gentlemen. I now hand the conference over to Mr. Amit Kalyani for closing comments. Over to you, sir.
Thank you very much, ladies and gentlemen, for your time and interest in our company and your encouragement. I look forward to our continued dialogue and association. If anybody has any specific questions or clarifications, you may get in touch with our investor relations team. Thank you very much, and have a nice evening.
Thank you. On behalf of Bharat Forge Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.