Bharat Forge Ltd. (BHARATFORG) Q4 FY22 Earnings Concall Transcript

Bharat Forge Ltd. (NSE: BHARATFORG) Q4 FY22 Earnings Concall dated May 16, 2022

Corporate Participants:

Amit Kalyani — Deputy Managing Director

Subodh Tandale — Head Sales & Business Development

Analysts:

Binay Singh — Morgan Stanley — Analyst

Kapil Singh — Nomura — Analyst 

Puneet Gulati — HSBC — Analyst

Amyn Pirani — JPMorgan — Analyst

Ronak Sarda — Systematix — Analyst

Basudeb Banerjee — ICICI Securities — Analyst

Pramod Amthe — InCred Capital — Analyst

Raghunandhan NL — Emkay Global — Analyst

Pramod Kumar — UBS — Analyst

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Mumuksh Mandlesha — Emkay Global — Analyst

Jinesh Gandhi — Motilal Oswal — Analyst

Gunjan Prithyani — Bank of America — Analyst

Aniket Mhatre — HDFC Securities — Analyst 

Presentation:

Operator

Ladies and gentlemen. Good day and welcome to Bharat Forge Q4 FY ’22 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Amit Kalyani. Thank you, and over to you, sir.

Amit Kalyani — Deputy Managing Director

Good afternoon, ladies and gentlemen, and thank you for joining our Q4 and full year analyst call. As usual, I’ll take you through a short commentary and then open up for Q&A. We have — I have with us members of our Finance, Investor Relations and management teams.

So just to sum up the year, I think we had a strong finish to the year. At a standalone level we witnessed about 71% growth in revenues, more than doubling of EBITDA and a 3x jump in PBT. EBITDA margins at 27% despite the inflationary pressures across all cost elements. We have a strong balance sheet with a net debt equity of 0.2, we’ve won over INR1,000 crores of new orders for Bharat Forge India, this is both for Indian and domestic — domestic and export markets. We have also won over $150 million of orders for steel and aluminum forgings for U.S. operations, which will be made and supplied in the U.S. to U.S. customers. I’m happy to note and report that we have won our first order for power electronics for automotive application from our EV division and also aluminum — high pressure aluminum die-cast parts from prestigious OEMs. We’ve had a 20% EBITDA margin at a consolidated level, we’ve crossed about INR10,000 crore revenue and our artillery gun has completed all trials by the users and passed with flying colors.

Just to look at the three months of the year, we ended again by growing our top line by about 28% to INR1,675 crores, driven by a pickup in both domestic and export markets. EBITDA margin at 25.7% are optically depressed due to the pass-through effect of the steel price increase. If that were not there, this would be about 27%. PBT for the quarter was INR352 crores, a growth of 40% over quarter four of ’21.

As I was just to say at a consolidated level, we expect in 2022 to be a stronger year driven both by top line growth and strong cash flow, wrapping up of our U.S. operations, growth in our aluminum operations in Germany, and significant growth starting to kick in for our industrial recovery [Phonetic].

So, I will now be happy to take your questions and answers.

Questions and Answers:

Operator

Thank you very much sir. [Operator Instructions] The first question is from the line of Binay Singh from Morgan Stanley. Please go ahead.

Binay Singh — Morgan Stanley — Analyst

Okay. Hi team. Thanks for the opportunity. My first question is on the order book. In the December quarter we had called out that the EV order book is around $50 million. So, this order that we are talking about, on the power electronics side is over and above that, so this is something you’ve got in the March quarter, is that correct understanding? And if so, what is the EV order book now, out of the…

Amit Kalyani — Deputy Managing Director

This is an increase, because this is something which we had done a product development and supplied to the customer for testing and trial, and this has now been approved and it will go into finished product.

Binay Singh — Morgan Stanley — Analyst

Okay. So within the INR1,000 crore, what will be the EV order book now?

Amit Kalyani — Deputy Managing Director

Sorry?

Binay Singh — Morgan Stanley — Analyst

Within the INR1,000 crore number that we’ve given, what will be the EV percentage for the order book?

Amit Kalyani — Deputy Managing Director

I would say probably about 50%. 50% out of this INR1,000 crore, India and all of the German orders are — out of the orders in the U.S. for aluminum, 80% of those are EV and hybrids.

Binay Singh — Morgan Stanley — Analyst

Right. Those are, I guess, the casting parts that are going into EV cars.

Amit Kalyani — Deputy Managing Director

Yes, no for the other quarter. Our total EV order book would be well in excess of, I would say INR1500 crores, between forging, casting and other parts. Between Germany, U.S. and India.

Binay Singh — Morgan Stanley — Analyst

And what sort of execution timeline should we look at like over — will it be executed over one year or over two years?

Amit Kalyani — Deputy Managing Director

So this will ramp up this year, and it will be running at full volume. These orders will be running at full volume in ’24-’25. But by then we anticipate significant more orders.

Binay Singh — Morgan Stanley — Analyst

Okay. That’s good to know. And just lastly on inflation, in the last call, we had specifically called out inflationary [Technical Issues].

Operator

Sir, sorry to interrupt, there seems to be some disturbance in your line.

Amit Kalyani — Deputy Managing Director

Sorry, I couldn’t hear at all. Hello?

Operator

It seems like we lost the connection for the current participant. We move to the next question from the line of Kapil Singh from Nomura. Please go ahead.

Kapil Singh — Nomura — Analyst

Yeah, good afternoon sir. First thing I wanted to check, what is the total order book that we have? This INR1,000 crores is per annum kind of orders that we have fund [Phonetic]?

Amit Kalyani — Deputy Managing Director

When it’s fully ramped up, it will be INR1,000 crores, yes.

Binay Singh — Morgan Stanley — Analyst

INR1,000 crores per annum, right? So I wanted to check, what is the — because you have orders from last year or maybe periods before that also, which are yet to go into production. I just wanted to check, what is the order book, which is yet to go into production?

Amit Kalyani — Deputy Managing Director

I would say more than INR1,000 crores for sure. It would be closer to about INR1,400 crores, INR1,500 crores.

Binay Singh — Morgan Stanley — Analyst

Sir, this INR1,500 crores — roughly around INR1,500 crores will be for the Indian operations, right?

Amit Kalyani — Deputy Managing Director

Yes. And that is the overall automotive side.

Binay Singh — Morgan Stanley — Analyst

And for the overseas operation?

Amit Kalyani — Deputy Managing Director

Overseas, as we have mentioned, right now it is $150 million in in the U.S.

Binay Singh — Morgan Stanley — Analyst

Okay. Got it. And sir, could you repeat, how much is the EV order book out of this INR1,000 crore that is…

Amit Kalyani — Deputy Managing Director

INR500 crores, and additionally, what we have in the U.S. and Germany.

Binay Singh — Morgan Stanley — Analyst

And sir, this INR500 crores is in which segment? Just asking?

Amit Kalyani — Deputy Managing Director

…Break it down, but it’s in the automotive segment, automotive electronics — automotive EV.

Binay Singh — Morgan Stanley — Analyst

No I meant these are like structural parts or…

Amit Kalyani — Deputy Managing Director

This is a variety of component, that goes across forgings castings power and control, electronics, etc.

Binay Singh — Morgan Stanley — Analyst

Okay. And sir, we also announced this maintained [Phonetic] order for DC-DC converters from Indian OEMs. This is which product category?

Amit Kalyani — Deputy Managing Director

This is the powertrain [Phonetic].

Binay Singh — Morgan Stanley — Analyst

No I mean, the — the final product, is it a similar, what kind of product is it?

Amit Kalyani — Deputy Managing Director

It’s a truck and bus application, commercial vehicle.

Binay Singh — Morgan Stanley — Analyst

Okay, understood. And secondly, could you also share the outlook for various markets in terms of market size, particularly the global markets, what do we see in terms of industry size for U.S. Class 8 and also for Europe market for next one to three years? How much production loss are the OEMs having right now, some color on that also too?

Subodh Tandale — Head Sales & Business Development

So, the US and European commercial vehicle market. We see them at least as of now fairly robust for this year and next year. That is the forecast. The order backlogs are quite healthy right now. So most of these guys have slots booked for the next 12 to 15 months as well. So as of today, all of this is fairly robust.

As far as the supply chain disruption is concerned, I would say that’s normal supply chain disruptions. There is nothing that is a very significant showstopper right now. There is a lot of volatility and there is a lot of, let me say disruptions, if you will, but they are able to manage and that is still supporting the production outlook.

Binay Singh — Morgan Stanley — Analyst

Do they require to raise our production significantly from current numbers? It’s around 25,000 for example [Indecipherable] do we need to go much higher than that, or current levels with that we should expect the same?

Amit Kalyani — Deputy Managing Director

They have maintained production at a stable level. So they have not — it’s fairly stable. You can call that.

Binay Singh — Morgan Stanley — Analyst

Okay, sir. I’ll come back in the queue. Thank you.

Operator

Thank you. The next question is from the line of Puneet from HSBC. Please go ahead.

Puneet Gulati — HSBC — Analyst

Yeah, thank you so much. My first question is on…

Operator

Yes sir, please proceed.

Puneet Gulati — HSBC — Analyst

Yeah. Great. Yeah, thank you so much for the opportunity. My question is, if you’re seeing any increase workflow flow or new orders coming on account of opportunities that may have arisen from the lack of supply chain in China, or any extra moment that you’re seeing in terms of additional export opportunities for your industrial products?

Amit Kalyani — Deputy Managing Director

Okay. Yeah, so for industrial, I think this is early days, but we are definitely seeing, let’s say, a new supply chain demand from India across sectors and that is our entire foray into castings, forgings, heavier forgings, with the acquisition of the Baroda unit, and then as we complete the acquisition of JS Auto, will allow us to cater to a much larger segment of the market and increase those companies’ revenues manifold, and grow our industrial business as well.

Puneet Gulati — HSBC — Analyst

Can you talk about specific industrial products, which are being asked?

Amit Kalyani — Deputy Managing Director

No, I am not going to talk about any specific industry, because this is competitive information, and I don’t want to share it. But it will be across sectors.

Puneet Gulati — HSBC — Analyst

Okay. And this is new in last — this is something that you’ve seen in last one year?

Amit Kalyani — Deputy Managing Director

Yeah, absolutely, absolutely.

Puneet Gulati — HSBC — Analyst

Okay, great. That’s all from my side. Thank you.

Operator

Thank you. The next question is from the line of Amyn Pirani from JPMorgan. Please go ahead.

Amyn Pirani — JPMorgan — Analyst

Yes, hi, thanks for the opportunity. On the industrial business, I think you already answered partly that question. So, which are the areas you mentioned which are 100% dependency on imports? Is it possible for you to highlight some — like broad areas where we can have a medium-term opportunity because of the…

Amit Kalyani — Deputy Managing Director

Roughly all in capital goods and replacement of imports. So it’s across sectors, it goes across many-many sectors, but it’s largely all in capital goods.

Amyn Pirani — JPMorgan — Analyst

Okay. And on the, on the oil and gas side, you mentioned that you expect stable revenues going forward. So right now, you are still below the peak that we used to have like four, five years ago?

Amit Kalyani — Deputy Managing Director

Yes. Yeah. We are at, I would say two-thirds of the peak.

Amyn Pirani — JPMorgan — Analyst

So despite higher oil prices, you are not seeing incremental investments going into that area, basically?

Amit Kalyani — Deputy Managing Director

No, there is incremental investment, but what has also happened is asset utilization, asset lifecycle has gone up substantially.

Amyn Pirani — JPMorgan — Analyst

Okay. Okay, okay. And sometime back, you had talked about trying to get into new products in terms of offshore, is there any development on that?

Amit Kalyani — Deputy Managing Director

No, no, we have developed new products and got new orders also for new products for the fracking sector. They will all start slowly this year and then increase next year.

Amyn Pirani — JPMorgan — Analyst

Okay. Okay.

Amit Kalyani — Deputy Managing Director

Not offshore.

Amyn Pirani — JPMorgan — Analyst

Okay. Not offshore. Okay. All right. Okay, great, thanks. I’ll come back in the queue.

Operator

Thank you. The next question is from the line of Ronak Sarda from Systematix. Please go ahead.

Ronak Sarda — Systematix — Analyst

Yeah, hi, thanks for the opportunity. First question on the India CV demand, how do you see the demand for current year, especially given the inventory in the system is pretty low, so how do we see…

Amit Kalyani — Deputy Managing Director

Right now, quarter one is looking like it’s back at peak volumes of 2016, 2017. Very close. I mean, quarter one is at about 50,000 numbers — sorry, 97,000 numbers.

Ronak Sarda — Systematix — Analyst

And how do you see this sustaining, let’s say over the full year?

Amit Kalyani — Deputy Managing Director

Right now everybody is bullish. Right now people are bullish for Q2 also. But I think we have to go quarter-to-quarter at a time.

Ronak Sarda — Systematix — Analyst

Yeah. Right. Great.

Amit Kalyani — Deputy Managing Director

But outlooks is strong, because the EV market has been depressed for a very long time.

Ronak Sarda — Systematix — Analyst

And we also we’re gaining — we had new content supply starting in the BS-VI regime. So should we see the full impact or full benefit of that as well? Or we should — our revenue growth will be largely linked to the production growth?

Amit Kalyani — Deputy Managing Director

Yes. Whatever new products we have developed, are for BS-VI. We have significant market share, 100% market share, and those are going well and that will continue. It will basically be in line with market demand.

Ronak Sarda — Systematix — Analyst

Right, okay. And also wanted your thoughts on the EBITDA margin. How should we look at the EBITDA margin, because commodity costs are increasing, at the same time, we will have operating leverage benefits coming through, and also the various cost reduction measures you have taken over the last few years.

Amit Kalyani — Deputy Managing Director

The problem is one can’t comment on what is the cost pressures, etc right now, and energy cost is also going up, freight cost is going up. So I think on a overall basis, if we are able to maintain at this level, between — say around 26, 26.5, I think that would be a pretty good number.

Ronak Sarda — Systematix — Analyst

Okay, all right. And finally, the question, your question on the India Industrial Parks, right. Last year we had a one-time revenue from supplies of [Indecipherable] lenders. How do you see the overall full year revenues from industrial division? Should we…

Amit Kalyani — Deputy Managing Director

Again, our Industrial division revenues will be strong this year, and it will be a continuing trend now.

Ronak Sarda — Systematix — Analyst

Right. So we shouldn’t see a major dip from what we did in FY ’22?

Amit Kalyani — Deputy Managing Director

No.

Ronak Sarda — Systematix — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Basudeb Banerjee from ICICI Securities, please go ahead.

Basudeb Banerjee — ICICI Securities — Analyst

Thanks. Congrats for decent set of numbers. Couple of things. One, sir, If I look at your cash flows for last four years, you have done consolidated level in excess of INR,1000 crore capex, and only FY ’20 was a free cash flow here. So, you have added U.S. capability, low [Phonetic] capability in between revenues back to FY ’19 levels. So what is the outlook for consol capex for the coming two years…

Amit Kalyani — Deputy Managing Director

We repaid lot of loans. So you’re saying we haven’t had free cash flow? I couldn’t understand what you were saying, it was very garbled and it was very incoherent. And so maybe I just…

Basudeb Banerjee — ICICI Securities — Analyst

Out of last four years sir, we could see free cash flow only in FY ’20 and revenue is back to INR10,000 crore plus. So how do you see free cash flow generation in coming years? And what should be the consol capex…

Amit Kalyani — Deputy Managing Director

…free cash flow generation even this year. If you account for — if you look at our debt repayment, we have repaid almost INR250 crores of debt, our loan has gone down. So yes, net of debt there is — free cash flow is not there. But we have the opportunity to raise more capital and raise more debt and finance cash flow — finance our capex. So I’m not concerned about that, because our balance sheet is very, very thin. And [Speech Overlap] between INR300 crores to INR350 crores of capex this year and next year.

Basudeb Banerjee — ICICI Securities — Analyst

At the consol level sir, including project growth maintenance capex.

Amit Kalyani — Deputy Managing Director

Except for acquisitions.

Basudeb Banerjee — ICICI Securities — Analyst

Okay.

Amit Kalyani — Deputy Managing Director

We have announced the acquisition of JS Autio, which when it gets completed, we will have to pay the money that is due. But without the acquisition, our consolidated capex will be in the region of about INR350 crores, [Indecipherable] next year.

Basudeb Banerjee — ICICI Securities — Analyst

And second question, sir, as you rightly said that U.S. truck — Class 8 truck manufacturing capacity is roughly 25,000 per month and order books are there, giving you visibility of that much production. So how to look at growth for Bharat Forge perspective, like what kind of parts per vehicle addition, new customer addition, amid static production outlook you would say?

Amit Kalyani — Deputy Managing Director

There’s lots of opportunity, because as all the customers are moving towards electric mobility, they are going to deintegrate and deemphasize in-house manufacturing. So that is a very big opportunity for us, and our teams are already engaged with customers on those matters.

Basudeb Banerjee — ICICI Securities — Analyst

Sure. Okay, thanks.

Operator

Thank you. The next question is from the line of Pramod Amthe from InCred Capital. Please go ahead.

Pramod Amthe — InCred Capital — Analyst

Hi. Two questions, one is with regard to the international aluminum forging. What has been the experience in terms of ramp-up? I think this quarterly in the financials, you indicate some revenues being booked. Second, are there any advancement of capex for aluminum forgings on the integration?

Amit Kalyani — Deputy Managing Director

So our aluminum being ramp up is going as planned. There has been a few months of slowdown, because of some of our customers being impacted by Ukraine etc. So, we’re using that time to do more product development, for future growth. And we have now, more business than we have capacity. So we will have to look at setting up additional capacity, to take care of that demand.

Pramod Amthe — InCred Capital — Analyst

And when do you plan to look into it and announce per se?

Amit Kalyani — Deputy Managing Director

We will in the following — next quarter.

Pramod Amthe — InCred Capital — Analyst

Thanks. And second one is with regard to EV components, you have indicated in the presentation, some win in the EV component space in the domestic market, if I’m not wrong. How do you see with all these questions being raised about, call it year-end concerns on safety. Do you see an opportunity for a quality player like you, to play a bigger role in EV components, as compared to currently imported?

Amit Kalyani — Deputy Managing Director

Absolutely. You’re absolutely right, Pramod, and we definitely do see that opportunity. But we are also being cautious in over-committing on timeframe etc, because we want to be sure that our products all go through the required steps, and we are represent 100% sure that they are going to meet the safety requirements. Because, the vehicle safety depends on all the system safety and the system here has one externality, which is the charging infrastructure and voltage and the current and voltage drops that we face in India. So these are not things that all over the world people are used to. In India you have to be conscious that this is a serious issue, and design your product for that.

Pramod Amthe — InCred Capital — Analyst

But you expect the — ultimately OEM to bear it, or you also have a role to play, in terms of providing better…

Amit Kalyani — Deputy Managing Director

In this product, the customer gives you a specification, and the actual design of the product is yours.

Pramod Amthe — InCred Capital — Analyst

Okay. Okay. That’s helpful. Thanks. All the best.

Operator

Thank you. The next question is from the line of Raghunandhan NL from Emkay Global. Please go ahead.

Raghunandhan NL — Emkay Global — Analyst

Thank you, sir. For the opportunity. The first question is on ATAGS. As you said the army trials have been successful. So media reports indicate that, the RFQ is expected in June for over INR3,000 crore worth of orders. Can you talk about your expectations, opportunity size and capacity for this business?

Amit Kalyani — Deputy Managing Director

I will tell you that, we expect that this whole ordering process should pick up steam, and hopefully get completed in this financial year. In terms of capacity. I think in our first year we will have a capacity of about 100 tons, and after that we will have an increase in our capacity to 200.

Raghunandhan NL — Emkay Global — Analyst

Thank you. What has been the investments sir?

Amit Kalyani — Deputy Managing Director

Investments so far has been about INR250 crores. But you know, please remember, this is only the investment for the [Indecipherable], the machining, forging, heat treatment all that was already in place. All that was already in place. So we’re leveraging the Group’s capabilities in that.

Raghunandhan NL — Emkay Global — Analyst

Sir, on Tork Motorcycles, can you talk about how has been the initial vehicle demand and the opportunity on the component supplies?

Amit Kalyani — Deputy Managing Director

So vehicle demand has been pretty good. We have closed the order book at a 1,000 orders. Because again after reading all the issues with safety and fires and explosions and reversals of certain products, we initiated a full testing regimen, including outside agencies, to make sure that our product is completely robust and will not have any of these issues. So I believe that it is better to take a little time, but do it right. And in terms of number of opportunities, we are very clear to what we know, what we will be making and supplying. And our plants are right now under construction.

Raghunandhan NL — Emkay Global — Analyst

Thank you, sir. Lastly, sir, on Nellore light-weighting plant, how much was the FY ’22 revenue and what is the expectation on the production ramp-up going forward?

Amit Kalyani — Deputy Managing Director

Our revenue in ’22 was very small, I would say hardly INR20 crores, INR30 crores. This will be a year of ramp up for us. We have received export orders for some marquee global customers and I think the real pickup in growth will happen in ’24. We will see growth, but ’24 will be the real growth year.

Raghunandhan NL — Emkay Global — Analyst

So we should be able to reach that INR200 crore kind of revenue target there? I think…

Amit Kalyani — Deputy Managing Director

I think so. I think we should be pretty close.

Raghunandhan NL — Emkay Global — Analyst

Thank you, sir. Thank you so much. I’ll come back in the queue.

Operator

Thank you. The next question is from the line of Pramod Kumar from UBS. Please go ahead.

Pramod Amthe — InCred Capital — Analyst

Yeah. Thanks a lot for the opportunity. Amit, my first question is related to exports. You did talk about some order wins and the fact that even now some of the segments that two-thirds of the peak, and even on the export industrial side, if you can just share outlook, given the fact that there is increasing concerns about recession fears in the developed markets. So if you can just provide some context on where do we stand in terms of our order book, what’s been the kind of share gain what we’re seeing and the incremental order win opportunity? So just to put things in perspective, from a two year perspective, whether exports, can we expect a double-digit growth, on a sustainable basis?

Amit Kalyani — Deputy Managing Director

Yes. So I’m going to have my colleague Subodh answer that question. He is far more active in the market.

Subodh Tandale — Head Sales & Business Development

So to answer your question, yes, we are expecting growth, whether it is double digits or more or less, that time will tell. But we are definitely working for growth.

Pramod Amthe — InCred Capital — Analyst

That’s very helpful. But if you can just provide some color as to what are the areas where you’re seeing some traction, because there are some areas, which are not coming back on the expected lines, in terms of say, oil and gas and how is renewable doing? If you can just give some more color? Yeah. Thank you.

Subodh Tandale — Head Sales & Business Development

Yeah. See, we are targeting growth in all the segments we operate in, which is right from commercial vehicle automotive, as well as industrial. And we have — we are putting together a strategy, which also focuses on development of different products. So even if the market remains stagnant to a certain extent, we see growth opportunities and we are engaged in that process in any case. This includes certain products in the oil and gas side as well.

Pramod Kumar — UBS — Analyst

Sir. And related to that with the transition to EVs, there was expectation that on the legacy parts, there’ll be more consolidation of vendors, wherein large OEMs will move their legacy parts vendor of supplies to larger consolidated vendors, who can — who have larger scale, and basically reduce their investments on those parts. So, are we seeing anything like that play out on the global side, especially in markets like North America and Europe?

Amit Kalyani — Deputy Managing Director

So while we are already seeing RFQs and proposals and discussions around that line. Right now, everybody has been very caught up in addressing day to day opportunities and issues of supply chain, stemming from all the macroeconomic and global issues that are happening. So they are started, but they’re not picking up pace, because people are worried about maintaining their day-to-day supply chain and running their plants.

Pramod Kumar — UBS — Analyst

Okay. So in a way, is it fair to assume, Amit, that once these things stabilize and probably from FY ’24 perspective, you should see some of these activities kind of contributing meaningfully, on the export side?

Amit Kalyani — Deputy Managing Director

So, so I don’t — we haven’t entered into any such agreements or contracts yet. So I don’t know if ’24, it will happen, but — in terms of revenue recognition. But I think directionally that’s definitely a path that we are on.

Pramod Kumar — UBS — Analyst

Yes, thanks a lot. Second one is on defense, understand that availability of proving ground the areas where these guns are tested and all that, that’s been the biggest handy bottleneck for defense new equipment order by trials basically. So is there any change there, or we should expect…

Amit Kalyani — Deputy Managing Director

No, no, that problem was solved during Mr. Parrikar’s time itself. He was the one who opened up the government test ranges for private players to use. That happened almost four years ago. Before that, we were not able to do testing, because there are no private testing fields in India.

Pramod Kumar — UBS — Analyst

Okay. And outside of the artillery gun, which is the next big opportunity you are looking forward to Amit, on the defense side?

Amit Kalyani — Deputy Managing Director

Beside the artillery gun, we have vehicle programs, and we have multiple artillery guns, not just this one, and then we also have opportunities to export our products across the world.

Pramod Amthe — InCred Capital — Analyst

Fair enough sir. Thanks a lot for that and wish you all the best. Thank you.

Amit Kalyani — Deputy Managing Director

Thank you so much.

Operator

Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Hi. I mean, just wanted to clarify on this export order of $150 million. You mentioned that in the state, forging would be made in the U.S.?

Amit Kalyani — Deputy Managing Director

This is not export order. These are orders received by our subsidiary in the U.S. for tin and aluminum forgings, which will be made in the U.S. and supplied.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay, sir. Would we need to put up a clean forging capacity there also, or…

Amit Kalyani — Deputy Managing Director

No, we are not going to put up forging capacity, they’re going to do automation of our forging line, and some amount of maintenance capex, which will allow us to debottleneck our facilities and produce — make them more productive.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Kay, got it. Second question pertains to the European aluminum forgings business. So can you talk about, what was the utilization or the 30,000 ton capacity which we have in Europe in fourth quarter and for the full year FY ’22?

Amit Kalyani — Deputy Managing Director

I would say capacity utilization in Europe was about 40%.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

For the full year?

Amit Kalyani — Deputy Managing Director

Yeah.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay. Okay. And the ramp-up has been — is it slower than expected, just because of the geopolitical issues which the customers are facing, or also there are…

Amit Kalyani — Deputy Managing Director

Those are planned, because — this was planned because we have to develop so many new products, because the product development happening in Germany, for both the U.S. and the German plant. Therefore we needed one extra-year for product development.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay. Okay. Got it. And talking about the European operation, did we see a material impact of energy cost inflation in fourth quarter, was that the key reason why our margins, excluding EU — sorry excluding U.S. aluminum were done?

Amit Kalyani — Deputy Managing Director

We do have turns [Phonetic] off the recoveries which are still pending, which will happen in the course of the next few months.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay. Got it. And coming to the foundry forging operation, so have we seen implementing utilizations…

Amit Kalyani — Deputy Managing Director

For industrial…

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Right, BFIT [Phonetic]?

Amit Kalyani — Deputy Managing Director

Technologies and solutions.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Yeah. So do we see any improvement in utilizations there?

Amit Kalyani — Deputy Managing Director

Yeah, so I think we will increase our sales there by at least 50% this year.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

In FY ’23, we should increase by 50%, but what — how did we close FY ’22?

Amit Kalyani — Deputy Managing Director

INR75 crores to INR80 crores [Phonetic] for the year. Sorry for nine months. So close to INR100 crores odd kind of run rate.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Right, right, right, got it. And our India operations subsidiary, primarily India’s [Indecipherable] and losses and that widened in fourth quarter. So is it largely because of foundry forging, or there are pressures in other operations as well?

Amit Kalyani — Deputy Managing Director

No losses. It’s defense and other things, it’s basically defense. That’s an area, where we are investing.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it. I have a few more questions, I’ll fall back in queue.

Amit Kalyani — Deputy Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Mumuksh Mandlesha from Emkay Global. Please go ahead.

Mumuksh Mandlesha — Emkay Global — Analyst

Thank you so much for the opportunity, sir. Sir, on the — first, one the PV signal side, what kind of outperformance do you expect led by the order wheels? So what kind of growth is expected for the…

Amit Kalyani — Deputy Managing Director

Who is the — this conferencing system is very unclear. I don’t know what is happening. Very, very muffled voices are coming. It’s very unclear to hear.

Operator

Mr. Mandlesha?

Mumuksh Mandlesha — Emkay Global — Analyst

Yeah, can you hear me?

Amit Kalyani — Deputy Managing Director

Yeah, can you just maybe put the speakerphone off or something?

Mumuksh Mandlesha — Emkay Global — Analyst

Yeah, yeah, I’ll speak loudly. Is it fine, sir?

Amit Kalyani — Deputy Managing Director

It’s not very clear. [Foreign Speech] Yeah, okay.

Mumuksh Mandlesha — Emkay Global — Analyst

Yeah, just on the PV segment, what kind of outperformance you expected over the industry growth, based on the order, sir?

Amit Kalyani — Deputy Managing Director

For PV segment, we will have definite outperformance, because we have won lots of business globally, Subodh?

Subodh Tandale — Head Sales & Business Development

Yes, absolutely.

Amit Kalyani — Deputy Managing Director

So I think we should be able to grow our PV business, even if there is no change in the underlying markets by at least 30% this year.

Mumuksh Mandlesha — Emkay Global — Analyst

And this is across domestic and overseas?

Jinesh Gandhi — Motilal Oswal — Analyst

No, I’m talking about for India. And of course in Germany also, it will increase because of our aluminum forging business.

Mumuksh Mandlesha — Emkay Global — Analyst

Okay, and the second question sir, on aerospace [Indecipherable], what kind of revenues we are seeing in FY ’22, and what is outlook for FY ’23 sir?

Amit Kalyani — Deputy Managing Director

Aerospace, again, we are seeing I would say between 30% and 40% growth this year, and possibly 25%, 30% growth year after next. Railways, there’s not much growth, because of the whole electrification and you know the lack of diesel business?

Mumuksh Mandlesha — Emkay Global — Analyst

And since it’s — Kalyani M4 order, has the order started soon?

Amit Kalyani — Deputy Managing Director

Yeah, yeah, yeah.

Mumuksh Mandlesha — Emkay Global — Analyst

So what kind of revenue was it this quarter sir?

Amit Kalyani — Deputy Managing Director

I think it was about INR20 crores, INR25 crores this quarter.

Mumuksh Mandlesha — Emkay Global — Analyst

Thank you so much sir.

Operator

[Operator Instructions] The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead.

Gunjan Prithyani — Bank of America — Analyst

Yeah hi Sir, thanks for taking my questions. I just had two follow-ups. Firstly on the industrial business…

Amit Kalyani — Deputy Managing Director

[Speech Overlap] coming in very clear. I don’t know what is the difference between one line versus the other. So I can hear completely what you’re saying. So sorry, we need to start again, ma’am.

Gunjan Prithyani — Bank of America — Analyst

Okay. So now just follow ups on your India industrial business. Now if you can share some color on the various segments, I mean little bit of the mix, you know where is it coming from, agri, aerospace, construction, the way you spell it out for F ’22. And you know when you’re giving your comments, clearly there’s a lot of confidence on the growth from this segment. So you know which are the categories where you are seeing you know…

Amit Kalyani — Deputy Managing Director

I have mentioned earlier, this is competitive information, and I don’t want to share it anymore. Because you know, there are lots of people who can listen to what we say and you know, I don’t want to create competition for myself. So let’s just say that, we’re going to grow this business. We have a good strategy. We have a new person who’s heading this business in our company and we have a very good plan.

Gunjan Prithyani — Bank of America — Analyst

Okay, no worries, only on JS Autocast, now if you can just give you know the timeline for the closure and you know what is the kind of…

Amit Kalyani — Deputy Managing Director

It will happen in this quarter.

Gunjan Prithyani — Bank of America — Analyst

It will happen?

Amit Kalyani — Deputy Managing Director

This quarter.

Gunjan Prithyani — Bank of America — Analyst

And anything that you want to give us a sense that how that business should scale up in terms of revenues, the way you put it for the Sanghvi?

Amit Kalyani — Deputy Managing Director

So the way I see it is, when we buy it, it will be at about INR380 crores, INR390 crores or so in top line. Our goal is that, in five years, we should be able to triple it.

Gunjan Prithyani — Bank of America — Analyst

And how much investment for that?

Amit Kalyani — Deputy Managing Director

We will talk about that later. You asked me the revenue, I have given you the revenue target in terms of my own business.

Gunjan Prithyani — Bank of America — Analyst

Okay, got it just the last bit from my side. I mean on the U.S. classic trucks, now clearly the orders have been seeing significant decline, and that I understand is because of the slots being closed. But are you sensing any increase in the cancellation or any change in outlook, you know, going by some of the other indicators, you know that you see in the industry?

Subodh Tandale — Head Sales & Business Development

Not for the moment.

Gunjan Prithyani — Bank of America — Analyst

Okay. So you expect that it stays stable, at least for next 12-15 months?

Amit Kalyani — Deputy Managing Director

Correct.

Subodh Tandale — Head Sales & Business Development

That is the expectation for now.

Gunjan Prithyani — Bank of America — Analyst

Okay, got it. Thank you so much.

Amit Kalyani — Deputy Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Aniket Mhatre from HDFC Securities. Please go ahead.

Aniket Mhatre — HDFC Securities — Analyst

Hi sir, thank you for the opportunity. So would you be able to share the Sanghvi Forgings EBITDA please?

Subodh Tandale — Head Sales & Business Development

It’s a smaller number, it’s about INR55 crore top line, and [Indecipherable]. And an EBITDA of about — this is the first year, of about 15%, 16%. But this is the first year, so I don’t think you know…

Amit Kalyani — Deputy Managing Director

I don’t think [Speech Overlap]. Backstage, we didn’t lose any money. We made PBT and an EBITDA profit.

Aniket Mhatre — HDFC Securities — Analyst

No, I mean the — frankly, the reason for asking the question was, to just decipher between you know — we understand Sanghvi Forgings is a very profitable entity, but we still see losses in the India subs. So just trying to understand…

Subodh Tandale — Head Sales & Business Development

This is nothing.

Amit Kalyani — Deputy Managing Director

Subs are, which are moving money are in defense [Speech Overlap] when you want to trial, there’s a huge cost.

Subodh Tandale — Head Sales & Business Development

Yeah, yeah. And what has happened is we have taken over Sanghvi from the 1st of July.

Aniket Mhatre — HDFC Securities — Analyst

Correct.

Subodh Tandale — Head Sales & Business Development

So in the first quarter there was — it was between [Speech Overlap]. So I think the point that you need to look at is, since we have taken over, there are no losses and we are poised for some very strong growth there.

Aniket Mhatre — HDFC Securities — Analyst

Sure understood Sir. And when you talk about 50% growth in FY ’23, for Sanghvi Forgings, sir, you’re talking about an annualized run rate from FY ’22, the nine month level.

Subodh Tandale — Head Sales & Business Development

Annualized run rate.

Aniket Mhatre — HDFC Securities — Analyst

Got it. And sir, just one clarification, this Kalyani M4 order and in the ATAGS order, that will come under the India subsidiary, right?

Amit Kalyani — Deputy Managing Director

Yeah, yeah. In India, yes.

Aniket Mhatre — HDFC Securities — Analyst

No, no, India’s subsidiary, it’s not in the standalone?

Amit Kalyani — Deputy Managing Director

No, that comes in standalone.

Aniket Mhatre — HDFC Securities — Analyst

Okay, both will come in standalone.

Amit Kalyani — Deputy Managing Director

India had bid for those order. We didn’t have KSSF [Phonetic]. So the orders were bid and won in BSF.

Aniket Mhatre — HDFC Securities — Analyst

Sure, one other clarification you just talked about a very strong 30% growth in the PV business, that was for PV exports, right?

Amit Kalyani — Deputy Managing Director

Yes. But even on PV domestic and PV overall, we will have a strong growth, because of lots of new order wins from new customers.

Aniket Mhatre — HDFC Securities — Analyst

Sure, understood. And just one final thing, you said CV domestic is — OEM’s are talking about very strong growth. Would we go back to the FY ’19 peak this year in your view, or as per customer, what is the…

Amit Kalyani — Deputy Managing Director

Q1 is tracking at close to peak numbers.

Aniket Mhatre — HDFC Securities — Analyst

Okay. Okay.

Amit Kalyani — Deputy Managing Director

If it sustains, then yes, the answer is yes.

Aniket Mhatre — HDFC Securities — Analyst

Great Sir, thank you and all the best. Thanks for the opportunity.

Operator

Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

So for FY ’22 of this 71% growth, what would be work-in, how much can you attribute it to the iron cost pass through and how much is organic?

Amit Kalyani — Deputy Managing Director

Iron costs. Well, you know what I would suggest, that our finance team, they will come back to you on this.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Sure. Secondly, we have seen in the fourth quarter, particularly, there is substantial increase in other income and interest costs. Is there any change in accounting which has happened which will continue?

Amit Kalyani — Deputy Managing Director

Explain?

Subodh Tandale — Head Sales & Business Development

No, we have planned disposal of assets.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay, and on the interest costs?

Amit Kalyani — Deputy Managing Director

[Speech Overlap] disposal of assets, and it’s actual cash received.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay. And interest costs also has gone up quite materially to INR40 crores.

Subodh Tandale — Head Sales & Business Development

The question of the exchange — part of exchange now, because of the [Speech Overlap].

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Okay, Okay. Got it.

Amit Kalyani — Deputy Managing Director

Our coverage [Phonetic] for interest costs is INR20 crores per quarter. I think that’s the way to look at it. And everything is [Speech Overlap] from the exchange impact.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it. And what was USD-INR realization for the quarter?

Amit Kalyani — Deputy Managing Director

Yes, INR76.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

INR76. Got it. And last question on our working capital, so in FY ’22 on a standalone basis, we have seen roughly about INR1,000 crore of outflow. So do you expect this to reverse or is this the normal course of business?

Amit Kalyani — Deputy Managing Director

So I just have one request, you know this is Amit Kalyani, I have to unfortunately head out, I have a flight to visit a customer. So I have to leave. If anybody has any last question for me, I will take that, otherwise our finance team will continue, our business team will continue with you.

Subodh Tandale — Head Sales & Business Development

Closing points.

Amit Kalyani — Deputy Managing Director

I’d just, you know, like to thank you all for your participation and your interest in our company and your encouragement and questions. Please do keep in touch and we will keep updating you on matters of importance with regards to investor relations and what the communication, in terms of new things at the company. And I wish you all good health and I leave you to our team here. Thank you very much.

Subodh Tandale — Head Sales & Business Development

Yeah, go ahead Jinesh, you had some question?

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Yeah, it was on the working capital site, so FY ’22 we had seen outflow of close to INR1000 crore on standalone basis. Do you expect this to reverse partly, or there’s no abnormality over here?

Subodh Tandale — Head Sales & Business Development

So the increase in the absolute number, on the basis of volume, if you compare it to the sales — percentage to the sales, it’s a kind of a flat LWC — in terms of absolute numbers. We are seeing year-on-year growth by almost 70%, and the increase in working capital is the reflection of that.

Jinesh Gandhi — Motilal Oswal Financial Services — Analyst

Got it, got it. Thanks, I am done. Thank you.

Operator

Thank you ladies and gentlemen, that was the last question for today. On behalf of Bharat Forge, that concludes this conference. We thank you all for joining us and you may now disconnect your lines.

Subodh Tandale — Head Sales & Business Development

Thank you, bye.