Bharat Forge to acquire Cent per cent stake in JSA

Bharat Forge hasentered into a definitive agreement to acquire a 100 per cenet stake in JSAutocast Foundry India (JSA) for an upfront consideration and a fixed deferredpayment at the end of the third year of operations. The Management hashighlighted that the acquisition would be EPS accretive and is expected to becompleted in four months. The acquisition will be done through BF IndustrialSolutions, BHFC’s wholly owned subsidiary.

Established in2004, JSA is a supplier of machined ductile iron castings for Renewable,Hydraulic, Off-Highway and Automotive applications. The weight of castingcomponents ranges from 7kg to 500kg. Annual capacity stands at 45,000 MT.

According tomarket analysts, the acquisition should strengthen Bharat Forge’s productportfolio and support customer additions in the industrial segment. Driven bythe acquisition of JSA and Sanghvi Forgings, the management expects therevenues of the renewable segment to increase to US$100-mn in the medium term.Management has reiterated the target of doubling industrial revenues in threeyears.

Market analysts expectrobust growth in the industrial segment, and believe that the acquisitions ofSanghvi Forgings (that happened in Jun’21) and JSA are right steps in thisdirection. Medium-term performance should be supported by new segments, such asDefence, Railways, Renewables, Aerospace, E-mobility, and Light-weightingsolutions.


Analysts’ View:

  • JSA’s acquisition will resultin new client additions for BHFC;

  • JSA has several clients who arealready associated with BHFC, and management expects to increase wallet sharewith these clients;

  • The entry into iron castingsshould broaden the addressable market in both domestic and overseas segments.JSA generates a large portion of its revenues (~45 per cent) from overseasmarkets, and there is scope for growing these revenues through combinedefforts;

  • JSA has a small portion ofrevenues from the Auto segment with focus on products such as turbine housings,exhaust manifold, brake disc and engine mount;

  • Current capacity utilizationstands at ~60 per cent and de-bottlenecking efforts can further add up to 25per cent capacity; the existing plant has additional room that can be utilizedto almost double machining capacities;

  • Synergies are expected in theareas of procurement and foundry related activities, which should lead to costsavings.

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