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Bharat Forge, Rolls-Royce sign pact for supply of aero engine components

Livemint:  December, 2015

New Delhi: Auto components maker Bharat Forge Ltd (BFL) has entered into a agreement with Rolls-Royce Plc to supply critical and high integrity forged and machined components for a range of aero engines, including the flagship Trent engine.

The flagship company of the $3 billion Kalyani Group on Thursday said it has formalized a significant supply agreement for a long-term cooperation without disclosing the contract value.

“This award follows a period of collaboration over the last 18 months to define and secure the necessary level of stringent quality and process approvals,” BFL said in a statement.

This agreement will help BFL achieve $100 million revenue from the aerospace sector by 2020.

On Wednesday, Mint reported that Bharat Forge entered the aerospace sector by signing four contracts.

B.N. Kalyani, chairman and managing director, BFL, said it is the firm’s strategic intent to play a significant role in global aerospace supply chain with forged and machined products and assemblies in future.

“This supply chain partnership with Rolls-Royce is a momentous step towards achieving our stated goal of $100 million revenue from the aerospace sector,” Kalyani said.

The company has been supplying components and so called sub-systems for the Indian defence establishments. BFL has been focusing on components, artillery gun programmes and other services businesses under the defence vertical.

It has zeroed in on four sectors—mining, power, railways, marine and defence—under the Make in India initiative and created a dedicated cross-functional team to identify opportunities in these areas.

In an investor presentation, which has been filed with stock exchanges, Bharat Forge said by 2018 the company will be net debt-free and double the revenue to Rs.7,000 crore. It has a total debt of Rs.2,546.42 crore as on 31 March.

On the other side, Rolls-Royce has customers in more than 120 countries, comprising more than 380 airlines and leasing customers, 160 armed forces, 4,000 marine customers, including 70 navies, and more than 5,000 power and nuclear customers.

Rolls-Royce has an annual revenue of £14.6 billion in 2014, around half of which came from the provision of aftermarket services. The firm had announced that its order book stood at £76.5 billion as of 30 June 2015.

Prime Minister Narendra Modi’s emphasis on defence and aerospace equipment as part of the Make in India campaign to encourage manufacturing and attract foreign investment has led many companies to seek licences to make defence equipment.

In November, plane maker Boeing Co. and Tata Advanced Systems Ltd formed a joint venture that will manufacture aero structures for aircraft and collaborate on integrated systems development opportunities in India, seeking to tap a military hardware market estimated to be worth an annual $41 billion in seven years.