The forging industry is watching the proceedings at the National Company Law Tribunal (NCLT) closely. Steel maker Bhushan Power and Steel and auto component maker Amtek Auto are undergoing insolvency proceedings at the NCLT. Amtek had the second largest forging capacity in the country and Bhushan is among the largest suppliers of forging quality steel. Problems at Bhushan Steel have affected supply of raw material to the forging industry. The forging industry dynamics could change depending on who gets Amtek. All this is happening at a time when the industry has come out of the rough couple of years it faced and a revival phase is in progress. “We see light at the end of the tunnel but the light is getting clouded because of all this,” says Asheet Pasricha, former president of the Association of Indian Forging Industry (AIFI). The industry is facing supply constraint and not getting raw material. Steel prices have gone up by 20% in the last nine months and are expected to go up by 8% from April 1, Pasricha said. You have demand but supply constraints because of the number of steel companies facing insolvency, he said.
Apart from Bhushan, Adhunik and Nico Jaiswal were supplying forging quality steel. Tatas have bid for Bhushan but they had exited the forging steel business 15 years ago and it is not sure whether they would continue this business if they take over Bhushan Steel. Similarly, how Amtek’s new owners deal with this business and how it will impact the industry is another area of concern. After a long time the Indian forging industry has seen demand growth. Yash Munot, chairman, Western Region AIFI and MD of KCTR Varsha Automotive, says, the surge in vehicle sales across all segments in the last quarter was definitely encouraging, and as a result, demand for forging has been on the rise both in the domestic as well as in the exports. But the steel requirement of the forging industry is not being met by the steel manufacturers in India and supply is less than demand, Munot said. Rising steel prices have also affected profitability, he added.
“But despite these issues, the overall business is looking up and we are anticipating good demand,” Anil Javalekar, MD, Poona Forge Pvt Ltd, said. The two-wheeler market will be good till the end of this calendar year as both the domestic market as well as the exports are growing and there is no longer the fear of a slowdown, Javalekar said. The CV market has also taken a positive direction which abodes well for the forging industry. “Backed by the strong demands we anticipate the forgings industry to grow by 10% to 12% this fiscal,” Munot said.
The western region accounts for half of the total Indian forging industry turnover at around Rs 15,000 crore. There are 147 forging units in the western region with installed capacity of 18.07 lakh MT. Capacity utilization of the overall industry is at 70% and could go up by another 5% to 10% if steel supply improves.