Bharat Forge: Best-in-Class Producer with Increasing Focus on Defense

Rajeev Mantri of Navam Capital presented his in-depth investment thesis on Bharat Forge Limited (India: 500493) at Asian Investing Summit 2020.

Thesis summary:

Bharat Forge Limited is a globally-renowned, best-in-class forgings and engineering components manufacturer in India, with a recent market capitalization of INR 100 billion ($1.3 billion). The company is in the midst of a business transformation, with increasing focus on defense production and next-generation mobility.

With deep technical capabilities, a track record of profitable growth, sound capital allocation, and conservative financial management, BFL will be able to capitalize on the trends underway in both Indian and global defense, industrial, and automotive markets. The analyst consensus appears to be under-rating the potential of the company’s defense production business.

A cyclical downturn in the automotive business has battered the shares, even as it has consistently diversified from the auto sector and grown non-auto revenue and earnings over the past decade. BFL has made key strategic investments to benefit from the electrification of transportation, and given the changes underway in India’s defense industry landscape, the unique technical capabilities required for defense manufacturing, and high barriers to entry in the sector, Rajeev views BFL shares as undervalued.

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About the instructor:

Rajeev Mantri is managing director of Navam Capital, an India-focused venture capital firm. Prior to founding Navam Capital, Rajeev worked as a venture capitalist at New York-based Lux Capital, focusing on investments in energy, water and nanomaterials. Rajeev has contributed columns and articles on technology, investing, venture capital and political economy to The Wall Street Journal, Mint, Financial Times, The New York Times, MIT Technology Review, BioSpectrum, Roubini Global Economics and other publications. In August 2010, Rajeev co-founded Vyome Biosciences, a biopharmaceuticals company, and served as Vyome’s president through the company’s formative years. Rajeev graduated with a BS in materials science and engineering from Northwestern University, and an MBA from Columbia Business School, specializing in private equity and value investing.