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Jul, 10 2018

MM Forgings plans RS 650 cr expansion on buoyant CV outlook

The company had acquired Rudrapur(Uttarakhand)-based DVS Industries, a manufacturer of crankshafts for CVs, agricultural and off-highway vehicles in February 2018.

Auto component company MM Forgings will invest ₹650 crore in expanding its capacity over the next two years in view of the favourable growth outlook in its existing and new business segments.

With the proposed expansion, the company hopes to cross ₹1,000 crore in revenue by the next fiscal.

“We are looking at both domestic and export growth. During last fiscal, we invested about ₹150 crore and ended FY18 with about ₹650 crore of revenue. In this fiscal, we will invest about ₹500 crore and another ₹100-150 crore during the next,” Vidyasankar Krishnan, Managing Director, MM Forgings, told BusinessLine.

The proposed investment, which will be funded through borrowings and internal accruals, will see the company increase its production capacity to 65,000 tonnes in the current year (from about 48,000 tonnes in FY18) and to more than one lakh tonnes by 2019-20.

“While a significant chunk of expansion is to meet the demand in the commercial vehicle (CV) segment, which accounts for about 75 per cent of the company’s revenue, we are also looking at growing our business in tractors and two-wheelers where we have a negligible presence now,” he said.

MM Forgings’ exports account for about 60 per cent of its revenue now.

However, the domestic business is expected to grow bigger and may account for about 60 per cent of revenue in the coming years.

“Exports will also grow, but the share of the pie may shrink,” he said.

The company had acquired Rudrapur(Uttarakhand)-based DVS Industries, a manufacturer of crankshafts for CVs, agricultural and off-highway vehicles in February 2018.

“We have put in about ₹60 crore in this and we are planning an additional ₹10-15 crore as an adjustment capex for the DVS. We repaid all their debt and cleaned up the company,” he said.

The capacity of DVS has been ramped up from 5,000 crankshafts a month to 12,000 now, and it will be increased to 20,000 by December.

“Crankshafts require 25-30 operations. If we were to set up a unit, it would take a long time with higher capex. So, we made this acquisition and it gives easier entry into the new segments such as tractors and light commercial vehicles,” said Krishnan.

The company has also planned to double its authorised share capital to ₹30 crore through a 1:1issue of bonus shares.

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