Bharat Forge Navigates Headwinds with Strategic Diversification in Q2 FY26

Bharat Forge Limited, a technology-driven global leader in manufacturing high-performance components, has demonstrated remarkable resilience in its Q2 FY26 performance, navigating a challenging global economic landscape with strategic diversification and disciplined execution. While the quarter saw some headwinds, particularly from the North American market, the company's consolidated financials remained robust, underscoring its ability to adapt and grow. Consolidated revenue from operations for Q2 FY26 stood at INR 4,031.9 crores, with a healthy EBITDA margin of 17.7%. This performance was supported by strong execution in the defense sector and steady contributions from its overseas subsidiaries, effectively mitigating the impact of external pressures. The company's profit after tax (PAT) for the quarter was INR 309.9 crores on a standalone basis, reflecting its operational efficiency despite a sequential revenue degrowth.

The standalone revenues for the quarter declined by 7.5% sequentially to INR 1,946.9 crores, primarily due to a significant 16% drop in revenues from North America. This was largely attributed to a sharp decline in North American truck production and extensive inventory destocking. CV exports to North America, in particular, saw a substantial sequential decline of 48% and a year-on-year drop of 63%. However, the company's proactive diversification efforts across geographies and products helped minimize the overall impact on profitability. Standalone EBITDA for the quarter was INR 544.6 crores, maintaining a strong margin of 28%, which was up 10 basis points quarter-on-quarter, driven by a favorable product mix and internal cost reduction initiatives.

Strategic Pillars and Growth Drivers

Bharat Forge's strategic focus on diversifying its business mix has proven crucial in navigating the current market dynamics. The company's Indian manufacturing operations, encompassing forging, defense, casting, and axle aggregates, now contribute approximately two-thirds of its consolidated revenues. This strong domestic base, coupled with a focus on capturing opportunities in defense, aerospace, castings, and aggregates, provides a robust foundation for future growth. The company secured new orders worth INR 1,582 crores in H1 FY26, with INR 559 crores specifically in the defense sector, bringing the total defense order book to an impressive INR 9,467 crores as of H1 FY26. This substantial order book provides long-term revenue visibility and underscores the company's growing prowess in the defense vertical.

In a significant development, Bharat Forge announced an expanded strategic partnership with Rolls-Royce on October 16, 2025, to manufacture and supply fan blades for Rolls-Royce's Pearl 700 and Pearl 10X engines. This agreement marks a pivotal milestone, reinforcing Bharat Forge's commitment to building in-country capabilities and its position as a trusted global supplier of precision aerospace components. This partnership not only strengthens its aerospace segment but also aligns with the 'Make in India' vision, showcasing advanced manufacturing capabilities. The aerospace business is expected to record strong growth, with full-year FY26 revenues projected to exceed INR 350 crores, a growth rate anticipated to continue for the next 3-4 years.

Navigating Challenges and Future Outlook

While the US and European operations experienced some weakness due to seasonality and prevailing sentiments, Bharat Forge is actively addressing these challenges. The review of its European steel manufacturing footprint is on track, with concrete measures expected by the end of the fiscal year. The company is also working to resolve weak spots identified in its EV business in India. Management anticipates that Q2 and Q3 FY26 will be similar in terms of performance, with an uptick expected by Q4 FY26, driven by the ramp-up in defense business and continued growth in Indian industrial and non-US export markets.

Furthermore, the company's balance sheet remains robust, with consolidated cash of INR 2,309 crores. Bharat Forge is exploring inorganic growth opportunities in India, having taken an enabling approval to raise up to INR 2000 crores through debt and NCDs for both organic and inorganic expansion. This strategic capital allocation is aimed at accelerating growth and market penetration in key sectors. The first-time consolidation of K-Drive Mobility (erstwhile AAM Indian Manufacturing Corp's CV business) in Q2 FY26 is also progressing well, contributing to the company's overall performance.

In conclusion, Bharat Forge Limited's Q2 FY26 results highlight a company adept at managing external headwinds through strategic diversification, robust operational efficiency, and a clear focus on high-growth segments like defense and aerospace. Despite global uncertainties, the company's strong order book, proactive initiatives, and healthy balance sheet position it for sustained growth and value creation in the medium to long term. The management's commitment to continuous improvement and strategic expansion reinforces investor confidence in its future trajectory.