Amforge Industries, Pune-based forgings manufacturer, has asked for permission to shut down its plant in Chinchwad. Industry players say more will follow and several units are also up for sale.

“At least another five are on the verge of closure and each of these units employs, directly or indirectly, between 300-500 people. The worry is that once a unit closes, it rarely restarts and each unit has a specialization. So, once industry picks up, the OEMs (Original Equipment Manufacturers) will not be able to get the specialist for that part who may have shut shop,” said Joint MD of Trinity Engineers, Asheet Pasricha.

Capacity utilisation in forging units in the region has been falling rapidly since September and is now down to 15-20%, Mr. Pasricha said. Other industry official said that several forgings units in the Pune belt, catering mainly to the commercial vehicle segment, are up for sale but there are few buyers.

Amforge Industries made losses of about Rs. 2.2 crore in the past financial year on a turnover of Rs. 50.8 crore, while its net loss for the quarter ended December 31, 2008, stood at Rs. 2.9 crore on a turnover of Rs. 3.7 crore. In its notice to the BSE, the company stated it has asked for permission to close the plant at Chinchwad due to drastic fall in demand from the automotive sector. The company is a Tier I supplier to Tata Motors and has 151 workers on its rolls.

A company spokesperson said the closure notice was issued on account of high outstandings from OEMs and Tier I suppliers and the poor capacity utilisation.

“We need a viable load, if the break even load is 500 tonnes per month, we can not possibly continue working at 100 tonnes per month. Our outstandings from Tier I suppliers is Rs. 6 crore and for an SME this is unsustainable,” the spokesperson said.

The Pune region has approximately 70 forgings units which cater mainly to the automotive sector. These units account for 45% of the company’s total forging production, making this region the single largest production center in the country, according to the Association of Indian Forging Industry (AIFI), an industry body.

Published in Economic Times dated. 2.2.2009.