Sanghvi Forging & Engineering Ltd. (Sanghvi Forging) is a manufacturer of forged products for non-automotive sectors. Founded in 1989 and based in Vadodara, India, the company produces forgings of all sizes for markets including oil and gas, power generation, marine and shipbuilding, and other heavy industrial applications. Its heavy forgings include tube forgings, forged bars, shafts and rings. The company’s other product offerings include forged flanges, open-die forgings, instrument forgings, ball forgings and other components.
Babulal Sanghvi, Sanghvi Forging & Engineering Ltd.’s chairman, went to Mumbai in 1970 to join the family’s metal-trading business. After a decade, however, he moved to Baroda as Mumbai’s pollution-filled weather did not suit him. After some trading experience in pipe fittings, Sanghvi started his own manufacturing operation in a small industrial park. The company began by manufacturing small closed-die forgings. When one of his sons, Naresh Sanghvi, joined him in the business in 1993, the fledgling operation expanded to a larger venue to manufacture both pipe fittings and flanges for fertilizer and steel plants.
With the experience gained in the manufacture of high-quality forgings to fulfil the strict technical requirements of their public-sector contracts, they further expanded the operation and built a larger plant for flanges. However, business stagnated for many years due to sluggish payments from Indian government agencies and because of the increase in competition from other suppliers.
In 1997, Jayanti Sanghvi, Babulal’s eldest son and currently the company’s managing director, joined the family business after completing his degree. He soon gained practical experience in running the production and marketing side of the enterprise.
The company’s market approach is to forego automotive forgings because of the highly competitive bidding and typically low profit margins on automotive components. It has instead concentrated on the oil and gas, petrochemical and power-generation industries. The firm mostly produces flanges, tube sheets and other products. In the area of small forgings, the weight range of Sanghvi Forging’s products is up to 12 kg (26.5 pounds) in its closed-die operations to a maximum of 2 tons through its open-die forging operation. The company forges parts from carbon steels, alloy steels, austenitic and martensitic stainless steels, duplex stainless steel, and tool and die steels.
Sanghvi Forging has nurtured its growth by focusing its efforts on the quality control of its products, mainly steel flanges for the oil and gas and other petrochemical projects. At first, these projects were for customers in India, which required very stringent adherence to international standards like ASME and ASTM, with phased inspection processes through qualified independent inspectors of national and international standing. Starting with quality approvals like ISO 9001:2008, ISO 14001:2004, BS OHSAS 18001:2007 and PED 97/23/EC, the company was able to gain approved contractor status for most major Indian engineering projects. Following its domestic success, Sanghvi Forging began to successfully bid on work for foreign customers.
The Path to Growth
With both domestic and foreign customers in place, the company’s financial position gradually strengthened due to robust bookings for forged flanges and nearly full utilization of its installed capacity for the production of closed- and open-die forgings. At near-full capacity, any major expansion could only be done by adding more machinery and equipment.
A case in point was Sanghvi Forging’s machining area, where old, traditional machining lathes were gradually replaced by CNC machine centers. These improved both the quality of finished flanges and helped the company enhance the capacity of its existing facilities to produce more finished products at declining rejection rates.
At about this time, Vikram Sanghvi, Babulal’s youngest son, also joined the company after completing his higher education in business management. The combined efforts and knowledge of the company’s senior management, along with the input of younger family members, spawned new ideas they hope will take the company to greater expansion and financial growth.
It was Jayanti, however, who spearheaded the launch of the firm’s website. One obscure inquiry on that site was from a Canadian distributor of oil and gas industry components, including flanges. That resulted in a contract that made Sanghvi Forging an exporter to Canada, and it gave them a foothold in exporting their products to Canada and France in 2003. The company expanded into the export market and built a considerable client list, which dramatically improved its financial outlook. Jayanti, with his business education, and younger brother Naresh, with his manufacturing experience, teamed up in complementary fashion to move the company ahead with export marketing activity. Ironically, successfully supplying export markets also helped the company gain credibility in their home country and resulted in additional Indian contracts.
A major market breakthrough occurred in 2004, when Shell made Sanghvi Forging an approved supplier of forgings to its Hazira LNG Terminal Project in India. Jayanti acknowledged that deal as a major turning point for the company, and it led to the expansion and growth it is experiencing today. By 2005, Sanghvi Forging quadrupled its output of closed-die forgings and increased the capacity of its operations.
In 2007, Sanghvi Forging began expanding its capacity in open-die forgings, gaining the ability to forge single-piece forgings up to 4 tons in weight. The capability to produce heavy forgings opened up new opportunities for the company and stimulated its investment in new equipment, which continues to the present.
In its history of growth, Sanghvi Forging took its milestones in stride but financed them internally. Before 2010, however, the company’s ambition outran available funding in private equity markets. Consequently, the company had an initial public offering (IPO) in May 2011, and Sanghvi Forging went public to finance its future.
Just prior to the IPO, the company placed orders for two large pieces of equipment: a press and a manipulator. The large manipulator was from the German company Dango & Dienenthal, which also bought a significant stake in the company at its IPO.
Hydraulic Press Increases Product Offerings
For its heavy forgings division, Sanghvi Forging commissioned a new four-column, 4,500-ton open-die hydraulic press in 2013 that enabled the company to expand its product offerings from flanges only to parts up to 40-50 tons in weight, including shafts, shells, discs, rings, die blocks and valve bodies.
As a result, Sanghvi Forging has a broader market base that is expanding from its traditional oil and gas and petrochemical sectors into industries including power generation, defense and shipping. The company’s shipments have increased fivefold in the past 20 years, reaching 18,500 tons per year at present.
Sanghvi Forging now has two steel forging plants located in Gujarat, India. One manufactures forged steel flanges with the help of closed- and open-die hammers. The second, commissioned in 2013, offers an additional 15,000 tons of annual capacity to manufacture heavy forgings.
Backward integration is already under management consideration. To ensure a supply of high-grade raw materials for its operations (as required by certain special customers and the defense sector), for example, Sanghvi Forging is considering its own production-refined steel through the electroslag re-melting (ESR) process. This is a process used for the re-melting and refining of steel and other alloys for high-quality mission-critical applications.
In addition, the company’s marketing efforts are being stepped up through the addition of staff and participation in international exhibitions in the steel, oil drilling, power, defense and heavy-engineering sectors. The company stands to gain a major share of India’s heavy-forging sector due to the absence of other manufacturers’ spare capacity in 30- to 50-ton single-piece forgings.
In only a quarter century, Sanghvi Forging & Engineering Ltd. grew from a small closed-die shop to a global supplier of large and small closed- and open-die forgings. Its incremental growth and profitability have given the company momentum to eye larger projects in expanding markets such as those in Australia and the Middle East.
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