Shares of Bharat Forge Ltd. dropped after German subsidiaries of India’s largest exporter of automotive parts reached a settlement in an anti-trust investigation.

Germany’s national competition regulator, Bundeskartellamt (Federal Cartel Office), was investigating Bharat Forge Aluminiumtechnik GmbH, Bharat Forge CDP GmbH and Bharat Forge Global Holding GmbH, among other companies, in two matters between 2004 and 2018, according to an exchange filing.

In the said matters, the subsidiaries have reached a settlement for an aggregate amount of 32 million euros to be paid over the next five years, the filing said. The terms of settlement are confidential under applicable laws.

While the final settlement for Bharat Forge Aluminiumtechnik GmbH was signed on Wednesday, that for Bharat Forge CDP GmbH and Bharat Forge Global Holding GmbH is in the final stage and expected to be signed early next year.

The amount to be paid over the next five years, according to a Morgan Stanley report, is 6-7% of the Indian parent’s FY23 consolidated net profit. The global research firm remains underweight on Bharat Forge, citing stretched valuations. The stock has more than doubled from its 52-week low in April this year.

“Strong defence order wins could help re-rating,” Morgan Stanley said. “The revenue opportunity is sizeable and the street does not expect any major defence wins over the next year.”

Shares of Bharat Forge fell as much as 6.2% in early trade on Thursday to Rs 505 apiece. Of the 31 analysts tracking the company, 12 have a ‘buy’ rating, 11 suggest a ‘hold’ and the rest recommend a ‘sell’. The stock is trading 3% higher than its 12-month Bloomberg consensus price target of Rs 490.9 apiece.



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