Release Date: June 02, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ramkrishna Forgings Ltd (BOM:532527, Financial) reported new order wins worth INR 4,600 crores during FY25, diversified across geographies and industries.
- The company successfully commissioned new cold, hot, and warm forging capacities, increasing total capacity to 268,400 metric tons.
- The merger of ACIL into the parent entity was approved, simplifying the business structure and expected to enhance operational efficiency.
- India Ratings upgraded the company's long-term bank loan rating to IND AA with a stable outlook, reflecting improved financial stability.
- The company received significant new orders from Indian Railways, enhancing its presence in the railway sector and demonstrating the potential of its fabrication business.
Negative Points
- Consolidated revenue for Q4 FY25 was INR 947 crores, a 3% decline year-on-year, indicating challenges in maintaining growth momentum.
- EBITDA for Q4 FY25 was significantly lower at INR 99 crores compared to INR 188 crores in the previous year, reflecting operational challenges.
- An inventory discrepancy amounting to INR 220 crores for FY25 was identified, impacting financial results and raising concerns about internal controls.
- The company faced increased working capital requirements, with a rise of INR 400 crores during the year, affecting cash flow management.
- The imposition of a 10% duty on goods in the US impacted revenue recognition, with INR 70 crores not recognized in Q4 FY25 due to this change.
Q & A Highlights
Q: Can you explain the inventory-related issue and its financial impact?
A: Naresh Jalan, Managing Director, explained that the inventory discrepancy was due to erroneous entries in production and non-recording of rejections, leading to an overstatement of inventory. The financial impact was INR220 crores for FY24-25 and INR50 crores for FY23-24. The management is confident that there will be no further significant financial impact from this issue.
Q: What measures are being taken to address the inventory discrepancy?
A: Naresh Jalan stated that corrective measures have been implemented, including enhanced recordings and stricter controls. The promoter group is committed to bridging the shortfall by issuing warrants convertible into equity shares, aggregating to INR204.75 crores, to be completed within the financial year.
Q: How has the inventory issue affected revenue recognition?
A: Lalit Khetan, CFO, explained that INR170 crores of revenue was not recognized in Q4 due to a change in revenue recognition policy. This was done to ensure prudence and align with best practices. The unrecognized revenue will be recognized in the following quarter.
Q: What is the outlook for debt reduction and working capital management?
A: Naresh Jalan assured that by FY26, there will be a substantial reduction in debt due to improved cash flow, warrant money, and tax refunds. The company is at the end of its CapEx cycle, which will also aid in reducing debt.
Q: How will the recent tariff changes in the US affect the business?
A: Naresh Jalan mentioned that the company has set up a Mexican entity to mitigate the impact of US tariffs. Customers will bear the tariffs, and no order resets have occurred. The company expects a strong recovery in the North American market and has secured new orders post-tariff announcement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
