Detailed Narrative
Q1 FY26 Performance Overview and Profitability Headwinds
Ramkrishna Forgings reported consolidated revenues of Rs. 1,015 Crores for Q1 FY26, marking a 6% year-on-year increase. However, profitability saw a significant decline, with EBITDA falling to Rs. 149 Crores from Rs. 169 Crores in Q1 FY25, resulting in a compressed EBITDA margin of 14.6%, down 300 basis points YoY. Profit After Tax (PAT) was severely impacted, dropping to Rs. 12 Crores from Rs. 55 Crores in the prior year, primarily due to a Rs. 52 Crores hit from inventory valuations, forex losses, and reduced realization.
Impact of Tariffs and Realization Challenges
The quarter commenced on a challenging note, marked by volatility from US tariffs and macroeconomic headwinds🌐. The company confirmed a 25% tariff rate on Light Vehicles and 10% on Commercial Vehicles for direct US exports, impacting 20% of its North American portfolio. While 50% of this tariff impact🌐 is being passed on to customers, the remaining 50% is under negotiation. Realization was further impacted by falling steel prices and currency movements, leading to a Rs. 31.65 Crores reduction for the quarter, with domestic realization down Rs. 8 per kg and export realization down Rs. 5 per kg.
Strong Order Wins and Segmental Traction
Despite the challenging environment, Ramkrishna Forgings secured new orders worth Rs. 660 Crores in Q1 FY26, with a program life of 4 years. Export orders constituted Rs. 502 Crores, driven by the passenger vehicle segment (Rs. 307 Crores) and commercial vehicles (Rs. 195 Crores). Domestic orders amounted to Rs. 158 Crores, with significant contributions from the off-highway (Rs. 99 Crores) and commercial vehicle (Rs. 59 Crores) segments. Notably, 47% of the new order book came from the passenger car segment, and 15% from the broader automotive segment.
Capacity Expansion and New Business Initiatives
The company is actively expanding its capabilities, adding an 8,000-tonne press line and a 3,000-tonne aluminium forging facility, which will collectively add 43,000 metric tonnes of capacity this year. Revenues from the new aluminium forging business are expected to commence from Q4 FY26 or October onwards. Mexico machining operations have begun, with significant revenue projected for FY27. The Rail Wheels Joint Venture is on track to start operations by January 2026, targeting 40,000 wheels in FY27 with a guaranteed off-take.
Capital Structure and Debt Reduction Targets
The company's net debt stood at approximately Rs. 1,800 Crores as of March 2025. Management expects to reduce net debt by Rs. 300-400 Crores during FY26, aiming for a net debt level of Rs. 1,400-1,500 Crores by the end of the fiscal year. The Rail Wheels JV has seen a total investment of Rs. 1,270 Crores, funded by 70% debt (Rs. 900 Crores) and 30% equity (Rs. 370 Crores). Additionally, promoters are committed to infusing over Rs. 200 Crores through warrants by the end of FY26, with 25% to be infused immediately post-Stock Exchange approval.
Margin Outlook and Recovery Path
Management expressed confidence in a gradual and steady recovery of EBITDA margins, expecting to return to 'old days of margins' (implied 21-22% standalone) by Q4 FY26 or Q1 FY27. They anticipate a 300-350 basis points improvement at the consolidated level in the next couple of months. The castings business is expected to maintain a 16-17% margin. The company aims for 85-90% utilization of its new castings capacity in the next half, targeting a monthly run rate of 6,000 tonnes, which is expected to double the top line from castings.