Detailed Narrative
Q4 & FY25 Financial Performance Overview
Ramkrishna Forgings reported a consolidated revenue of ₹947 Crores in Q4 FY25, a 3% decline year-on-year. EBITDA for the quarter stood at ₹99 Crores, significantly lower than the restated ₹188 Crores in Q4 FY24. However, PAT for Q4 FY25 was ₹200 Crores, boosted by a deferred tax credit of ₹223 Crores from the ACIL merger. For the full fiscal year 2025, consolidated revenue grew 9% to ₹4,034 Crores, while EBITDA was ₹560 Crores (down from ₹770 Crores in FY24) and PAT was ₹332 Crores (up from restated ₹283 Crores in FY24).
Inventory Discrepancy and Remedial Actions
An interim joint fact-finding report confirmed an inventory overstatement of ₹220 Crores for FY25 and ₹50 Crores for FY24 due to erroneous entries and non-recording of rejections. Management stated this was not intentional but a lapse due to rapid growth outpacing systems. To address this, promoters will infuse ₹204.75 Crores via warrants by FY26 end, and the company has implemented enhanced controls, stricter processes, and a full physical inventory across all locations, with systems to be auto-fed by September to prevent recurrence.
Capacity Expansion and Business Structure Simplification
The company commissioned 25,000 tonnes of cold forging capacity in January and 14,250 tonnes of hot and warm forging capacity in March, bringing RKFL's standalone capacity to 268,400 metric tonnes. NCLT approved the merger of ACIL into the parent entity on March 27, 2025, with an appointed date of February 20, 2024. The merger of Multitech Auto and Mal Metalliks into Ramkrishna Casting Solution is also underway and expected to be completed this year, simplifying the overall business structure.
Order Wins and Market Outlook
Ramkrishna Forgings secured new order wins worth ₹710 Crores in Q4 FY25, with a program life of 4 years. These orders are diversified, with 74% from the automotive segment and 23% from non-automotive. The company also received orders from Indian Railways for fully assembled bogie frames. Despite a subdued US market and 10% tariffs, management expects a 'hockey stick recovery' in North America and has won new orders post-tariff from various segments, including off-highway, PV, and CV, as well as a large order for its Mexican entity.
Capital Allocation and Debt Management
Working capital increased by approximately ₹400 Crores in FY25, attributed to longer transit times due to the Red Sea issue and inventory build-up for new customer orders. Gross debt is currently around ₹1,800-2,000 Crores. Management is confident of a substantial debt reduction by FY26 end, driven by the ₹204.75 Crores promoter infusion, tax refunds from the ACIL merger, and free cash flow. Capex for FY26 is projected to be ₹100-150 Crores, primarily for maintenance and completing existing WIP, with no major capex planned until mid-FY27.
Revenue Recognition Policy Change
Following the inventory issue, the company revised its revenue recognition policy. In Q4 FY25, approximately ₹170 Crores of revenue was not recognized. This includes ₹100 Crores for goods that left the factory but had not reached the customer's place, and ₹70 Crores related to goods where US duties had not yet been paid. Management stated this new policy will be consistently applied going forward⏳, and the unrecognized revenue will be recognized in the coming quarter.