This article provides a detailed analysis of Ramkrishna Forgings Limited’s performance for the fiscal year ending March 31, 2024 (annual report). I have also added points from the company’s H1 FY 2025 Investor Presentation.
This analysis aims to offer readers a clear understanding of Ramkrishna Forgings’ current standing performance and future direction within the forging industry.
Key Highlights from annual report 2024
Financial Performance:
Ramkrishna Forgings Limited showed strong financial growth in FY 2024. Revenue from operations increased by 16.28%, reaching ₹348,960.75 lakhs. Profit before tax (excluding exceptional items) was ₹43,653.35 lakhs.
Profit after tax grew by 38.40%, totaling ₹32,606.93 lakhs. Earnings per share (EPS) rose to ₹19.36. Additionally, the company declared interim dividends of ₹2 per equity share for FY 2023-24.
Capital Strategies and Partnerships:
- Market Expansion: In June 2023, Ramkrishna Forgings entered the rail wheel manufacturing sector through a joint venture with Titagarh Rail Systems Limited. This partnership established Ramkrishna Titagarh Rail Wheels Limited, diversifying the company’s product portfolio.
- Capital Infusion: The company successfully executed a Qualified Institutions Placement (QIP), raising ₹1,000 crores. This capital strengthens working capital and addresses existing loan obligations, supporting sustained growth and operational efficiency.
Ramkrishna Forgings Management on Their Vision and Outlook
Ramkrishna Forgings management is highly optimistic about its future growth. The company has a strong financial foundation and a strategic roadmap designed for growth and value creation. They anticipate significant volume growth with a projection of year-on-year increase of about 15% to 20%.
This growth should be majorly due to RKFORGE’s expansion across segments and the introduction of new products. They are particularly focused on expanding their domestic market presence, diversifying their portfolio by venturing into non-automotive segments, and also capitalise on the rapidly growing electric vehicle (EV) market.
RKFORGE is bullish on its expansion into the North American market. The company has been performing exceptionally well in Nothh American markets and expects continued growth. From the management’s commentary, its also evident that RKFORGE is confident in the success of its newly launched trailer axle assembly business and anticipates capturing a substantial market share.
They are investing heavily in a new aluminum forging plant dedicated to EV components. This plant will aim to derive a significant portion of their revenue from EVs or hybrid vehicles by FY27.
What Ramkrishna Forgings is doing to overcome challenges in forging industry?
| Potential Challenges | Mitigation Measures |
|---|---|
| Intense Competition |
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| Economic Volatility |
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| Technological Disruptions |
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| High Delinquency Rates in the Trucking Market |
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| Market Risks |
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RKFORGE Company & Market Overview
Ramkrishna Forgings Limited is the largest forging company in India and the second largest globally, according to a CRISIL report from November 2023. The company manufactures and supplies highly engineered, mission-critical components for both automotive and non-automotive sectors. Mission critical components are basically those which are very important in operation of a system.
The company’s business model includes forging, rolling, machining, fabrication, and casting processes. Ramkrishna Forgings serves various growing industries such as Railways, Automotive, Earth Moving, Mining, Farm Equipment, Oil & Gas, and General Engineering.
The company’s strengths include a strong market position, customized solutions, and a focus on operational excellence. These factors drive its primary revenue streams and reinforce its leadership in the market.
Market Presence & Segmentation
Geographical Reach:
Ramkrishna Forgings operates in over 22 countries, with significant markets in North America and Europe. In H1 FY25, auto exports contributed 40.1% and other exports accounted for 4.9% of revenue, highlighting the company’s global footprint.
Target Customer Segments:
- Automotive Sector: The company serves OEMs and Tier-1 companies, focusing on commercial vehicles, including heavy, medium, and light vehicles. It also supplies components for passenger vehicles and the emerging electric vehicle (EV) market.
- Non-Automotive Sector: Ramkrishna Forgings caters to Railways, Oil & Gas Exploration companies, Farm Equipment Manufacturers, general engineering firms, steel plants, earthmoving, and mining companies.
Market Share & Value Proposition:
As the largest forging company in India, Ramkrishna Forgings holds a dominant market share domestically. Its key value propositions include expertise in forging technology, customized product offerings, integrated solutions, and a global reach with a strong network of customers and partners.
Industry Trends & Sector Analysis
Macroeconomic and Industry Factors Influencing FY24 Performance:
- Growth in Commercial Vehicle (CV) Sales: The Indian CV market grew by 2.97%, reaching 10,66,429 units in FY 2023-24. This growth likely increased demand for Ramkrishna Forgings’ products.
- E-commerce Growth and Logistics Demand: The US trucking market saw strong growth driven by e-commerce expansion. This trend likely boosted demand for the company’s components tailored to logistics and transportation.
- Infrastructure Development: Government investments in infrastructure projects, including railways and mining, contributed to increased demand for Ramkrishna Forgings’ products.
Competitive Landscape & Notable Shifts:
- Industry Fragmentation: The forging industry is fragmented, posing challenges to players. However, Ramkrishna Forgings’ scale and established presence provide a competitive advantage.
- Intense Competition: Surplus capacity in the industry has intensified competition, affecting pricing and profitability. Strategic initiatives and operational efficiencies help mitigate these challenges.
Raw Material Price Volatility: Fluctuations in raw material prices impact input costs and profitability. The company’s strategic sourcing and cost management practices are crucial in maintaining profitability.
Financial Performance & Analysis
| Particulars | As at March 31, 2024 | As at March 31, 2023 | Change (%) |
|---|---|---|---|
| Total Assets | 479,211 | 363,059 | 32.00 |
| Total Liabilities | 133,893 | 137,344 | -2.51 |
| Total Equity | 267,256.19 | 132,492.43 | 101.71 |
| Particulars | FY 2024 | FY 2023 | Change (%) |
|---|---|---|---|
| Net Cash from Operating Activities | 63,635.58 | 77,775.59 | -18.18 |
| Cash Flow from Investing Activities | -95,843 | -29,727 | 222.46 |
| Cash Flow from Financing Activities | 43,992 | -47,057 | -192.64 |
Key Ratios & Metrics
Profitability:
- EBITDA Margin: Increased from 22.39% in FY23 to 23.42% in FY24. This improvement reflects enhanced operational efficiency.
- Net Profit Margin: Rose from 7.85% to 9.34% in FY24, indicating stronger profitability.
Leverage:
- Debt-to-Equity Ratio: Dropped from 0.83 in FY23 to 0.20 in FY24. This decline shows a healthier financial position and reduced reliance on debt financing. The improvement resulted from the successful QIP issuance and debt repayments.
- Interest Coverage Ratio: Slightly increased from 5.85 in FY23 to 6.00 in FY24. This indicates the company’s ability to comfortably meet interest obligations.
Liquidity:
- Current Ratio: Improved from 1.27 in FY23 to 1.58 in FY24. This suggests a stronger short-term liquidity position, likely aided by QIP proceeds.
Earnings Per Share & Dividends:
- Basic EPS: Increased to ₹19.36 in FY24 from ₹14.73 in FY23, showing improved profitability for company.
- Dividends: The company declared interim dividends of ₹2 per share in FY24. This underscores the commitment to rewarding shareholders.
Revenue & Cost Drivers
Revenue Segmentation:
Ramkrishna Forgings’ revenue is primarily driven by:
- Steel Forgings: Constitute 95.96% of revenue from operations, highlighting the company’s core competency in forging technology.
- Exports: Auto exports account for 40.1%, and other exports make up 4.9% in H1 FY25.
Cost Drivers & Operational Efficiencies:
In the presented annual report, specific cost changes are not detailed. However, the improvement in EBITDA and net profit margins indicates effective cost management and operational efficiencies. Strategic initiatives, including the joint venture and capital infusion, have optimized the cost structure and enhanced profitability.
Management Discussion & Analysis
Performance Review for 2024
Ramkrishna Forgings Limited achieved results that met or exceeded expectations in FY 2024. Key drivers behind this performance include increased demand in the commercial vehicle sector and successful expansion into new markets.
Strategic Initiatives & Outcomes
The company undertook major product developments and business transformations. A notable achievement was the joint venture with Titagarh Rail Systems Limited, which expanded Ramkrishna Forgings’ presence in the rail wheel manufacturing sector. Additionally, the successful QIP raised ₹1,000 crores, strengthening the company’s financial position.
Risk Factors & Mitigation
Ramkrishna Forgings faces operational and market risks, including raw material price volatility and intense competition. The company addresses these risks through strategic sourcing and enhancing operational efficiencies. Internal controls and governance measures are in place to manage and mitigate these risks effectively.
Strategic Priorities
Ramkrishna Forgings has several key focus areas. First, it has been winning sizeable orders, including one worth ₹1,522 crore spread across different regions. It also aims to deepen engagement with customers by offering more comprehensive solutions and increasing its share of their overall spending.
Financial Projections & Targets
Although exact figures for 2025 aren’t published, the company expects revenue to keep growing as new orders roll in, customer relationships deepen, and products expand into fresh markets. In Q2 FY25, the consolidated EBITDA margin stood at around 22.09%, which was slightly lower than before. However, management is working to improve this margin. The plan involves continued investments in capacity and capability upgrades.
ESG & Sustainability
Ramkrishna Forgings has set ambitious environmental goals, including net-zero emissions by 2040 and a complete switch to green steel by the same year. It has already commissioned a 6.80 MW rooftop solar project and plans to add 10 MW in FY25. The company aims for zero water discharge by 2030 and aims to cut total waste by half by FY30 through a structured waste management plan.
Social and governance practices are also priorities. The board includes women directors, and the company follows strong ethical guidelines and a whistleblower policy. A dedicated Risk Management Committee oversees compliance and integrates ESG considerations into corporate strategy.
Conclusion & Investment Perspective
From my review, Ramkrishna Forgings appears financially stable, with clear plans for growth. Its strategic emphasis on capacity expansion, product diversification, and emerging EV opportunities points to potential revenue gains. The company’s dedication to ESG goals may also attract investors looking for sustainable options.
While there are always risks tied to any investment, Ramkrishna Forgings’ balanced approach to growth, combined with its track record of profitability and strong governance, suggests it could deliver long-term value.
