Ramkrishna Forgings Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Record revenue, margin ambition intact: The company posted its highest-ever top line and expects to improve on the 22.09% EBITDA margin in the near future, even as raw material price declines weighed on realization.
• Order book provides multi-year visibility: Secured ₹1,522 Crores in new orders to be executed over four years, dominated by North American auto, with a new aluminum forging capacity fully backed by a firm five-year order.
• Subsidiary ramp-up is underway but early: Multitech is established at ₹94 Crores, while JMT and ACIL are just starting production; consolidated revenue guidance of ₹4,500–4,600 Crores for FY25 factors in raw material adjustments and the Globe divestiture.
• Aluminum forging is a cautious, high-upside bet: Management is entering non-ferrous for the first time with a small 3,000-tonne capacity, calling the overseas opportunity 20–30x that size, but is moving deliberately given pricing volatility.
• What to watch next quarter: Whether elevated working capital and receivables moderate as promised, the pace of trailer axle market share gains toward the 25% target, and any concrete signs of the H2 volume acceleration needed to hit full-year growth guidance.

Revenue Growth & Volume Outlook

• Top-line resilience despite price headwinds: Revenue reached a record even as raw material prices fell 4%, which lowered realization per tonne; management reaffirmed 15% volume growth for the full year and 15–20% year-on-year growth as the long-term trajectory.
• H2 acceleration implied but unsubstantiated: Per an analyst's math, hitting 15%+ volume growth requires 20–25% growth in the second half. Management said it is very confident and has a concrete plan but declined to substantiate further or say whether the pickup starts in October or is back-ended in Q4.
• Domestic outperformance despite MHCV decline: Standalone revenue grew 10% while the MHCV industry contracted by a high-single-digit or double-digit percentage, driven by increased share of business, more value-added products and assemblies, and new product development.
• North America bullishness: The market is flattish but RKFL is growing by penetrating new segments and customers; the Mexico facility now being set up is expected to further consolidate and grow that position. A 2027 emission norm change is expected to create a pre-buy, making 2026 a very strong year.
• Raw material procurement lag: There is a quarter lag in raw material procurement, which affects margin timing.

Naresh Jalan: "our internal vision in next 2 (two) years by FY 27, is that our 15% to 20% revenue should be coming from EV or hybrid vehicles. That is the vision we are working with and I think we are on track to achieve our vision."

Order Wins & Capacity Expansion

• ₹1,522 Crores in new orders: North America contributed ₹1,475 Crores (auto ₹1,312 Crores, non-auto ₹163 Crores) and India ₹47 Crores (non-auto ₹39 Crores, railway ₹8 Crores), all to be executed over four years. Management declined to name the new segments or clients.
• Aluminum forging entry: Board approved ₹57.5 Crores to establish 3,000 metric tonnes per annum of aluminum forging capacity at Jamshedpur, primarily for EV transmission components. The capacity is entirely backed by a firm five-year order from overseas OEMs, not Indian OEMs.
• Cold forging and press capacity: Significant CAPEX deployed in H1 on upsetters, cold forging, and an 8,000-tonne hot forgings press line.
• Casting capacity doubling: By FY26 the company will have almost 60,000 tonnes of casting capacity, with an overall aim to double capacity in the next two years, supported by confirmed visibility from existing clients and a strong RFQ pipeline from new customers.
• Ramkrishna Titagarh JV on track: The wheels JV will start producing and delivering to railways in the last quarter of FY26, with another ₹47–50 Crores to be invested in H2.

Naresh Jalan: "The opportunity is, I think, almost 30x of the capacity which we are putting in right now. So, it is just a tip of the iceberg."

Subsidiaries & Consolidation

• Multitech established, others ramping: Multitech already at ₹94 Crores; JMT (Ramkrishna Castings) production started and capacity is being added; ACIL is ramping up and undergoing renovation.
• Inter-company elimination: Approximately ₹40 Crores was eliminated due to material shipped from the parent to subsidiaries for value-add that has not yet been sold to customers; the percentage will change as subsidiaries ramp up but management gave no specific quantum.
• Globe divestiture closed: The 100% stake in Globe All India Services was sold to Yatra Online for ₹128 Crores cash; the disposal has a commensurate impact on the consolidated top line.
• TSUYO investment withdrawn: The company pulled out of the TSUYO investment; the ₹10 Crores paid will be refunded.
• Consolidated revenue guidance: FY25 consolidated revenue expected at ₹4,500–4,600 Crores, adjusted for the Globe disposal and raw material price decreases. Management clarified the 500 Crore target was always on a consolidated basis, not for subsidiaries alone.

Trailer Axle & Proprietary Products

• Trailer axle assembly launched: Achieved sales of almost ₹20+ Crores in the quarter; the axles are patented, proprietary items going directly to consumers (B2C segment, not OEM).
• Market share ambition: The trailer axle market is over ₹2,000 Crores and growing 17–20% annually. Management expects to reach almost 25% market share by year-end or Q1 next year, with 40–50% QoQ growth until that level is achieved.
• More proprietary parts coming: Management said it will launch additional proprietary parts in coming months or by next quarter, which it expects will be exceptionally good for growth in assembled verticals.

Naresh Jalan: "This is a Rs. 2,000 plus Crores market and growing at a very rapid pace of 17% to 20% every year. And it's that we are expecting to at least by this year-end or first quarter of next year to get to almost 25% market share in this segment."

Balance Sheet & Working Capital

• Debt increased by ₹282 Crores in H1: Driven by CAPEX in upsetters, cold forging, and the 8,000-tonne press, investment in subsidiary ramp-up, and inventory build-up. Management expects debt to normalize as benefits from these initiatives materialize, with more substantial momentum from FY26 onwards.
• Inventory elevated on samples and Red Sea: Inventory increased due to production ramp-up at subsidiaries, stock build-up for new products and order wins, and stock in transit and at warehouses because of Red Sea issues. Samples and development inventory will liquidate as approvals convert to bulk supplies.
• Receivables spike should correct: Consolidated receivables rose ₹119 Crores mainly from delayed overseas customer receipts; management expects this to moderate and improve in the upcoming quarter, with only marginal impact in days as sales also increased.
• Working capital to moderate: Elevated working capital will come down in coming quarters as sample approvals convert to bulk supplies.

Aluminum Forging & EV Strategy

• Cautious entry into non-ferrous: Management has never ventured into non-ferrous before and is entering in a very cautious mode because of pricing volatility. The initial 3,000-tonne capacity is a test of the waters.
• Overseas opportunity dwarfs initial capacity: The total available opportunity in the overseas market is 20x the capacity being set up for the current customer; management called it the tip of the iceberg.
• Domestic expansion contingent on execution: Once the company gains confidence by delivering bulk supplies for a few months, it will extend CAPEX to cater to the domestic market as well, with large amounts of CAPEX to be allocated to aluminum in coming years.
• EV revenue vision: Internal target is 15–20% of revenue from EV or hybrid vehicles by FY27; management says it is on track. The biggest PV chunk is expected by FY26 from both North America and India.

Naresh Jalan: "We would want to test waters because we have never ever ventured in non-ferrous ever before. So, we want to enter into non-ferrous in a very cautious mode because of the volatility in the pricing and other things."

Guidance & Commitments

Key Metrics