Ramkrishna Forgings Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Domestic surge drives 21% QoQ revenue growth: GST rationalization revived automotive sentiment and the railway segment began bulk bogie assembly supplies, while exports stayed flat and North America remained soft.
• Railway is the next growth engine: Full bogie assembly approval unlocks a ₹2,000 cr revenue opportunity for FY27, with railway wheel commercial production starting Q2 FY27 and 40,000 wheels contracted for next year.
• Margins dipped on mix and rejections, recovery promised without a date: Gross margin fell to 45% standalone, and management wants to return to 19-20% EBITDA as fast as possible but explicitly declined to commit to a timeline.
• New capacities are live but underutilized: Aluminium forging just started commercial production, the casting facility is in trial runs, and cold forging sits at 40% utilization pending customer approvals, dragging overall utilization to 66%.
• What to watch next quarter: Whether the Q4 margin rebound materializes, the pace of railway wheel trial approvals from Indian Railways, and any confirmation that North America build rates are actually recovering.

Railway: The Growth Pillar Taking Shape

• Bogie assembly approval is the quarter's biggest unlock: Full approval from Indian Railways qualifies RKFL for bulk orders and opens a ₹2,000 cr sales revenue opportunity for next year, with management calling it a highly accretive margin business.
• Railway wheel timeline firming up: Trial production has started and 300 wheels must be submitted to Indian Railways for approval before bulk production begins; management sticks to the 40,000-wheel supply target for next year under the existing contract.
• Export wheel ambition waits on domestic obligation: Discussions are underway with import customers in export markets, but international supply will only begin after domestic commitments are met and capacity reaches 100,000-plus wheels next year.
• Railway revenue trajectory: Management sees double-digit sales from railways in the next two years and calls the order book extremely strong; FY27 is positioned as the year railway becomes the biggest chunk of traction for RKFL.

Naresh Jalan: "But for RKFL, I think the biggest chunk of traction is going to come from Indian Railways. I think that's the next level of growth, which is going to come from Indian Railways in FY'27."

North America: Worst Behind, Recovery Unproven

• The damage this year was demand-led, not tariff-led: Overall build rates and demand in North America slowed over the past year, but management states tariffs had nothing to do with the change in premix and that RKFL supplies on a DAP basis so carries no direct tariff exposure from Mexico.
• New customer wins are the recovery bridge: Management expects new client additions and order wins to compensate for most of the losses made this year in North America, with full sales from new customers expected from Q1 FY27.
• Existing customer base held up: In spite of the build rate being down, RKFL maintained sales levels with existing North American clients, which management frames as resilience and a source of optimism.
• Recovery is budgeted but cautious: Management has budgeted for a 10% YoY increase in build rate and consumption from existing clients, but remains cautious on January Class 8 order data and acknowledges the recovery may not come from existing customers alone.

Milesh Gandhi: "North America has been more a jewel in our crown, and I would say that it is still there. And I think the diamond is sure to sparkle more."

Capacity Build-Out: Commissioned but Underutilized

• Three new facilities at different stages of ramp: Aluminium forging commenced commercial production only a couple of months ago; the casting facility is under trial run and will commission in Q4 FY26; the Mexico machining facility is nearing commissioning.
• Utilization math explains the 66% headline: The 66% utilization is calculated on total capacity already commissioned, so young facilities like aluminium forging drag the average down; cold forging at 25,000 tons capacity sits at 40% utilization because customer approvals are still at one stage.
• Ramp timelines are back-end loaded: Full utilization of aluminium forging is expected within 8 to 10 months; cold forging is projected to reach 80-85% utilization by the close of next financial year.
• Titanium and aerospace alloys are already in trial: Post commercial production of aluminium forgings, trials of titanium and other alloys have started, and furnaces required for aerospace-grade alloys are already installed; RKFL has begun bidding for defence contracts in new alloys.

Naresh Jalan: "66% of the utilization, which you see right now is basically on the total capacity, which has already been commissioned. Like for aluminium forging, it is about only a couple of months, we have been able to go for production. And as we ramp up this capacity to full utilization, I think within next 8 to 10 months, you will see full utilization."

Margins: A Dip Without a Dated Recovery

• Gross margin fell to 45% standalone: The contraction was driven by product mix and higher rejections in the quarter; management expects a return to normal levels next quarter.
• EBITDA margin recovery is a commitment without a clock: Management wants to get to 19-20% as fast as possible and states they are working aggressively internally on costs, but explicitly declined to put a time frame on it when pressed by an analyst.
• Prior Q4 20% margin commentary walked back: An analyst noted management had previously mentioned a remote possibility of returning to 20% by Q4; management deflected by saying they never give quarterly updates and the market does not work on a quarterly basis, without directly addressing whether the timeline has slipped.
• Cost-side offsets are emerging: Lower power and fuel costs from reduced electricity duty, efficiency improvements, and rooftop renewable power helped offset some pressure; other expenses were marginally down due to lower operating FX losses.

Naresh Jalan: "I don't put a time frame to that. I'll not ballpark. For me, every quarter, I would like to get to that, but it is a process, and we are getting there."

Domestic Demand & Product Diversification

• GST rationalization was the catalyst: The September GST rate cut revived customer sentiment in automotive, with lower tax rates and reduced on-road prices producing a sharp rebound in demand.
• Mining and construction are driving the tipper cycle: The market is splitting into two zones: the trailer market for long-haul is not growing significantly, while consolidation and growth is coming from tipper vehicles used in mining and construction segments.
• PV segment entry is underway but small: RKFL has started receiving orders from two large domestic PV manufacturers, three international PV manufacturers, and one EV segment in the export market; management targets 10%+ revenue share from PV by FY28.
• EV participation is growing with the market: RKFL is positioned as a primary supplier for whoever is making EV vehicles today, and EV numbers are increasing as beneficiaries of green policies; an additional ₹18 cr of business was won from the EV segment this quarter.
• Realizations are stagnant and management won't quantify improvement: Realizations are flat as commodity prices are stable; improvement is only likely with product mix shifts and addition of more assemblies and value-add products, but management declined to put a number on it.

Guidance & Commitments

Key Metrics