Ladies and gentlemen, good day . Welcome to the Q1 FY 2026 annual conference call of Ramkrishna Forgings Limited, hosted by IIFL Securities Capital Limited . As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal office or by pressing *10 on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Joseph George from IIFL Capital . Thank you, and over to you, sir.
Thank you, Musk an. Good evening, everyone. On behalf of IIFL Capital, I welcome you all to the 1Q FY 2026 results conference Call of Ramkrishna Forgings Limited. I also welcome the senior management. From the management team, we have Mr. Naresh Jalan, Managing Director; Mr. Chaitanya Jalan, Whole-Time Director; Mr. Lalit Khetan, Whole-Time Director and CFO; Mr. Milesh Gandhi, Whole-Time Director; and Mr. Rajesh Mundhra, VP Finance and Company Secretary. Now, I will hand over the call to Mr. Khetan to take the call forward. Over to you, sir.
Thank you, Joseph. Good evening, everyone, and thank you for joining us on the call to discuss the Q1 FY 2026 results. I trust all of you had a chance to look at the earnings that we have shared earlier. Financial year 2025-2026 has come in on a challenging note. There has been a lot of noise on tariffs and resulting volatility and uncertainty, coupled with macroeconomic challenges, has caused an environment where customers are hesitant to spend and OEM cars costs in the position. As a result, we also have struggled with the sluggishness in demand from our customers. To begin with, what's top of the mind of everyone are the tariffs recently announced by the U.S. administration, including [those on] automobile and auto components imports. While the crisis continues to evolve, we believe these measures will primarily impact demand in the short run.
There could be a scenario where some opportunities open up, but there will be some disruptions in demand and supply. We have all seen the announcements from President Trump that tariffs of 25% will commence from August 1 and are closely monitoring the development to ensure that we comply with all applicable regulations and any contingency detection for our customers is minimized. Secondly, the other development that has emerged, and this will impact all markets, is the potential disruptions due to supply chain complexities and heavy reliance on China for rare earth materials. China and Polish automakers could encounter certain challenges.
On the top of these two developments from a global perspective, coming to the India market, we have seen the quarter one of the current financial year mixed trend with the headwinds and the major industrial output, a bit slowdown in some of the industrial sectors and the IIP numbers, etc. For commercial batches, we saw volume decline in the overall market, though at the RKFL, we have been able to improve on our domestic performance. For much further, I would like to add, the commercial batches' segment has been under pressure lately, but times of recovery are also emerging. Coming to capacity addition, we commenced the financial year at the present capacity of 268,410 tons, and we are in the process of adding our 8,000-ton baseline and 3,000-ton aluminium forging facilities that will add capacity further by 43,000 metric tons during this year.
Now, let me share some financial highlights for the first quarter. We reported consolidated revenues of INR 1,015 crore. That is higher by 6% on a year-on-year basis. EBITDA, excluding other income, for the quarter is INR 149 crore, which is lower by INR 20 crore compared to EBITDA of INR 169 crore for Q1 FY 2025. EBITDA margin consolidated is 14.6%, lower by 300 points year- on- year. Profit after tax for the quarter is INR 12 crore compared to INR 55 crore in Q1 FY 2025. The other profit is interested mainly during this quarter on increase of, sorry, decrease in realization and change in export domestic mix. The impact together of this change in mix and realization is about INR 40 crore, which we have highlighted in our presentation also. Further, there are impacts on the inventory valuations also on the warehouses overseas due to correction in indexes.
Apart from that, there is a forex loss accounting in our JV Ramkrishna Titagarh Rail Wheels due to the import of machines, and now the machine has already reached the site. We have to account for the forex loss, and for our share, we have to account for a loss of INR 6.66 crore in this quarter. Apart from that, we have also incurred a INR 5 crore loss in Ramkrishna Forgings Limited on account of import of machines which are under installation. Altogether, there is an impact of about INR 52 crore on the profitability during the quarter. Now, I hand over the proceedings to Mr. Milesh for having you an update in marketing. Over to Milesh.
Thank you, Lalit. I would like to brief the audience. The company received new orders worth INR 660 crore in quarter one, program life being four years. For railways, we received an order of INR 23 crore for the one-year period. Against the above, export orders are worth INR 502 crore, and domestic orders are worth INR 158 crore. In the domestic orders of INR 158 crore, INR 99 crore come from the off-highway segment, INR 59 crore come from the commercial vehicle segment. In the exports, against the INR 502 crore, INR 307 crore come from the passenger vehicle segment. That is the PV segment. This also includes orders directly from American OEMs. Apart from that, INR 195 crore come from the commercial vehicle segment and prominently from Europe.
We would like to mention in line with what we had committed in the last quarter, kindly note that 47% of our new order book for quarter one comes from the passenger car segment, and another 15% comes from the automotive segment. We are maintaining a healthy position in our commercial vehicle segment too by increasing our penetration in the European market. That's from my side. Thank you.
Thank you, Milesh. Now, I'll hand over the line to the moderator for the Q&A session.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on the touch-tone telephone. If you wish to remove your telephone question queue, you may press star and two. Participants are requested to use handsets while asking a question. We will wait for a moment while the question queue assembles. The first question is from the line of Mitul Shah from DAM Capital. Please go ahead.
Thank you for the opportunity. Sir, I have a few questions, starting with the U.S. tariff-related impact. In this quarter, how much impact is someone has to gauge about that? We have to absorb the tariffs before it gets negotiated or settled down between us and OEM customers. What was the effective tariff rate we applied during the quarter on whatever we exported to North America or U.S.?
Mitul, for quarter one, our tariff rate for light vehicles, light LV and passenger vehicles was 25% flat as in auto tariffs. For commercial vehicles, it was 10%. Going forward also, as we see right now, the new tariff which has been announced is not going to be applicable on auto. Auto has been kept as a separate field. Auto will continue to attract 25% in terms of passenger vehicles and 10% in commercial vehicles. As we understand today, unless there is a further change in terms of the final releases which come before August 7th. As of now, whatever statements we have made till now, what we see on the final prints will be passed at this rate unless there is a change in terms of the overall picture by the Trump administration.
In terms of what has been the total outflow in terms of cash flow for the company, it has been close to around, for our U.S. shipments, it's going to add around INR 6 crore, out of which we have received customer confirmation to the tune of almost 50% of full pass-on. For the balance 50%, we are still negotiating with the customers back and forth for the balance INR 3 crore to how and how much we will need to absorb and how much will need to be paid by the customers. It is still a fluid situation. Going forward, we will be having more clarity in the next couple of months as to exact quantum of tariffs in terms of outflow from the company or in terms of the overall basket of the company is done and how much is being paid by the customer.
As of now, whatever we have clarity, we have 50% which is being absorbed by the customer and 50% of the balance we are still negotiating. To just clarify your exact position to all our North American exports, almost 80% of our exports go into Mexico, which is not there in tariffs, and we are just supplying our goods into the manufacturing locations of the customer in Mexico and Canada. All these are basically not in tariffs. Only 20% of our portfolio to North America is getting into tariffs, which is directly getting into U.S.
Just clarification, this INR 6 crore entire we have captured for that time, or only INR 3 crore we have taken in P&L? INR 3 crore, we already got confirmation, so not taken.
No, we have not. We have basically not captured anything right now in our P&L. We have captured whatever customer confirmations we have received, we have captured in the P&L, and balance we have not yet captured.
INR 3 crore for that time, we have to absorb as a part of the tariff.
No, we still feel that it is receivable. I think we should be by the end of, because right now, customer does not also have any certainty in terms of what is going to be the exact tariff. I think by the end of August, we should have complete clarity on this.
Right. My question is that in this P&L, we have taken the hit of INR 6 crore or INR 3 crore right now?
No, we have not. No, we have not taken any impact right now of the tariff in the P&L.
Okay. The second question on the realization, sir, as currency is already going adverse or favorable in terms of the rupee depreciation, still our realization on the export market as per the presentation has fallen meaningfully. Is it a commodity pass-on or because of this tariff thing or any price?
No, it is basically, Mitul, I think if you see the last quarter, last quarter currency, if you are looking at it, in the last 20 days, currency has again come back. Otherwise, currency year- on- year, there was a decline in terms of last quarter. There has been a steel price decline as far as index is concerned. That steel price has impacted the fall in steel prices in the U.S. market and has brought the realization on the downward trend.
Overall, how much would be the impact of steel or how much steel price impact have we taken in terms of realization both for domestic export roughly per kg basis?
Yeah. Nitul, the total rear one-year projected is INR 31.6 crore. INR 31 crore is on account of the amount here. That's on the specifically, the semicontinental area is still another area because industrial areas are coming. Overall, the realization is INR 31.6 crore.
Per kg, you are talking, sir?
Yes. If you look at, Mitul, on the domestic side, we have lost INR 8 per kg. On the export side, INR 5 per kg.
Okay. Understood. Last question on this new order of INR 500 crore plus from the export side, we highlighted INR 300 crore from U.S. OEM. That is related to an EV player like that aluminium business, which we were expecting better.
It is. Aluminum forging is still a work in progress. I think we should start seeing revenues from this quarter end or October onwards from that field. This new order book is from the new OEM from North America market.
That is from passenger vehicle or commercial vehicle?
PVs. I think Milesh in the opening statement has already clarified that this new order book, as we had said, our increased focus on passenger vehicle, this entire new order book of INR 300 crore plus is from the passenger vehicle.
From ICE only, right now?
From ICE.
Yes, it is from ICE only.
Thanks, sir. Thanks a lot. I'll fall back on the queue.
Thank you. The next question is from the line of Balasubramanian from Arihant Capital Markets . Please go ahead.
Good evening, sir. Thank you so much for the opportunity. Sir, on the Mexico facilities, I think the opening operations have begun. What kind of contributions we can expect from FY 2026 onwards? Is there any plan to expand into the forging side?
I think in Mexico operations, we are only going to continue to add machining operations, a value add. Forging and castings are going to be shipped from India. We have just started, and I think by the last quarter, we are supposed to increase our capacity. We are going to see significant revenue in FY 2027 from our Mexico operations.
Okay, sir. Sir, on the EV side, we are investing 3,000 tons of capacity for aluminium EV components. It's an addressable market. How does this align with the local OEM demand shifts?
I think we are very, very bullish about our aluminium forging. This is our first entry into nonferrous components, and this is just the start of our investment into nonferrous. I think once we are able to successfully launch our nonferrous activity, the demand side, there is a huge potential globally in terms of aluminium forging. We think that the next level of growth in the next couple of years is going to come from aluminium forging, where we are looking at once we are successful and once we are able to utilize, move to higher utilization in this current capacity of 3,000 tons, we are going to just continue to replicate this capacity.
Okay, good. Sir, on the driving delivery side, are we on track to commence the operation by January 2026? What is the current status in the industry of wheel chassis side?
I think for our wheel plant, we are well on track. I think the plant is moving in a great shape. I think we are on track to submit by last quarter of this financial year to submit samples for approval for Indian Railways and look at getting significant revenue of 40,000 wheels in FY 2027 from this joint venture. As everybody knows, this is a complete 80,000-plus wheels are guaranteed to be as an offtake plan. We are not worried in terms of capacity utilization in this capacity.
Yes, thank you.
Thank you. Thank you very much. The next question is from the line of Dhaval Shah from Girik Capital . Please go ahead.
Yeah. Hello, team. Thank you for the opportunity. A couple of questions from my side. First is, on the P&L, what will be the impact of the inventory correction which have been taken? The EBITDA margin is 14.6%. If you get healthier understands, if I'm adjustable for that inventory problem, what will be the EBITDA margin? Related to that, the warrant money that's basically coming from the promoter side. Has any part of it come in the company? Any timeline if you can help with, along with the current debt position of the company?
I would like to address this question. First, on the promoter's money, we are going to increase this money very shortly as we are waiting for the approval from the stock exchange, the initial approval. We expect that after this, they were waiting for some formality to be complied with, and we are open. This will be done shortly, and we expect the money in the next two weeks' time.
Okay. Number two, there are no adjustments on account of inventory in the current quarter number. Okay? All the inventory adjustment has been done and accounted for till March 31st, 2025. Okay?
Okay. Okay. Okay.
What was your third part of the question?
Yeah. I'll give code this: it started dropping EBITDA margin year- over- year. How should I, how should we rate this margin? Is it because of a big operating lead average, because of only a 1% overall cropland growth versus we were ready with all our capacities as of, you know, as of last year? FY 2026 was the year of growth for us. Given the lack of demand, the volume wouldn't have happened. How should we see this margin trajectory going forward? Also, this 14.6% margin, can this help me understand the reason for such a drop?
I think. I think, Milesh, if you go through the presentation and as Milesh has explained in his opening remarks, almost INR 40 crore of effect basically has been in terms of realization, in terms of mostly in terms of our export and domestic steel price drop, which has happened. As you know, we had already shipped this material beforehand. The consumption of this material has happened in this quarter. The steel price decrease, which had happened on April 1, had to be absorbed in the cost itself. As our basically, the trend continues, if there is a steel price drop in the quarter, the same has to be passed on to the customer from April- June 30th. Similarly, from July 1s, there is a new pricing setting. Obviously, quarter- on- quarter, there is going to be a realization plus currency both playing together considering March ending.
In this quarter, the currency and raw material pricing both have affected the realization in our exports, and as well as there is a drop in realization in the domestic market also due to steel price decrease. Both taken together, we have almost had a hit of around INR 40 crore, which has dented the margins. In terms of overall performance of the company, the company still expects that steel prices to stabilize and the company to get back into the stable margin regime.
Okay. Noted, sir. This also regarding, I think in our discussion, we were discussing about the accounting for our shipments once it reaches the customer's port. Is there also an impact because of that in this?
No, I think that was one we have already taken in the month of March. Now we have the policy which was changed. I think that is in prevalence. I think accordingly, you will see every quarter that things will continue in the same fashion. I think whatever happened in the month of March now has taken into.
A regular position.
Hello?
Yeah.
Hello.
Yes, sir.
It has already been taken as a regular position, and that is the way we are now. New normal for us.
Yes. In the base year, those revenues were recorded in the other. That's why the next two, three quarters, we should see that impact, right? Because in the base year.
No, not two, three quarters. I think what you are seeing now is the worst behind us. I think going forward, you will see a stable thing going on our port logistics.
Okay. I would just like to further add to what Naresh is saying. There will be now no adjustment on the upward or downward side on account of that accounting amount or change in accounting amount. Whatever little market demand and supply can, according to the three-quarterly reported, and there. In terms of that, it's now not real at all.
Got it, sir.
Sir, what about the current growth-based net debt position? How do you see that over the next two, three quarters developing?
Currently, when we see the growth, it's around March, when we cannot market produce to the same level. We expect that it will go down, which got still on that fall. At least INR 300 crore-INR 400 crore to get this return, which will be happening in increase per year. By the end of FY 2026, my debt level will be somewhere around INR 40 crore- INR 50 crore.
Net debt level?
Because of the control level. Okay?
Yeah, net debt control level. Okay. Okay. Got it, sir. Thank you.
Thank you. The next question is from the line of Siddharth Bassi from [Sass & B] . Please go ahead.
Good evening, sir. Thank you for the opportunity. A few questions, actually. I'll ask a question, [wait for] answer, and then ask the next. That's the best way to go forward. Firstly, we have obviously reported a sharp drop in profitability. If we were to adjust for the one-time expenses that have happened, the losses on the currency, etc., and let's assume that that would have not happened, what would our profit have been in this quarter? You mentioned there was a margin shift due to domestic and export mix. What would our profit have been had the one-time machining costs and currency expenses not happened, assuming they will not happen in the future?
At the control level, I think on the rough side, on our approximate side, we should have been higher by almost 300- 350 basis points.
Okay, about.
Hello?
How do we ask for INR 17 crore? Should have been, say, what would have been the ballpark number?
Can you repeat the question? I broke down in the middle.
I'm saying the profitability right now is INR 17 crore. If we remove for the one-time that has happened, including machine cost, currency cost, etc., what would have been our profit number if we take those costs as one-time and they won't happen in the future?
You're talking about the PAT number?
Yes, PAT number.
Once we have to look at this, we have given you impact on the price realization and the forex. If that has been the higher of the INR 45 crore have been added in the control for profitability, and if that impact has to be reduced, overall profit would have been on the control basis, would have been higher by almost INR 40 crore.
Almost by INR 40 crore. We would have been somewhere around INR 57 crore-INR 58 crore.
Correct.
Perfect. Next question, sir. How did we go wrong on the steel pricing? Don't we hedge our steel and currency? In the future, also steel prices may vary. We can't have losses because of a change in steel prices.
I think steel prices, we cannot hedge. I think we are buying steel in India, and there is no help we can do in terms of steel pricing is concerned because when we export to the U.S. and our current all the contracts based out of the U.S. are based on steel pricing in the U.S. basically, both are two different geographies, and we cannot hedge in terms of steel pricing are concerned. There is no formula or no place wherein we can hedge the currency. I mean, we can hedge the currency, but we cannot create a hedge on steel pricing.
Understood. Understood.
Basically, one more thing which you will need to understand because it is when the customer consumes this part, that is the time the invoice is ready. We need to have, with the current market situation, we cannot predict when the customer is going to ultimately consume the parts. Also, second is that both geographies being different, if we start, we may incur more losses if we start hedging and this crossover.
Understood. For the next question, when we are exporting to Mexico, which is basically to understand the tariff impact, are we basically exporting to companies that are manufacturing in the U.S., basically U.S. companies, and are then exporting back to the U.S.? Or are we sending it to our own plants, which is then exporting to the U.S.?
No, we are sending to the companies who have manufacturing based out of Mexico, and they are assembling it into the fully assembled part or vehicle, and then exporting it to the U.S.
What?
Under USMCA.
The USMCA is obviously 94% of those goods are not being targeted anyway. We are not in any special bad place.
Yes.
The conversation regarding our stuffing on the U.S. tariffs is basically misplaced because Mexico auto imports are a part of the USMCA, and we are exporting to American or other companies which are selling in Mexico and sending to the U.S. There is no tariff impact per se on our case.
No, tariff per se on our Mexican shipments are not there. Out of our North American export, 20% directly go into the U.S., wherein we are suffering this tariff impact. That's the reason I said that INR 6 crore to the earlier question, last quarter, there has been an impact of INR 6 crore on account of tariff.
Understood, sir. Considering the company of our size, that's a marginal impact versus one that she's still estimating.
I can say is like for all our Canada shipments, we have FOB shipments. As such, also, we are zero impacted, and the customer is picking up this, and customer is paying for the tariff to Canada. Similarly, for Mexico operations, all our material goes into Mexico, and it ships to the local locations of the customer in Mexico. We are not impacted by any tariffs for all our shipments to Mexico and Canada. Only shipments going into U.S. are impacted. I don't know why what market is formulating that. Out of our total North America shipments in terms of our exports, 20% of our exports directly go into U.S.
Understood, sir. Just another question, is this still worse in terms of our margin performance and our PAT performance? In the future, considering the market remains as it is, status quo, because for me, it's the worst in the market cycle right now. Are these the worst numbers that the company is going to give? Can we go back up to the INR 70 crore- INR 75 crore profitability by next quarter or the next semester?
No, I think in terms of profitability, in terms of EBITDA levels, I think with depreciation, if you see at the control level, we have very high depreciation right now with all the new equipment and other things in place. EBITDA margin levels, I think this is the worst, which is there behind us. I think you will see a gradual and a steady recovery quarter on quarter, every quarter. As already guided in our earlier calls also, the company is doing what is required to go back to the old margin days. I think it should not be too long before we get to that place.
Understood. Just a few more questions. Firstly, big, big compliments to Jalan sir and the family for standing by individual investors and the market for providing the inventory losses from their own pocket in terms of taking warrants at INR 2,100. Just a question on that. Since you mentioned two weeks' delay, we're putting the money in. Are we putting in the 25%, or are we going to fully subsidize 100% of the warrants with the INR 200 crore amount?
No, I think to answer your question, as guided in our earlier call, we are putting in 25% on an immediate basis as soon as we receive stock exchange approval. As committed, before the end of this financial year of FY 2026, the entire money is going to come into the company, and the entire INR 200-plus crores are going to be paid and converted to shares from warrants.
Understood. Any such other opportunities in terms of what the business is looking at, which, because I'm assuming with the tariffs more happening as well, other opportunities open up. Anything we're looking at on that front? Secondly, sir, since our exports, since a lot of our money is coming from exports and the European markets also, and a lot of our CV orders have come from the European markets, any view on the market there and how is it performing? There is such a lockpick there because in the last call, you mentioned that the CV cycle is reaching a place on demand and that there will come a time when orders will be placed. Any views on that?
I think Europe is doing extremely well for us. If you see the last quarter also, Europe's performance has been extremely good. I think what we are seeing right now is extremely good traction from Europe. I can very confidently say in FY 2027, our revenues from Europe are going to equally match North American operations. I think we are not going to be impacted, or we are going to be only impacted for the next couple of months for our North America sales. Europe is one of the strongest markets for us going forward and is going to make up more than what we are going to lose in terms of overall demand in North America. We have not lost any business in North America. We continue to gain market share in North America. Overall market demand per se is down in North America.
That is what is reflecting in our sales in terms of our North America operations. If the sales come back, I think North America operations are also going to equally do well for us with the new order wins, both in non-auto and auto, which we have gained in the last couple of months despite tariffs. We have won INR 300+ crore from PV application, and the rest of North America orders are from non-auto segment. Keeping together, I think the flags for the overall exports, we continue to ride on new order wins, and we are extremely confident of doing well. To answer your second question, what more we are trying to do, we are increasing our wallet share considerably in the Indian Railways.
I think I'll be happy to say that we have just received approval a few weeks back to supply the complete undercarriage in assembled form in Indian Railways for passenger coaches, which will give us an incremental revenue of almost INR 50 crore-INR 75 crore in this financial year. We are looking to do almost INR 300+ crore of revenue in the next financial year from only assembled undercarriage, for which we have already done and completed CapEx in the previous year. We were just waiting for final approvals from Indian Railways. The approvals are already in place last few weeks back. We are expected to supply the development orders which we have already received from Railways for about INR 50 crore in this financial year.
Sir, why don't we, as a company, disclose this to the exchanges or order when the CapEx goes, add more to the investor sentiment for their regarding, especially in tough times and tough markets?
I think as a policy decision, after what had happened in the last year due to speculation because of our order win announcement, we had a lot of heartburns with our customers. We have taken it as a policy matter to only do order announcements with our earnings calls and not do midway any order announcements or anything related to that. That is a policy decision we have made. We don't want to antagonize any of our customers in the export market or the domestic market. Order wins without customer name also, there are a lot of speculations, and this speculation leads to a lot of heartburns at the customer end. Basically, we don't want to add on to all these problems for us.
Just one last question. This is more again regarding the markets in terms of, have you been in touch with other mutual funds since over the last couple of quarters? We've seen Aditya Birla and others. Aditya Birla Sun Life has completely pulled out its holdings of Ramkrishna Forgings Limited. A couple of other mutual funds have also cut positions. Are we in touch with any mutual funds to explain to them how the company is doing, what the company is all about, to get better people on the cap table?
We are always available to meet and receive any investors, irrelevant of the sizes they are concerned and irrelevant of the background. We are happy to take them through the performance of the company, take them through the plans of the company. We are always in touch. Our higher people are always in touch with the investors. I think at the right moment, as the uncertainty fades away and as the company's performance improves, we are sure that investors will come back to the stock. It's a matter of time. I think we are patiently waiting, and I think that's what best we can do. We continue to work on what is there on the table for us and keep on performing, keep on navigating the tough times with new order wins, new geographies, and new business opportunities in these tough times.
I think that's what is our job and that's what we are doing continuously.
Right, sir. Thank you so much. Just a couple of suggestions, if you don't mind. Since a lot of reinvestors also go through the numbers, it would be great if in the first phase, A, obviously you talk about the order wins of the undercarriage and the kind of profitability we expect from it and the revenues we expect in the future. Secondly, in terms of this quarter, optically, the number of PAT looks really bad, and the EBITDA looks really bad. It would be great in the first phase if you explain that the one-time which has happened this time, including the steel impact and the machine depreciation impact and the currency impact, our PAT would have been north of INR 50 crore. That would bring in a lot of confidence in terms of company performance.
I think your suggestion, what you are giving is correct. If you see our presentation, we have already explained the INR 50 crore, why profit has been impacted. Line item-wise, we have provided details in our presentation with the results. If you go through the presentation, you will be able to see the INR 50 crore impact we have mentioned line item-wise, what is it for domestic and everything. Your suggestion is well taken, and we will ensure more transparency going forward.
Absolutely. Thank you, sir. I'm an individual investor, decent new investor in the company. After seeing that we had an inventory issue, and when Mr. Jalan, how graciously he has decided to shield individual investors and retail investors by taking the hit of himself and the family, shows that the company really means business and wants to do well. Although you have one lakh share, it means a lot that you're leaving us behind two small individual shareholders as well. Thank you so much. All the best .
Thank you. Thank you very much.
Thank you. The next question is from the line of Aditya Agrawal from Old Bridge Capital Management . Please go ahead.
Good evening, sir. Thank you for the opportunity, and congratulations on the good set of volumes received. Sir, my question is on the, firstly, on the undercarriage order that you have got, is this over and above the Vande Bharat order that you won maybe last year up to INR 270 crore?
Yes, that is over and above. Vande Bharat order which we have received, that is from BHEL, and that is a private sector. Now, what we have received approval also from Indian Railways and the order of INR 60 crore from Indian Railways directly to supply complete assembled undercarriage.
Sir, what's the status on the Vande Bharat order? Have you started the production, or are we still in progress on that?
No, we have already started the proto manufacturing. I think by October, we should submit the proto design, and everything else has been approved by ACIL. Proto submission date is October, and we are well on track to submit it within October, or the proto submission is going to happen. We have an obligation to supply, I think, Milesh, what is the exact quantum by March we are going to supply?
Basically, for the first two train sets, that is the first two train sets of 16 coaches, we will have 32 bogies. Total 64 we need to complete by March.
Okay. Okay. Okay.
That's the 64.
The 64 is going to go to Vande Bharat, and the Indian Railways order is going to also directly go to Indian Railways, which is going to, we are trying to get that also completed. Our wishlist is before March year-end.
Perfect. All right. Sir, my second question is on the newer, much newer segment costings. If I look at the differential between control numbers and the standalone numbers, the amount comes out to be INR 78 crore. Is this, this number should all be proportionate to the costing payment?
Okay. Repeat that question.
Yes. My question was on the costing part. On standalone, we basically report the forging fee services. With the new restructuring, we have done the costing for coming to control business. In this quarter, the difference between the standalone and consolidated is close to INR 78 crore. Should we proportionate the INR 78 crore to the costings, fully to the costing segment?
Depends on the cost.
In New York State, just on the costing only. This is a little bit cost either Mexico or U.S. brand or.
Sorry to interrupt, sir. Your voice is not clear properly.
Hello, are you getting my voice now?
Yes, sir. Now it's better.
Hello?
Yes, sir. Now it's better. Go ahead.
Yeah, yeah. I was just verifying. It's largely to the costing business.
Okay. Given that, if I compare this number to last year, last year this number would have been around INR 73 crore. Given that you have given a very healthy show in the domestic volumes in forgings, what is the kind of ramp-up we are looking at in the casting segments? What is the current utilization of the capacity and what are the volumes that are picked up in the casting stock?
Casting, to answer your question, we have the capacity which we have acquired is almost running at 90% plus utilization. I think new capacity which we have picked up is going to go into production or trial runs, I think, in the next two weeks' time. We are hoping to offer higher utilization in casting in this quarter and in the next quarter to go almost to a monthly run rate of 6,000 tons. I think we are looking at almost in the next half to double our topline from the casting.
Okay. Casting is currently running at 90% utilization, right?
Yes.
Okay.
The new facility of the casting, the addition of the casting facility which we have done for close to 40,000 metric tons, is going to go into trial runs in the next two weeks' time. That capacity is going to add up to this capacity. I think almost two times the capacity we have new put up. This is going to create revenue in the next half of the year for us.
You are looking at 6,000 tons of monthly volume optic, right?
Yes.
Okay. What will be the full, I guess, the full capacity after the new addition will be close to 63,000 tons or 64,000 tons, right?
Almost around that. We are looking at 70,000 tons per annum.
Technically, we are looking at 100% kind of utilization from day one?
No, we are looking at 90%. We have a confirmed order book from casting. I think we are just waiting for the entire capacity as soon as it comes. We are looking at in the next half to go to almost 85%- 90% replacing from castings.
If I just may ask, sir, what would be the per ton realization in the casting business you had?
Lalit, can you tell what is the realization in castings?
It varies between 50- 60 kg per pound.
Sorry, sir. Your voice is cracking.
Yeah, it's the range between INR 120- INR 150 per kg.
Okay. This all will be machined, right?
Yes, 99% of the castings we are supplying is in machine condition.
Okay. Thank you for that. Just one more scraping question. This quarter, our other expenses came in around INR 197 crore other expenses, which was down from last quarter, 5% on a YOY basis as well as 4%. What has driven this, driven the downward trajectory of these expenses?
I think we will continuously see a downward trend in terms of our other expenses. With the kind of cost cutting and other things we are able to do, in terms of processing charges and other things, the way we are right now working on it, you will continuously see a downward trend in those expenses for the near future. That will be the new norms going forward in our cases.
Okay. Okay, sir. Okay. Thank you. Thank you for that.
Thank you. The next question is from the line of Sunny from MK Ventures. Please go ahead.
Yeah. Hi. Thanks for taking my question. Basically, I think this has been asked before, but I would still like to understand this [ZH] impact and mixed impact on the inventory. Basically, while we understand that there is some rate difference in the export and some inventory which is lying in the warehouse, there is a INR 24 crore impact on the domestic tonnage or due to realization. Wouldn't that mean that although the realization has dropped, our raw material cost also would have, like steel prices also would have dropped, and that impact should have gotten neutralized? How is this impact of INR 24 crore coming from the domestic volumes? Isn't this a routine phenomenon in the business, or is this something which has come up one time?
No, I think, Sunny, to answer your question, in terms of domestic realization, the market did not go up as we had planned the inventory. You can see that there is an inventory hit. You are right when you say that whatever steel price decrease happens, it also happens with the steel mill suppliers. However, the steel mill supplier does not give us the deduction based on whatever inventories we have in the system or inventories we carry through. All that has to come into the P&L, and we have to absorb as suppliers to the OEMs. Going forward, yes, we have already started getting new pricing inventories, which you will see in coming quarters. This will not get reflected in the balance sheet in the P&L. In terms of our exports, the realization equipments which we had had already done with the previous raw material and U.S.
raw material has dropped more than the domestic raw materials. That's the reason we have a higher hit in terms of the overall shipments to the export side.
So export.
That is coupled by the currency also.
Got it. No, export, I think, is well understood, but domestic was something because basically, what you're saying is that you had excess raw material in the opening inventory, which was at a higher cost. Basically, your selling price is determined on the current running price of steel?
Yes.
As you basically ran down the old raw material inventory, your cost was to that extent higher, but realization was based on the current pricing, which kind of impacted the margin in this quarter. Now, basically, your current closing raw material inventory and the realization that you're getting from the customer is in line with each other. That impact will effectively not get carried forward in the future quarter.
Yes, you're right.
Got it. Second, on the mix impact, while I understand the higher domestic mix should impact your percentage margins because your export margins, in terms of percentage, is better, how does the mix impact in terms of the absolute EBITDA? How is it?
I think in terms of our overall exports, our realizations are at least 150 basis points to 200 basis points higher in terms of profitability from the domestic supplies, which has been impacted basically because of mixed gains, domestic going higher and exports going down.
Got it. Got it. Okay. Basically, this INR 5 crore forex loss impact on import of CapEx of, say, INR 5 crore standalone is above EBITDA impact. Basically, net net about INR 45 crore of impact would be above EBITDA. The INR 6.66 crore is coming from part of JV.
JV and.
It is directly get knocked off in the PVP.
Got it. In terms of the normalized margins, if you adjust the 300 bps, approximate 300- 350 bps of margin impact from the current quarter, that number comes to about 17%- 17.5%, which is kind of still lower than your margin of 21%- 22%. Is there a pathway to that 20%?
I think, Sunny, I have answered this question previously also. With the storm we have weathered in the previous quarter, I think you will see a quarter-on-quarter continuous records, with margins getting improved. We are very hopeful by the last quarter or first quarter of financial year 2027, we should be back to our old days of margins on a standalone basis. While casting business gets consolidated, casting business, while we will be able to crop a very high level of revenue and utilization with the kind of order wins we have and with the kind of traction we have from the customer, that will never be a 20%- 22% margin in the business for us. Casting will always remain to be a 16%- 17% margin.
On a blended level, we are looking at almost, margins on a standalone RKFL should get back in the next 3-4 quarters back to their old margins business.
Got it. Just one last question. Basically, your export pricing is on a quarterly basis, but how often your domestic pricing is, like, how does it get repriced in the domestic market?
Domestic market, it depends on the OEM directly negotiating with the raw material supplier. We have no role to play in that, nor is there any index based on that. Basically, the raw material supplier negotiates directly with the OEM, and as we receive information from the OEM on a quarter basis, it immediately takes a message. Everything, whatever happens, happens at the starting of the quarter and is applicable for the entire quarter. There may be price rollover also. There may be a price change also.
Got it. This quarter, unfortunately, you got caught in the wrong cycle with high inventory, and basically, on the starting date, the OEM negotiated a lower price with the steel supplier.
Yes, yes.
Got it. Got it. Thank you. Thank you for the detail.
Thank you. The next question is from the line of Devang Shah from Asit C Mehta Investment . Please go ahead.
Yeah. Hi. Good evening, sir. Just to, you know, ask you, the way earlier we guided, very optimism as far as, you know, our revenue topline and bottom line, we can understand, you know, last quarter there was some kind of inventory selection. In an initial remark of your commentary today, you have mentioned some kind of, you know, slowdown and certain global challenges is impacting the company's performance. You know, certain also opportunities also you have shared in, you know, in this particular call also. I would like to note that, you know, our estimation to have some kind of, you know, 25% kind of topline growth. As you have mentioned, gradually, we will come back to our normalcy of a margin of, you know, somewhere 22%. It will not be a too longer also, you have mentioned to earlier participants.
Sir, that was the only question that in this particular financial year, can we be able to, you know, have a such kind of, you know, achievement by the end of FY 2026? I'm not talking about the quarterly performance. I can understand it may have some kind of challenges. My question is that by the end of FY 2026, we can have some kind of, you know, a possibility of achievement as topline somewhere close to 25% and also come out to some kind of 22% or, you know, some kind of plus minus margin relatively, you know, close to that.
To answer your question, I think in opening remarks of Lalit, whatever he has said is based on tariffs and other things, what are applicable and what is concerning the market and what is our view related to the tariffs and other things. It does not mean that we are not working, are not burning midnight oil to ensure that our performance does not decline vis-à-vis the industry. As in the past, we have always outperformed the growth in terms of the whole industry, and we will continue to do so. As we have guided in our previous call, we have never guided for a 25% growth on a yearly basis, but we have guided for a volume growth of 15%- 20%. With the kind of capacities and other things are coming in place in the next two months.
As guided in our earlier call, we had clearly said that almost 80% or 90% of our entire projects to increase capacity both in castings and forgings are going to be in place by the end of September. Once all these capacities are in place, we are looking to have a very healthy second half of the year. We still believe that this phenomena of market slowdown is not a long-lived situation. I think for the full year basis, we will be on a growth trajectory in terms of overall volumes, in terms of our topline, and in terms of bottom line. On a standalone basis, we are very confident that every quarter on quarter, there will be a significant increase, and we will strive to get to the old days of profitability of the company on a standalone basis.
The new capacity which is getting added in castings, casting will never be a 22%- 23% business for us. As guided earlier also, while we will get significant volume and significant topline from our casting business, which is 100% subsidiary of RKFL, we will outperform the industry both in terms of volume growth and in terms of profitability in the castings also.
My second question, sir, as you already mentioned, there are due to tariff-related challenges, that's what we are now witnessing as far as general geopolitical situation is concerned. Do you, as we come out, any kind of studies in terms of trade agreements kind of thing, do you see your, the situation and the outcome may change in the coming quarter as well? That's what's something possibility?
I think right now, like I said in earlier questions, we have learned to live with 25% auto tariff, which is in place. I think we are in process with discussing with all our customers and all our stakeholders for all our U.S. shipments. Again, I would like to stress on that our total North America exposure, only 20% of our shipments go directly into the U.S., which is, as of now, last quarter has been impacted by almost a tariff of 25%, which is INR 6 crore. On a full year basis also, if you can see the INR 6 crore, if I put in a full-scale basis also, it's going to be INR 20 crore-INR 25 crore on the full balance sheet. Basically, we are looking at this kind of tariff number, and we are negotiating with our customers to offer a 100% pass-on.
We have almost received 50% confirmation from our customer for 100% pass-on. We are not speculating in terms of if there is going to be an FTA, what changes it can happen, and how much time it's going to take. I think it is very difficult for us to do those guesswork. I think we are not looking at or not speculating based on what FTA brings us. If anything happens on the downward trajectory, it is good for us. We are getting prepared ourselves with the current numbers, and we are working with our customers on the current numbers. We are just waiting for demand outlook to improve. As you may be aware or you may be seeing the details, overall auto industry in the U.S. is suffering very badly for this tariff-related issue.
I think we will just need to wait on the sidelines and watch how the demand side improves.
Understood, sir. Thank you so much, and wishing you all the best.
Thank you. The next question is from the line of Viral Shah from ENAM Holdings . Please go ahead.
Yeah. Hello. Thank you for the opportunity. Some of my questions have been answered. Just one clarificatory question. You said you expect to reach 21%- 22% EBITDA margins by Q4 of 2026 or Q1 of 2027. Is that correct?
Yes, on a standalone basis.
On a standalone basis, how are you looking at these numbers in the next year? Do you think there is scope for further improvement, or do you think the stabilized margin should remain at 21%- 22%?
I think as a company, we are always working to improve margins. I think with the capacity replacement improving, with the kind of new capacities getting augmented by September, our aspiration is to be on the upward trajectory of the margins. I think with our acquisitions stabilizing, and I think the crankshop machining plant, which is merged with RKFL, I am happy to say that from this quarter onwards, we are going to start seeing profitability coming in from there because the utilization level has improved. We are looking at it on a full-year basis to get a significantly good topline from those facilities. These are all going to be an improvement side in terms of the overall margins. To be very cautious, we are taking a longer lead time in terms of expectation building in terms of our investors.
We don't want to overcommit, and that's the reason we are building in five quarters from here when we then on a safer side to be hitting those margins on a standalone basis.
Sure. The next question is on your expected outflow towards CapEx and investments in the current year. Accordingly, how are you also looking at the net debt progressively coming down because you also had an elevated working capital last year? How are you looking at both?
I think Lalit has answered to this question. We are looking at almost INR 300 crore-INR 400 crore decline in our net debt levels on a control basis by the end of FY2026. Basically, right now, the current net debt is close to INR 1,800 crore, which is the same as what was the closing of March 2025 balance sheet. We are looking at this year to end somewhere in between anything between INR 1,400 to 1,500 crore as net debt of the company at our control levels.
What is the assumption of CapEx and investments in this, sir?
I think, in terms of, Lalit, can you give us the exact numbers of investments and CapEx?
Coming to the investment part, we have already invested INR 370 crore in the region. In 2023, we have invested INR 115 crore further. We will invest it in the same investment. Coming to the CapEx part, there will be a CapEx of INR 300 crore.
I'm sorry to interrupt, sir. Your voice is not clear properly. Slide is breaking.
Yeah, I think it's better now?
Yes, sir.
CapEx for the current year is INR 300 crore-INR 350 crore. I said the investment, we have already invested around INR 370 crore in the JV, INR 230 crore gold partner together will further increase. About INR 115 crores will be ours here in the investment.
Okay. INR 415 crore-INR 450 crores is the kind of outflow that you will have this year from profitless investments?
Yes.
Okay. Just lastly, sir, a clarification, sir, what would be your tax rate in the standalone business this year?
The tax rate is 25% only, but we are not provided for any tax on account of mergers with ACIL, and only there is a correction in deferred tax assets which we created in the last quarter.
Okay. Got it. Okay. Thank you so much.
Thank you. The next question is from the line of Hardeep from SP Dara & Associates. Please go ahead.
Hello, sir. Very good evening. Thank you for the opportunity. I just have two questions. First, what is your long-term strategy going ahead for Ramkrishna Forgings Limited? What I mean to ask is, are there any new products under development, or are we looking to consolidate the casting and forging traditional business that has been going on?
No, I think we are working aggressively in terms of new product developments. I think, like I answered the earlier question, we have just received approval for complete assembled undercarriage assemblies for passenger vehicles. We look at an extremely solid set of numbers coming in.
The next couple of years, and with the passenger vehicle segment growing in Indian Railways significantly, I think there is a lot of work to be done and a lot of revenues to be created in next years, in coming years. I think this is a significant milestone in terms of the overall development of these assemblies, with a mix of forging, fabrication, and casting together. I think that's one of the game changers which we have been able to get an approval in a very short span of time. The development order, I think my marketing people have done an extremely good job by getting an order which is worth about INR 60 crore, which we are going to fulfill by March 2026, and look at a bigger chunk of business in the next financial year.
To be more precise, railway buys close to around INR 1,000 crore-INR 1,500 crore worth of fully assembled undercarriage assemblies per year for passenger coaches. I think for next year onwards, this entire post completion of development order will be eligible to supply for the complete city. We have set up a very significant capacity for this. We are looking at to do a significant number going forward in next years onwards in these undercarriage issues.
Got it. My second question was, since you said the casting business is a 16%- 17% at its business, on a blending basis, what margin should we expect on the consolidated fund over the next two to three years?
If you look at the casting plus forging, EBITDA margin blended basis, casting business will be somewhere around, if you look at the next year, will be 20% - 25% of our business altogether on the full-year basis. If there is a 500- 600 basis point gap, there will be 100- 150 basis point overall reduction in from the standalone to control number. We propose we reach to a 2,200, 22% of EBITDA. Control level, it will be somewhere between 20% - 21%.
Got it. Thank you so much. Thanks a lot.
Thank you. The next person is on the line now, Mitul Shah from DAM Capital . Please go ahead.
Yes, sir. Thanks for a follow-up opportunity. First question on this railway JV, as per presentation, there's INR 2,000 crore capacity grown and nearly INR 350 crore-INR 360 crore equity infusion has already happened. What would be the debt component? Right now, what is the current debt on JV? How much total debt plus equity is invested so far?
Total current debt may be 70/ 30, 70 debt, 30 is equity. 30% of equity consumes between INR 70 crore what we issued and a proportionate amount of about INR 900 crore has been debt. Total is about INR 1,270 crore is invested so far in the JV.
Answer to your question, Mitul, I'll answer your question. The INR 2,000 crore project investment is in two phases. The first phase will not require the entire INR 2,000 crore. We are looking at close to around INR 1,600 crore to be spent in this first phase. There we will augment the capacity of machined finished 100,000 plus wheels, which will suffice my requirement for Indian Railways up to FY 2028. The second phase of investment of INR 400 crore, which is going to happen, is going to happen once we have a utilization level of 100,000 plus wheels sent to Indian Railways. Only then will we invest the second phase to augment full capacity of 200,000 plus wheels.
Incremental only, nearly now INR 100 crore, INR 120 crore equity infusion is pending for the first phase, and another INR 300 crore could be the debt, right?
Yes.
Debt is also like a nearly INR 1,000 crore debt on JV apart from our existing this INR 1,800 crore.
I think the JV does not carry risk in terms of RKFL console is concerned. Neither this balance sheet is getting consoled in RKFL right now. Obviously, this debt is not, and debt is entirely on plant and machinery and land bank of the JV, which is concerned.
Second, sir, just a clarification on this impact we have highlighted in our PBT mix as well as this raw material thing. Nearly about INR 40 crore seems to be because of this raw material thing we, as you explained earlier, in scale forward inventory at a higher cost material purchase in previous quarters. This INR 11 crore forex impact is again on the import of the CapEx. That would be part of the balance sheet, or we are factoring that CapEx-related impact also in P&L.
I think RKFL on a standalone basis is about INR 5 crore. That is above EBITDA. The balance on the JV, which is there, that is part of PBT. I think on the control basis, this entire quantum of INR 15 crore- INR 16 crore has gone into the balance sheet.
Further to clarify, on the standalone basis, everything is part of EBITDA. So INR 45 crore EBITDA. You can show on the control basis, again, INR 6.6 crore of JV also rotates to PL only as a separate line item. Everything has been rotated to PL. Nothing has been rotated to the balance sheet.
Okay, sir. Understood. As we highlighted, about 300- 350 basis points impact is at EBITDA level, right?
Yeah.
Earlier you highlighted that impact of 300- 350 basis because of this raw material, and you have to pass on the benefit immediately. That implies nearly INR 30 crore- INR 35 crore on absolute basis.
Yeah. We wrote INR 40 crores + INR 5 crores, INR 45 crores. We have to subsidize the per cap of 25%. It comes to around INR 34 crores. That is 300, which is 0.1.
Both types of impact we are considering in the. All right.
Last year's review, raw material prices, sale prices doesn't change Q1, Q2, and Q2. Can you expect direct this benefit or impact going away in 300 basis type of a jump in profitability Q2 itself? Or we see that every quarter we may realize just 50- 60 basis and gradually we'll go to this 200- 300 basis increment in overall by Q4?
Lalit, can you answer to the Mitul question?
Yes.
Mitul?
Yes.
What I understood from your question, what you are asking is next quarter how the margin will move?
I repeat the question. My point is that if the raw material sale prices remain flat Q1 and Q2 in this quarter, Q2 itself, can we realize this entire 300- 350 bps benefit in Q2 itself for this journey to improvement of 300 bps? Will it be gradual with a 50-100 bps every quarter improvement till Q4 or next year?
It's not that simple because it depends on a lot of things. The domestic export mix plays a big role here. You see, realization and the mix is a mixed share. If mix moves positive, from 60- 40, it will have more positive impact. If the mix remains like this, there will be no improvement on that ground. Certainly, price realization and production also has to play roles. Certainly, the inventory correction part will be not there, so there will be improvement. It's very difficult to quantify in terms of basis.
Okay. The last one thing, again, as we highlighted, our ambition to reach to 21%-22% EBITDA margin by the fiscal end or maybe next year first quarter. If we look at the historical peak margin of about 22%, and if we consider the inventory-related error in the past one or two years, then at just choice, a realistic margin would be somewhere closer to 20% as we calculated 200 basis impact of the inventory. Do you mean that we would surpass the historical peak also in the next 3-4 quarters and we'll go to 21%-22%?
Mitul, to answer this question, previously, the previous participant also asked in terms of our other expenses. If you see, we are working significantly in terms of our cost structure. There has been a significant reduction Q1 and Q2 and year on year in terms of our other expenses. You will continuously see improvement in terms of our other expenses. I think it is a journey which we have started. I think in the next 4-5 quarters from here, what inventory-related was one of the time issues on a standalone basis with the kind of capacity which we are building in in the next two months, most of the capacities are going to be in place. With this, we are very confident with the kind of order which we have had in exports and the domestics.
We will be able to surpass our previous margins in the next couple of quarters.
Yeah, really great, sir. Great, and all the best. Thanks.
Thank you. Ladies and gentlemen, that was the last question for the week. I now hand the conference over to the management for closing comments. Over to you, sir.
Thanks, sir. I would like to thank all the participants for taking our time to join our earnings call. I hope we have been able to answer and address all your queries. For any further information, you can get in touch with us or with CDR India. On behalf of Ramkrishna Forgings Limited, we wish you all a really wonderful paycheck. We look forward to interacting with you again in the next quarter. Thank you very much for taking up our time again. Thank you.
Thank you. On behalf of IIFL Capital, that concludes this conference. Thank you for joining us. We will now disconnect your line. Thank you.