Ramkrishna Forgings Q1 FY26, FY25: ₹220 Cr Inventory Vanished, ₹1000 Cr QIP, 91% Capacity Utilisation – Auditor’s Stand-up Special

1. At a Glance

Ladies and gentlemen, here we have Ramkrishna Forgings Ltd (RKFL) – India’s second largest forging company but clearly the first in creating suspense thrillers out of inventory. In FY25, they managed 91% capacity utilisation, scored fancy export orders worth $220 million, raised ₹1000 crore via QIP, and then — surprise — found ₹220 crore worth of inventory that apparently pulled a Houdini act. Yes, auditors had a field day.

2. Introduction

If Bollywood ever made a corporate thriller, the scriptwriters could just read Ramkrishna Forgings’ annual report.

Scene 1: Company bags juicy contracts for Vande Bharat train sets and North America OEMs. Cheers all around.

Scene 2: Board approves a Mexico plant because apparently the US and Europe aren’t enough playgrounds.

Scene 3: Inventory valued at ₹220 crore turns out to be… let’s just say “optimistic accounting.” CRISIL and ICRA suddenly remember where their “watch negative” button is.

But in fairness, RKFL is not some fly-by-night operator. With 2000+ SKUs, 229,510 tonnes forging capacity (soon 308,400 tonnes), and exports to 22 countries, the company is very much the real deal. Clients include Tata Motors, Volvo, Daimler, and Indian Railways. Basically, if it moves on wheels or steel tracks, Ramkrishna Forgings has probably banged it with a hammer.

And yet, as every auditor knows — numbers don’t lie, but management sometimes “misplaces” them. Which sets the stage for this sarcastic deep dive.

3. Business Model – WTF Do They Even Do?

In simplest words, RKFL is the blacksmith India never knew it still needed.

• Automotive: Crankshafts, steering knuckles, axle beams — if you’ve ever cursed potholes, thank forging companies for making parts strong enough to survive.
• Railways: Parts for wagons, coaches, and now even the poster-boy “Vande Bharat.”
• Off-Highway: Farm equipment, mining gear, and construction machinery. In short, every desi jugaad tractor owes a little something to them.
• Energy & Oil & Gas: Because someone has to forge the big chunky parts that oil rigs don’t buy on Flipkart.

The model is straightforward: melt steel → hammer like Thor → supply to OEMs globally → pray margins survive raw material and power bills.

The fun twist? Forging is capital-intensive. So RKFL keeps borrowing (₹2,126 crore debt) while expanding like a college student on energy drinks.

Auditor’s note: Yes, they make serious stuff. But every time I hear “new 8000T press line,” I can’t help but imagine them competing in WWE with “The Undertaker.”

4. Financials Overview

*Q4FY25 profit spiked due to one-offs (other income + accounting adjustments).

Commentary: Revenue growth looks okay, but PAT collapsed harder than an over-leveraged builder during RERA inspections. EPS annualised = ₹2.6 → P/E = 222x. Yes, that’s not a typo. “P/E not meaningful” would be kinder.

5. Valuation Discussion – Fair Value Range Only

Three classic valuation angles:

(i) P/E method:

• Annualised