🟢 At a Glance:
Ramkrishna Forgings Ltd (RKFORGE) reported a strong ₹408 crore standalone net profit in FY25, announced a ₹1 dividend, and even approved ₹204.75 crore preferential warrants for promoters. Sounds bullish? Not so fast. The auditors dropped a bomb — ₹2,200 crore worth of raw material and WIP inventory was overstated. Yes. That’s not a typo.
🏢 About the Company
- Name: Ramkrishna Forgings Ltd
- Industry: Auto components, railway wheels, global forging solutions
- Clients: OEMs across India, North America, Europe
- Recent moves: Set up JV with Titagarh (RTRWL), acquired Mexican unit, sold Globe All India Services
They make the bones of the vehicle — chassis, axles, wheels — and have expanded globally with acquisitions and a government-friendly JV strategy.
🧾 FY25 Standalone Financial Highlights
| Metric | FY25 | FY24 (Restated) | Change |
|---|---|---|---|
| Revenue | ₹3,65,294 Cr | ₹3,52,287 Cr | 🔼 +3.7% |
| EBITDA | ₹59,254 Cr (approx) | ₹58,451 Cr | 🔼 Marginal |
| Net Profit | ₹408 Cr | ₹214 Cr | 🔼 +90.6% |
| EPS | ₹22.22 | ₹12.13 | 🚀 |
| Dividend | ₹1/share | ₹0.50/share | ✅ Doubled |
So far, everything looks amazing.
📉 But Then Comes This: The ₹2,200 Cr Audit Qualification
Auditors SR Batliboi & SK Naredi threw a qualified opinion on the books.
- A physical inventory mismatch was discovered.
- RKFORGE overstated ₹2,052 Cr worth of raw material, scrap and WIP.
- Also ₹502 Cr in FY24 was similarly overstated — but not caught then.
- Management says it was due to “non-recording of rejections at plants.”
Translation: “Our ERP thinks we have 2,000 Cr worth of steel. We actually don’t.”
And yes — these adjustments have now been retrospectively applied to FY24 too. The net hit to FY25 net worth? ₹202.6 crore.
🧠 Why This Is a Massive Red Flag
- This isn’t just a typo — it’s a structural accounting failure.
- Over 6.7% of the company’s reported net worth was fictional.
- Auditors are still waiting on a full root cause analysis.
- External agency is “still investigating” — meaning this is not over.
If this were a startup, SEBI would’ve already issued a show cause.
🏦 Preferential Allotment: Warrants @ ₹2,100
Right after revealing the financial hole, the company:
- Approved 9.75 lakh convertible warrants to Riddhi Portfolio (promoter)
- Issue Price: ₹2,100 per warrant
- Total: ₹204.75 Cr
- That’s 2.95x the SEBI floor price of ₹712
👀 Promoter pumping in capital at 3x floor price?
Or pre-empting dilution control after market shakes?
📊 Balance Sheet Snapshot (Standalone)
| Item | FY25 | FY24 (Restated) |
|---|---|---|
| Total Assets | ₹5,86,303 Cr | ₹4,85,821 Cr |
| Equity | ₹3,01,014 Cr | ₹2,52,012 Cr |
| Borrowings | ₹1,58,854 Cr | ₹89,934 Cr |
| Inventories | ₹1,08,510 Cr | ₹95,975 Cr |
| Trade Payables | ₹94,636 Cr | ₹91,579 Cr |
Leverage has increased. Cash flow dipped. Inventories still high despite the write-down.
🧠 EduInvesting Take:
Ramkrishna Forgings is operationally strong, strategically expanding, and throwing ₹400+ Cr net profits. But the inventory fiasco is serious. You don’t “accidentally” misstate over ₹2,000 Cr in materials unless your ERP is built in PowerPoint.
Add to that:
- Auditor flags
- Past data restated
- Dividend to sweeten perception
- Promoters issuing warrants to themselves
This screams “We are in control, but things are messier than they look.”
📌 TL;DR
- ✅ ₹408 Cr net profit in FY25 (up 91%)
- ✅ ₹1 dividend declared
- 🚨 ₹2,200 Cr inventory overstatement discovered
- 🚨 Auditors issued qualified opinion
- 🧮 Net worth artificially inflated — now restated
- 💰 Promoter warrants issued at 3x SEBI floor
- 🔍 External audit agency still probing
Author: Prashant Marathe
Date: June 1, 2025
Tags: Ramkrishna Forgings Results, RKFORGE Q4 FY25, Inventory Audit Fraud, PSU Stock Alert, Preferential Warrants, SEBI Disclosures, Auto Ancillary Stocks, Forging Sector India, Dividend Announcements, Audit Red Flag
