RKFORGE — earnings call

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Prepared remarks

& CHIEF FINANCIAL OFFICER · MR. MILESH GANDHI – WHOLE-TIME DIRECTOR

MR. MILESH GANDHI – WHOLE-TIME DIRECTOR MR. RAJESH MUNDHRA – COMPANY SECRETARY & VICE PRESIDENT (FINANCE)

Moderator · Conference Operator

MR. MANAV SHAH – NUVAMA WEALTH MANAGEMENT

Ladies and gentlemen, good day, and welcome to Ramkrishna Forgings Q3 FY '25

The next question is from the line of Shaleen Kumar from UBS.

Please go ahead.

Shaleen Kumar

Nareshji, can we get a status on the ACIL unit, like are they operational or what's the status?

Naresh Jalan

ACIL business?

Shaleen Kumar

Yeah, ACIL business, sir.

Naresh Jalan

ACIL business, I think from this quarter onwards, the current quarter as we speak, is going to start making profits.

I think till last quarter, it was not making profits.

I think we had incurred in the last quarter almost around Rs.

5 Crores losses over there.

But most of our products in two-wheelers as well as farm equipments have been approved as we approached at the end of December, 2024.

And this quarter onwards, with RKFL’s own forging, this subsidiary is going to start performing and is supposed to do well.

And we are expecting at least a growth of 25% to 30% in terms of top line and significant improvement in bottom line from this company.

Shaleen Kumar

Sir, 25% to 30% growth in ACIL unit or RKFL?

Naresh Jalan

ACIL.

Shaleen Kumar

ACIL growth?

Naresh Jalan

Yes.

Shaleen Kumar

And ACIL, how much has ACIL done?

Naresh Jalan

ACIL in last quarter I think did Rs.

16 Crores.

This quarter we are expecting in absolute terms to be as closer to Rs.

30 Crores.

This is around anything between Rs.

27 Crores to Rs.

30 Crores we should be there.

Next year, we are looking at considerable growth because of full year performance.

We should be somewhere around in ACIL around Rs.

200 crores plus.

Shaleen Kumar

This is both the plants we are talking about or only one plant.

Moderator · Conference Operator

Thank you.

The next question is from the line of Kanchi Shah from MC Research.

Please go ahead.

Kanchi Shah

Sir, is it possible that you can give us the breakup of revenue segment like how much was from the commercial vehicle, passenger vehicle, non-auto, etc.?

Moderator · Conference Operator

Thank you.

The next question is from the line of Vijay Pandey from Nuvama.

Please go ahead.

Vijay Pandey

Sir, I have two questions.

One was I wanted to check on what is your long-term view on like exports, like what is your target especially coming from the auto sector in the export segment?

It has been slightly declining, and we know that auto sector in general outside India has been on declining trend.

So, just wanted to check, are you planning to move to increase share in other segments in the export?

Naresh Jalan

Our continuous endeavor is to continuously improve in terms of all the segments, but I don't see a decline in terms of our exports in the auto sector and we continue to gain new orders, new segments within the auto sector and continue our vision of growing our exports into automotive plus non-automotive.

With the new automotive order wins, we are growing our business in export, but that does not mean that our exports to automotive segments have declined.

I think if you only see in the third quarter, but I don't see that there is a decline in terms of our fourth quarter exports to auto segment.

In nine months, we have done almost, last year we did 37.4% in terms of our automotive export.

This year, we have done almost 37.8% automotive exports.

So, I think we are well on track with the growing top line.

We are maintaining our percentage in terms of the overall contribution in revenue.

Lalit Kumar Khetan

Just to add here, we have done exports of Rs.

1,172 Crores for the 9-month versus Rs.

1,070 Crores for the previous.

So, there is a growth of almost 9.5% in the current year in the exports revenue, and that is mainly consisting of auto only.

Vijay Pandey

Thank you Sir.

I just wanted to confirm about the pricing, the average realization, if you can just guide us how the realization will look like for the fourth quarter for FY ’26.

Is it going to be broadly in line or do you expect to increase it?

Naresh Jalan

No, I think right now it is very difficult to comment.

Realization is directly linked to raw material pricing, and it will depend on how the raw material steel continues to perform and if steel declines, I don't think there is going to be any decline.

We are more concentrated on our conversion margin, and I think in terms of our conversion margin, we are keeping on increasing and that is the reason our realization still remains intact.

Moderator · Conference Operator

Thank you.

The next question is from the line of Dhawal Shah from Girik Capital.

Please go ahead.

Dhawal Shah

Sir, great set of numbers.

Congratulations.

Only one question I have.

If you can help us understand the cost saving initiative which we had taken by onboarding a consultant.

So, how is that progressing and is it getting, the benefits are getting lost in the other operational expenses which we are doing for our expansion plus Mexico and plus other subsidiary investment?

So, ex of that, where is the cost saving benefit visible on the P&L?

Lalit Kumar Khetan

Dhawal, see, the cost saving benefits are continuing and the result will certainly come in the P&L in the upcoming year as we are already at a quite advanced stage in the progress.

So, just wait for some time, then we will elaborate more on that.

Moderator · Conference Operator

And just one more.

This utilization is about 80% by the fourth quarter of next year you mentioned on the consol level.

Am I correct?

Naresh Jalan

No, it is for the casting plant.

Dhawal Shah

Of the casting plant.

Okay.

Naresh Jalan

Yes, which we are just setting up the capacity.

Dhawal Shah

And the expanded capacity which is 392 including subsidiary, on that utilization, what you had commented.

Naresh Jalan

392 includes casting facility.

Right now, casting facility inclusive it is 2,66,000 metric tonnes.

And that is going to move to 3,92,000 metric tonnes.

So, individually, I think in terms of casting capacity, 62,000 metric tonnes, we are looking at almost 80 plus percent utilization in the coming year.

And in forging, we are looking at almost 15% growth in the coming year from where we end this year.

Dhawal Shah

So, currently, since the console volume is not mentioned, the existing forging is only 4,000, right, in the subsidiary under RKCSL?

Moderator · Conference Operator

The next question is from the line of Devvrat Mohta from Capital International.

Please go ahead.

Devvrat Mohta

Just one quick question, I wanted to understand between Q2 and Q3, on a consol basis EBITDA did not really grow a lot, like what's happening on a quarter-on-quarter basis, like why is it not growing?

Naresh Jalan

No, EBITDA has grown, Devvrat.

I think if you see the overall expense side, there are few things which are, if you see, the raw material decrease which has happened in this quarter is basically close to around Rs.

3,000 per metric tonne in the domestic side and in export close to Rs.

4,500 per metric tonne, which has hit our inventory available with us plus the warehouse and what was material in transit.

So, all this has been accounted for in this.

And second is our other expenses which have gone up by almost Rs.

13 Crores, which includes around Rs.

7 Crores is on account of labour wages, means the blue collared labourers which are basically contractual labours, the minimum wages which has gone up in India for that and plus Rs.

6 Crores for the expenses which we incurred for setting up our entire booth in Hanover, Germany fair.

So, all this taken together if you see, the overall impact has been close to around 2.5% of the EBITDA which we could have got in case these expenses would not have been there.

Devvrat Mohta

So, Nareshji, how much would be the impact from just this Q-o-Q inventory impact on a consol basis?

Just the inventory.

Not Hanover and labourr cost.

Naresh Jalan

Inventory hit is close to, Lalit, what is the exact inventory quantum hit?

Lalit Kumar Khetan

So, it will be somewhere around Rs.

12 Crores to Rs.

13 Crores, value terms.

Naresh Jalan

Close to around, both taken, labour wages, Hanover and this taken together is close to around 2% of the EBITDA.

Basically, that is what we feel, 2.5%.

Moderator · Conference Operator

Thank you.

The next question is from the line of Viral Shah from ENAM Holdings.

Please go ahead.

Viral Shah

Sir, first, just wanted to check on the net debt number.

What would that be at the end of the quarter?

Lalit Kumar Khetan

So, net debt number right now will be Rs.

440 Crores at the end of quarter.

Viral Shah

So, it's flat largely on a quarter-on-quarter basis?

Lalit Kumar Khetan

No, so it's up by almost Rs.

250 Crores quarter-on-quarter.

Viral Shah

This is the consolidated number, right?

Lalit Kumar Khetan

I was talking about the standalone.

The consolidated number is somewhere around Rs.

1,500 Crores.

Viral Shah

Secondly, can you just throw some light on the working capital?

How is it?

I think in the previous quarter it was slightly elevated.

So, how are you seeing the working capital coming along?

Moderator · Conference Operator

The next question is from the line of Khush Nahar from Electrum PMS.

Please go ahead.

Khush Nahar

So, my first question was, so I see that in the last three quarters, our gross margin increased substantially to 58%, 57%.

So, what are the major attributes for this increase in gross margin compared to our earlier years?

Moderator · Conference Operator

Thank you.

The next question is from the line of Aditya Gupta, an individual investor.

Please go ahead.

Aditya Gupta

I, first of all, wanted to inquire about the current estimated go-live dates of the various plants.

So, we have the 25,000 metric tonnes cold forging line and the 14,250 metric tonnes that I am guessing we are saying should come up this quarter.

Is that right?

Moderator · Conference Operator

Thank you.

The next question is from the line of Manav Shah from Nuvama Wealth.

Please go ahead.

Manav Shah

Just one question.

Can you share the order wins for the quarter and the breakdown of it?

Naresh Jalan

I think now it is already there in our presentation, and I think Milesh has also in his opening statement.

Milesh, can you again elaborate it?

Milesh Gandhi

So, in this quarter, Rs.

697 Crore order book has been received to be executed over a period of four years in which I specified Rs.

600 Crores came for an export order for mining and earth moving industry, Rs.

54 Crores came from oil and gas, and from railways we got a Rs.

43 Crores order book.

Moderator · Conference Operator

The next question is from the line of Chirag Shah from White Pine Investment.

Please go ahead.

Chirag Shah

Lalitji, just one question on this INR depreciation.

If you can help us understand, how does it help us because there is a reasonable depreciation off late.

So, we must be doing some forward contracts.

So, when does the benefit start flowing in P&L?

Lalit Kumar Khetan

So, Chirag, see, you are talking about the foreign exchange gain basically.

So, certainly it is helping us.

And see, we have a policy of hedging exports also.

So, we have a policy of hedging 50% to 60% of the exports, but simultaneously we have the import, we have the packing credit also that offsets also some of our gain.

So, we are consistently gaining on the dollar, but you know the currency is very volatile, but we are keeping us quite on the edge and monitoring it and for the nine months we have gained Rs.

20 Crores on the absolute terms in the currency negating all the import factor also.

So, net gain for the nine-month period is about Rs.

20 Crores on the currency side, and we hope to continue with the currency gains every quarter.

Chirag Shah

So, sir, in a very simple way if the recent INR depreciation say in last whatever one month, the benefit of that will be visible six months down the line, right?

Lalit Kumar Khetan

That will be visible, but Chirag, that will be somewhat offset with the import obligations we have.

Moderator · Conference Operator

The next question is from the line of Vidrum Mehta from ASK Investment Managers.

Please go ahead.

Vidrum Mehta

Sir, firstly, can you help us with the Q3 revenue for subsidiaries that is Multitech and JMT?

Lalit Kumar Khetan

Certainly, Vidrum, so, see, Rs.

952 Crores is the revenue for the company and if you look at RKCSL (JMT), revenue was somewhere around Rs.

42 Crores and ACIL is Rs.16 Crores and Multitech is somewhere around Rs.

100 odd Crores.

So, that is the revenue, but there is an elimination also because of the interrelated party.

So, that's why it is around Rs.

1,073 Crores on the consol number.

Vidrum Mehta

Sir, you alluded to the fact that in your opening remarks that the CV demand is relatively moderated or muted and you expect the recovery from H2.

So, just wanted to understand is it H2 of FY ’26 or H2 probably of CY ’25?

Naresh Jalan

No, no, I think to be precise we are already seeing an elevated demand from this quarter in the commercial vehicle and what Lalit wanted to basically more elaborate that we are expecting the calendar year, means second half of this calendar year to be very robust seeing all the election and other things being over and budget also over.

So, we

Moderator · Conference Operator

Thank you.

As there are no further questions from the participants, I now hand the conference over to the management for the closing comments.

Questions and answers

12:48:56 +05'30' · Research Analyst

Ramkrishna Forgings Limited

Moderator · Conference Operator

Thank you, sir.

We will now begin the question-and-answer session.

The first question is from the line of Chirag Shah from White Pine Investments.

Please go ahead.

Chirag Shah

Thank you for the opportunity and sir, congratulations for the good set of numbers in this tough environment.

Sir, my first question is with respect to slide 41 where we have shown almost 50% increase in installed capacity by end FY25. I just wanted to understand, based on the current demand environment plus the new business order that you expect, by when can we see the optimal utilization of this incremental capacity?

And if you can throw more colour in terms of granularity, from this segment, how do you look at this utilization?

RAJESH · Research Analyst

Thank you very much.

We take this opportunity to thank everyone for joining the call.

We hope that we have been able to answer and address all your queries.

For any further clarification or information, kindly get back to us or reach our investor relation advisors.

Thank you very much for sparing your time and joining us in the call.

Thank you and have a good weekend.

Moderator · Conference Operator

On behalf of Nuvama Wealth Management, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.

Disclaimer

This is a transcript and may contain transcription errors.

Certain statements made or discussed on this call may be forward looking in nature and must be viewed in conjunction with the risks and uncertainties that the company faces.

The company does not undertake to update these forward-looking statements publicly.

Please also note that this document has been edited without changing much of the content, to enhance the clarity of the discussion.

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