Ramkrishna Forgings Ltd. recorded a substantial block trade on the National Stock Exchange (NSE), highlighting significant institutional activity in the mid-cap forging company's shares.

Block Trade Details

The transaction details reveal the scale of institutional interest in the company:

Market Significance

Block trades represent large-volume transactions typically executed by institutional investors, mutual funds, or other significant market participants. These transactions are conducted outside the regular market to avoid impacting the stock's market price during execution. The execution price of ₹507.05 per share indicates the institutional appetite for Ramkrishna Forgings' equity at current market levels.

Company Profile

Ramkrishna Forgings operates in the castings, forgings, and fasteners sector, serving as a key player in the automotive component manufacturing industry. The company specializes in manufacturing forged and machined components for commercial vehicles, passenger cars, and off-highway vehicles.

Such significant block trades often reflect institutional portfolio adjustments, strategic investments, or exits by large stakeholders, providing insights into institutional sentiment toward the company's prospects in the automotive components sector.

CRISIL has removed Ramkrishna Forgings from rating watch and reaffirmed its AA-/Negative rating for ₹1,650 crore facilities. The company has implemented corrective measures for inventory controls.

Ramkrishna Forgings Limited has received updated credit ratings from CRISIL Ratings Limited, with the rating agency removing the company from rating watch while reaffirming its existing ratings. The development was disclosed by the company under Regulation 30 of SEBI listing requirements.

Rating Action Details

CRISIL has reaffirmed Ramkrishna Forgings' credit ratings while removing them from rating watch status. The rating action covers substantial financial facilities across multiple categories:

Rationale for Rating Watch Removal

The rating watch removal follows corrective measures implemented by management to address previous concerns. CRISIL noted that the company has improved internal controls regarding inventory reporting through regulating and restricting manual interventions and implementing best practices for streamlining processes.

Independent external agencies completed a joint fact-finding study in the quarter ending September 30, with no further discrepancies identified beyond those accounted for in the previous fiscal year. Additionally, the company proposed compensation of ₹204.75 crores through preferential issue of convertible warrants to promoters, with ₹51.19 crores infused as upfront consideration.

Negative Outlook Factors

Despite the rating reaffirmation, CRISIL maintains a negative outlook due to several operational and financial challenges:

Operational Performance

• Revenue and operating profitability of ₹1,923.00 crores and 14.10% respectively in the first half of the current fiscal year
• Operating margin down from 14.40% in the previous fiscal year
• Exports as percentage of total revenue declined to 30% in first half of the current fiscal year from 42-43% in previous two fiscals

Financial Metrics

• External borrowings elevated to ₹2,613.00 crores on September 30 (from ₹2,013.00 crores on March 31)
• Interest coverage ratio moderated to 2.70 times
• Gearing ratio increased to 0.85 times
• Capital expenditure of approximately ₹350.00 crores during first half of the current fiscal year

Industry Challenges and Export Risks

The company faces headwinds from the overall slowdown in the commercial vehicle industry and levy of custom duty on exports to the United States. The group generates around 15% of revenue from exports to Mexico, where imposition of duty by Mexico on Indian exports may adversely impact demand and cost pass-through.

Rating Strengths and Market Position

CRISIL's ratings continue to reflect the company's healthy market position in the auto components industry, with established relationships with major customers and integrated operations. The group has maintained its position as one of the largest manufacturers of forged automotive components in India, with consolidated revenue from operations exceeding ₹4,001.00 crores for the previous fiscal year against ₹3,676.00 crores for the year before.

Rating Sensitivity Factors

CRISIL outlined specific factors that could influence future rating actions:

Upward Factors

• Improvement in revenue and sustenance of revenue growth with operating margin above 16%
• Ramp up of production capacity utilization and prudent working capital management

Downward Factors

• Significant decline in revenue or operating margins sustained below 14%
• Time overrun in proposed funding support extension or increase in external borrowing

The rating agency maintains adequate liquidity assessment, with fund-based bank limit utilization averaging 81% for six months ending September 30, and free cash bank balance of ₹37.00 crores as of September 30.