Ramkrishna Forgings Ltd. witnessed significant institutional activity through multiple bulk deals, with global investment bank Morgan Stanley emerging as a major buyer while French bank Societe Generale reduced its position in the mid-cap forging company.

Major Bulk Deal Transactions

The company recorded substantial institutional transactions involving prominent global financial institutions:

Market Performance and Pricing

Both transactions were executed at a discount to the previous trading session. The buying and selling prices represented a 1.20% discount compared to Monday's closing price of ₹512.90 on the NSE. The stock ended the trading session at ₹508.90, declining by ₹4.00 or 0.80% from the previous close.

Technical Analysis and Market Position

The stock's technical indicators reflect challenging market conditions:

The stock is currently trading below both its 50-day and 200-day simple moving averages, indicating bearish momentum. The Money Flow Index of 28 suggests the stock is in oversold territory, as values below 30 typically indicate oversold conditions.

Financial Performance

The company's recent financial results show operational challenges. Ramkrishna Forgings reported a consolidated net loss of ₹9.50 crores in the September quarter, contrasting sharply with a net profit of ₹190.00 crores in the corresponding period of the previous year. Total revenue declined 13% to ₹913.00 crores from ₹1,056.00 crores in the year-ago quarter.

Company Overview

Founded in 1981, Ramkrishna Forgings operates as a metal forming company specializing in forged, machined, and fabricated products. The company serves diverse sectors including automotive, railways, farm equipment, earth moving, mining and construction, oil and gas, power, and general engineering industries.

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.