Ramkrishna Forgings shares fall on disclosure of inventory discrepancies
Ramkrishna Forgings
Ltd's shares fell nearly 4.8% on Monday, after the supplier of
forged parts
for automotive, defence, railways and mining sectors disclosed over the weekend that
inventory discrepancies
could knock 4-5% off its net worth.
The company's promoters on Monday pledged to step in and fund any shortfall, helping cushion the blow. 'Our priority at this moment is to ensure correct assessment of the discrepancies and to take appropriate remedial measures,' managing director Naresh Jalan said on an investor call.
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It discovered the discrepancies during the annual fiscal 2025 stock taking,
Ramkrishna Forgings
said in a filing with stock exchanges on Saturday. The company has engaged independent external agencies for a
forensic audit
after its audit committee approved a fact-finding exercise.
Analysts estimate its net worth at around Rs3,000 crore. This would mean a notional impact of around Rs150 crore. Analysts said it could go up further.
Calling this the first such incident in its history, Ramkrishna Forgings said it would account for any financial hit on a one-time basis once the external audit concludes.
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The company's shares fell to Rs625.05 on the BSE Monday, when the benchmark Sensex ended about 1.3% higher.
Jalan said he 'takes moral responsibility' for what has happened and will ensure the promoters live up to the expectations of the investor community and best corporate governance practice.
'We are fully cognisant of any actions and recommendations by the reputed agencies and, as approved by the board, may have implications on the net worth of the company,' he told investors.
In response to a question on the need for a fund infusion by the promoters, Jalan said it is being done with a 'single-minded focus of enhancing the financial position of the company. This infusion will also provide additional liquidity to the company and strengthen its leverage position,' he said.
The company runs 18 manufacturing plants in India with a total capacity of 3,06,000 metric tonnes.
Tata Motors
is its largest customer, with medium and heavy commercial vehicles contributing the bulk of revenues.
In FY2024, Ramkrishna Forgings made a spate of acquisitions to diversify into new segments like passenger vehicles, tractors, and light commercial vehicles.
As the cause of the error, its magnitude and impact on profit and loss is not known yet, there is uncertainty on the overall impact on financials, DAM Capital analyst Mitul Shah wrote in a research note.
'The details from an independent auditor are most critical in this scenario. Therefore, we would await the outcome of the independent auditor's report and auditors' remark for better clarity, before taking any concrete view,' Shah wrote, placing his rating of the stock 'under review'.
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