Ramkrishna Forgings Limited has seen its long-term bank loan rating downgraded to IND AA- with a Stable outlook, while maintaining its short-term rating at IND A1+. The move follows a rise in consolidated net leverage to 4.64x during FY26, driven by capital expenditure and a temporary dip in margins. Despite these challenges, the company expects improved credit metrics in FY27 as export demand recovers and internal efficiencies are realized.
Understanding the Rating Revision
India Ratings & Research (Ind-Ra) has recalibrated the credit profile of Ramkrishna Forgings Limited. The long-term rating is now IND AA-, reflecting current pressure on the company’s financial metrics. The adjustment is primarily attributed to a rise in consolidated net leverage, which hit 4.64x in FY26, influenced by aggressive investment in capacity expansion and a decline in EBITDA margins caused by shifting export sales mixes.
Operational and Financial Context
Despite the downgrade, the company reported consolidated revenue of INR 42,381 million in FY26, marking a 5.1% growth over the previous year. While profitability was impacted by inventory discrepancies totaling INR 2,026 million (post-tax) and softer export demand in the US market, the company saw a recovery in Q4 FY26, with EBITDA margins climbing to 17.1%.
Path to Recovery
The company is implementing a strategic roadmap to improve its financial health. Management projects consolidated revenue to reach INR 48,000–50,000 million by FY27. Key drivers for this recovery include:
- Financial Inflows: Planned infusion of INR 2,027.5 million from share warrants and tax refunds totaling INR 2,800 million.
- Capacity Utilization: Scaling up recently commissioned capacity in its press and casting divisions.
- Revenue Diversification: Expanding presence in the Indian Railways, electric vehicle (EV), and non-auto segments to reduce dependence on the cyclical commercial vehicle sector.
Outlook for Future Metrics
Ind-Ra anticipates that the company’s net adjusted leverage will improve to between 3.5x and 4x in FY27. With ongoing debt amortization and strengthened internal controls following the resolution of inventory reporting issues, the company aims to reduce its leverage below 3x by the end of FY28.
Source: BSE
