We Are Focusing On Redefining Product Mix And Diversifying Across Segments: Naresh Jalan, MD, Ramkrishna Forging

The Indian commercial vehicle category is on the rise. This trend is forecast to continue over the next 1-2 years in the global CV industry as well, which will likely benefit from the ease in semiconductor supply. Even when overall exports have remained under pressure in the short term due to the global slowdown, leading forging component maker Ramkrishna Forgings has been continuously gaining traction on new global order wins and expanding products across new segments such as EV, Oil and Gas, LCV, and so on.

Kolkata-headquartered RKFL is aiming to strengthen its product mix as the next level of growth. According to Naresh Jalan, Managing Director, the company’s product mix has experienced significant adjustments, from altering models to redefining designs. Some goods moved from machining to assemblies, whereas others went from forging to machining. It has also been able to make greater use of the press, resulting in more tonnage produced in the same amount of time.

The company continues to see strong domestic demand, with a rebound in the medium and heavy commercial vehicle (MHCV) segment and a comeback in exports with higher realizations owing to greater execution speed. It has also seen increased momentum from the Oil and Gas, Mining, Material Handling, Agriculture, and Indian Railways sectors, prompting the firm to set a target of 25 per cent contribution from the non-auto industry, up from 18 per cent in Q2FY23.

The second-largest forging company has been in the business for about 38 years. It has a long history of being a preferred supplier to high-profile clients in both local and international markets. It has long-standing connections with companies such as Tata Motors and Volvo, and it recently received an Rs. 400 crore contract from a Swedish OEM for developing and delivering EV truck components for the European market.

Jalan highlights that the percentage of MHCVs has dropped down to 40 per cent of total revenue, and the company is now diversifying into LCVs, PVs, and EVs, which bodes well for long-term growth. He believes that RKFL has a unique combination of research and production potential, with equal emphasis on developing both at the same time; the company's in-house R&D team has acquired DSIR accreditation. During this quarter, Ramkrishna Forging also boosted capacity utilisation by 300 basis points year on year to 82 per cent while maintaining the best product quality.

With the Indian manufacturing sector getting a leg-up from China plus one strategy, pioneers like Ramkrishna Forging with the capability to deliver will see greater volume growth.

Lalit Khetan, CFO, emphasizes the important role of segment diversity, saying, "We have been focusing on de-risking our business model by diversifying across segments, customers, and geographies. Our operational scale has grown, and we are constantly adding value-added goods to our overall offering.”

The financial performance of the company exceeded market expectations as consolidated revenue increased to Rs. 824.44 Crore in Q2FY23 from Rs. 578. 82 Crore in Q2FY22 registering a growth of 42 per cent Y-o-Y. The PAT and EBITDA showcased a growth of 53 per cent and 21.27 per cent, respectively, Y-o-Y.

“We expect to achieve revenue growth of 20 per cent CAGR over a period of the next three years. The repayment of debt and the payment of dividends will be commensurate with the increased cash flow from the above growth”, Mr Khetan highlights.

In an environment that is vastly competitive and entrenched with uncertainties, it is heartening to note that RKFL is not only navigating the currents but forging a better path.