Stricter internal controls, fund infusion on Ramkrishna Forgings' radar

Promoters to infuse Rs 204.75 crore at 3x market price via warrants as part of effort to offset accounting losses and strengthen internal controls and SAP processes

The promoters of Ramkrishna Forgings will infuse fresh capital into the company through warrants priced at nearly three times the market value, a move aimed at reassuring minority shareholders following discrepancies in inventory balances and stock accounting at the company’s manufacturing plants, resulting in a notional loss in net worth.

 

“As a moral responsibility, we are taking this step to ensure that the interest of minority shareholders is taken care of,” Ramkrishna Forgings managing director Naresh Jalan told Business Standard.

 

He added that the price at which the warrants would be issued is three times the current market price to ensure that there is minimum dilution of overall equity.

 

“If we had done it at the current market price, the dilution would have been much higher which would have affected the minority shareholders,” he said.

 

On June 5, the company informed the stock exchanges about the issuance of warrants, each convertible into or exchangeable for one equity of face value of ₹2 each, to promoters of the company. An extraordinary general meeting (EGM) has been convened on June 28 for shareholders’ approval.

 

The issue price is ₹2,100 each. On Monday, the stock closed at ₹648.40 on the BSE.

 

The promoters would be bringing in ₹204.75 crore. The notional loss to the net worth of the company due to the accounting gap is around the same amount.

 

“When this occurred one month back, as promoters, we promised to bring in the notional capital loss during an investor call. This is to ensure that the net worth of the company remains intact,” Jalan said.

 

On April 26, the company had informed stock exchanges that during the annual physical verification of inventory undertaken by the company for FY25, it was observed that there had been discrepancies in certain cases of inventory. The verification commenced from April 6, 2025.

 

The audit committee had then approved the appointment of independent external agencies to conduct a joint fact-finding study for the discrepancy in inventory.

 

The company had also mentioned that while the physical verification process was continuing, as per the internal estimate of the company, there was a likely adverse impact of 4-5 per cent of the net worth of the company.

 

While announcing its results for Q4 and FY25, the company disclosed that it had received the interim joint fact-finding report which confirmed certain erroneous entries/non-recording of rejections at plants.

 

This resulted in an overstatement of ₹220.52 crore as on March 31, 2025, while it was ₹50.22 crore as on March 31, 2024. The approximate adverse impact (net of tax) on the net worth of the company would be around ₹202.60 crore (6.73 per cent of the net worth of the company as on March 31, 2025), it said.

 

The shortage was recorded in the financial results for the quarter and FY25 and FY24.

 

The joint fact-finding report was conducted by Salarpuria & Partners Chartered Accountants and CLA IVC LLP (erstwhile Baker Tilly Private Limited).

 

On June 14, the board of Ramkrishna took note of the final report. In the exchange filing, the company mentioned that no further financial impact was required on account of the final joint fact-finding report.

 

On the next course of action, Jalan said that the audit committee had appointed the two agencies which had conducted the report to implement the recommendations on the floor so that there is no recurrence in future.

 

He also said that the SAP (systems, applications & products) system was getting corrected.

 

The exchange filing on Saturday had mentioned that the management was in the process of appointing an external SAP/other consultant to review the existing production process in SAP and recommend actions to be taken towards strengthening controls and streamlining the process. This was expected to be completed over the next 4-6 months.