Ramkrishna Forgings asks external auditors to submit report before earnings
This story was originally published at 14:29 IST on 28 April 2025
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--Ramkrishna Forgings: Inventory in books found to be more than physical goods
--CONTEXT: Ramkrishna Forgings mgmt's comments in conference call
--Ramkrishna Forgings: Found irregularities in recording inventory
--Ramkrishna Forgings: Appointed 2 agencies to probe inventory discrepancies
--Ramkrishna Forgings: High inventory due to exports commitments
--Ramkrishna Forgings: Inventory discrepancies not to impact shareholders
--Ramkrishna Forgings: Don't expect any financial loss from inventory issue
--Ramkrishna Forgings: Await external audit for reason of inventory lapses
--Ramkrishna Forgings: Internal audit suggests notional loss from lapses
--Ramkrishna Forgings: Asked external firms to conclude audit before results
--Ramkrishna Forgings: Can't disclose names of external audit agencies
--Ramkrishna Forgings: Will make sure there's no loss to minority shrholders
--Ramkrishna Forgings: External firms for probe decided by co's audit panel
--Ramkrishna Forgings: Will ensure adherence to corporate governance norms
--Ramkrishna Forgings: Co always maintains 100-120 days of inventory
--Ramkrishna Forgings: Discrepancies largely in work-in-process inventory
MUMBAI – Ramkrishna Forgings Ltd. has appointed two external agencies to conduct a probe into the discrepancy found in its inventory records, the company's management said in a conference call with analysts Monday. The company has asked the agencies to submit their fact-finding report before the company announces its quarterly earnings, the date for which is yet to be announced. The management said the company's internal audit committee had appointed the two external agencies, but refused to disclose the names of the auditors.
The company found in its internal audit that the book value of some of its inventory was much higher than the value of physical goods. In a filing to exchanges Saturday, the company said it may have to take a hit of 4-5% of net worth due to these lapses. A back-of-the-envelope calculation shows the company had a net worth of over INR 29 billion as of Sept. 30, which implies a hit of INR 1.2 billion-INR 1.5 billion.
"Our assessment right now is that it is a notional loss because it is irregularity in recording of inventory," Lalit Khetan, chief financial officer of the company, said in the call. "But certainly, we have to wait for any conclusion...we have to wait for the report of independent agency to come to any final conclusion."
The discrepancies were found largely in the work-in-process inventory, the management said. It assured that the discrepancies did not arise due to any theft, and despite the hit to its net worth, the company has enough raw material and inventory to run the business. It pointed out this was the first instance of such an inventory discrepancy in its history, and the company remains committed to adhere to corporate governance norms.
As a business requirement, the company keeps an inventory of 100-120 days, the management said. It clarified that it needs to keep high inventory due to commitments outside India and clients' model of just-in-time inventory.
There were several questions from analysts over the company's comments that promoters may infuse funds due to lapses in recording inventory. An analyst over the call asked: "In case promoter decides to infuse funds, how will that benefit minority shareholders?...because they (stake) will get further diluted."
The company's management, without delving into details, said it would choose a way of fund infusion which will not "adversely impact" the minority shareholders. "...that instrument will be designed in a manner so that there will be no financial loss to the minority shareholders due to this impact," it said.
At 1426 IST, shares of Ramkrishna Forgings traded 5.76% lower at INR 619.20 on the National Stock Exchange. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Anshul Choudhary and Narayana Krishna
Edited by Tanima Banerjee
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