Ramkrishna Forgings Expands Global Footprint with Mexico Acquisition

Ramkrishna Forgings Limited announced on July 24, 2024, its decision to acquire Resortes Libertad S.A. DE C.V., based in Mexico. This strategic move marks a significant step in the company’s global expansion strategy.

Strategic Rationale

The acquisition is aimed at establishing machining facilities in Mexico. A 10-year take-or-pay agreement with a North American customer, valued at USD 3.5 million annually, will ensure a steady supply of forgings to be machined at the new facility. The acquired company, which holds an IMMEX program, will facilitate smooth operations in the Mexican market. The Company has taken a factory space on lease at Monterrey, Mexico and will start its machining & warehousing operations from Q3FY25 onwards.

Financial Implications and Timeline

Ramkrishna Forgings will invest approximately USD 4,64,600 (equivalent to MXN 83,81,000) in cash for this acquisition. The deal is expected to be finalised by September 30, 2024.

No Regulatory Hurdles

The company has confirmed that no regulatory approvals are required for this acquisition. However, it will comply with necessary formalities and applications as mandated by the authorities.

Ramkrishna Forgings Q1 FY25 Financials

During Q1 FY25, overall capacity utilisation stood at 86% vs 91% in Q4FY24 and 92% in Q1FY24. The drop in utilisation is due to the addition of capacity during the quarter. In domestic markets, revenue for Q1FY25 stood at ₹46,745 lakh, as compared to ₹48,243 lakh in Q1 FY24.

Commenting on the results, Mr Naresh Jalan, Managing Director, Ramkrishna Forgings Limited, said, “I am pleased to share our financial performance and strategic milestones for this quarter. Our revenues on a standalone basis stood at ₹868 crore, reflecting our strong market presence and operational efficiency. Our adjusted EBITDA was ₹201 crore, yielding an impressive EBITDA margin of 23.1%. Our Profit After Tax (PAT) for the quarter was ₹73 crore. We received a significant order inflow, amounting to ₹1,679 crore, to be executed over a period of four years. The order book also includes an undercarriage business order from a metro car in the railway segment, contributing to our diversification into the non-auto space.”

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