Ramkrishna Forgings

Summary of MM Forgings AGM:
The forging capacity utilization was around 80% in FY2015. So, the company is in the process of expanding its forging as well as machining capacity at a cost of Rs 125 crore over next few months. Under this capex programme, the forging capacity will expanded to 65000 tonnes per annum. Between 2008-2015 production capacity was increased to 46000 TPA. Existing plants has enough lands for future capacity expansion. Growth in manufacturing sector around the work is expected to be sluggish in 2015-16, which in turn could adversely impact demand for forgings. However the company could mitigate this over time with its focus on development of new parts.
Of the 73-76% share of export in sales about 10% is accounted for by South America and balance is equally from North America and Europe. The South American market continues to grow. The company is confident of sustaining the Q1FY15 revenue growth and operating margin for the entire fiscal. All the factories of the company are located in Tamil Nadu. Power costs in this state are escalating and supply is erratic. Other input costs such as raw material and manpower costs are also rising steeply. The company is relentlessly focuses on bringing costs down especially energy cost.
By connecting the plants directly to the grid and by tying up with private sources of power, the company has effectively eliminated its dependence on highly expensive diesel generation sets. Only about 15% of power requirement is currently bought from grid. Similar focus on tool costs, low cost automation are also yielding fruits. The company is also adopting low cost procurement of raw material both domestic and overseas. All these are facilitating margin expansion along with better capacity utilization.

The recent weakness of the rupee would be in favour of the company but maintaining costs down in FY2015-16 will be a tough as power costs in TN, where all of the company’s plants are located, escalate and supply continue to be erratic.

MM Forgings Management has indicated 5-7% growth in FY16

Common theme that arise out of both these companies (RKF & MM):
1. Growth will primarily be driven by exports for both the companies.
2. Outlook remains positive as they are undergoing capacity expansion to cater to futuristic demand.