A joint fact-finding report to address the concerns regarding discrepancies in the inventory balances and stock accounting at Ramkrishna Forgings’ manufacturing plants has confirmed a ₹220.52 crore inventory overstatement for the last financial year, which resulted in an adverse impact of close to 7 per cent on the forged products maker’s net worth.

The report has further revealed that the erroneous entries and non-recording of rejection of raw materials and scrap inventory at the plants resulted in inventory overstatement of ₹50.22 crore for FY24.

Adverse impact

The adverse impact of the discrepancy in inventory on its net worth has been higher than what the company had earlier indicated. At the request of the statutory auditors, S R Batliboi & Co, and S K Naredi & Co, the management of the company had convened an audit committee which appointed external agencies to conduct the joint fact-finding study for the discrepancy in inventory.

“The approximate adverse impact (net of tax) on the net worth of the company would be around ₹20,260 lakh (6.73 per cent of the net worth of the company as on March 31, 2025). Such shortage has been recorded in the financial results for the quarter and financial year ended March 31, 2025 and March 31, 2024,” Ramkrishna Forgings said in a stock exchange filing.

The Kolkata-based company’s board, at a meeting held on Saturday, noted the report submitted by external agencies CLA IVC and Salarpuria & Partners in the matter. The report was first placed before the audit committee meeting for its observations and thereafter before the board.

Notably, the company, on April 26, informed that the audit committee approved the appointment of “reputed independent external agencies” to conduct a joint fact-finding study for the discrepancy in inventory and reasons thereof. During the course of annual physical verification of inventory undertaken by the company for the last financial year, which commenced from April 6, it was observed that there had been discrepancies with respect to certain inventories.

“While the physical verification process is continuing, as per the internal estimates of the company, a likely adverse impact of the order of 4-5 per cent of the net worth of the company is indicated,” Ramkrishna Forgings had informed stock exchanges in April.

Stocks down

Following this disclosure, the company’s stock had reacted sharply. On April 1, stock was at ₹775.55 apiece on BSE. It fell sharply on April 28 at ₹625.05 after the company informed about conducting the joint fact-finding study.

The promoters of the company earlier said that they stood firmly committed to protecting and preserving the stakeholders’ interest to uphold highest standards of corporate governance. And, to mitigate the potential adverse impact, they were giving an assurance to the investors that they intended to fund the same through permissible instruments as permitted under applicable laws.

In the qualified opinion to the board of directors, on the occasion of declaring the results for the last fiscal on June 1, the auditors said, “...during our observation of the physical verification, based on testing of sample of work-in-progress inventory with the book records of holding company, we noted that book stock was higher as compared to the physical stock and we requested management to initiate an independent investigation.”

“As indicated and committed, the promoters would come forward to make good the shortfall arising due to the inventory discrepancy,” said Naresh Jalan, Managing Director, Ramkrishna Forgings, during the fourth quarter earnings conference call on June 2.

Published on June 15, 2025