Ramkrishna Forgings Sees 4%-5% Net Worth Hit Due To Missing Inventory, Appoints External Agencies For Probing

Ramkrishna Forgings Ltd. said that the discrepancies identified during its annual physical verification process could impact its net worth by about 4% to 5% and that the company has appointed to external agencies to investigate the matter.

The company said the missing inventory was detected during verification for the financial year ending March 31, which started on April 6, according to its notification to the exchanges on Saturday. The news sent shares of Ramkrishna Forgings plunging by as much as 10% before trimming some of the losses.

During a conference call hosted by Nuvama on Monday, Ramkrishna Forgings’ management said the discrepancy related specifically to work-in-progress inventory records. That management indicated that the discrepancy may result in a notional loss in its profit and loss statement. The ongoing external audit is being conducted by agencies appointed by the audit committee, with the scope of work shared with EY, they added.

The audit committee, at its meeting held with the company on Saturday, approved the appointment of independent external agencies to conduct a joint fact-finding study to investigate the discrepancies and identify their causes. The company said the move was aimed at ensuring transparency, accountability and adherence to corporate governance standards, while also working to prevent any recurrence.

The company said it will account for the financial impact on a one-time basis after receiving the final report. Promoters have assured investors they intend to fund the shortfall through permissible instruments, under applicable laws, to protect stakeholders’ interests.

Ramkrishna Forgings said in its Saturday’s statement this is the first such incident in the company’s history. No timeline has been provided for the completion of the fact-finding exercise.

It added that this is the first such incident in its history. The promoters have assured investors that they intend to fund the impact through permissible instruments under applicable laws to protect stakeholders’ interests.

The company did not specify the details of the missing inventory and by when the joint fact-finding study would be completed.

Shares of Ramkrishna Forgings fell as much as 10.16% to Rs 590 apiece on Monday. It pared losses to trade 4.50% lower at Rs 627.15 apiece, as of 12:31 p.m. That compared to a 1.25% advance in the NSE Nifty 50 Index. The scrip has fallen 17.97% in the last 12 months and 31.02% so far this year.