MM Forgings Keeps 'A;Stable' Rating Despite Profit Dip and Rising Debt

Total operating income for MM Forgings stood at ₹1,525 crore in FY25, while profit after tax declined 10% to ₹122 crore.

CARE Ratings Affirms MM Forgings' Credit Rating

CARE Ratings has affirmed MM Forgings Limited's credit rating at 'CARE A; Stable', maintaining a stable outlook. The agency recognized MM Forgings' strong track record, engineering skills, and solid business risk profile. However, the rating also points to challenges such as moderate debt levels, reliance on the cyclical auto industry, customer concentration, and fluctuating raw material prices. For the fiscal year 2025, the company reported total operating income of ₹1,525 crore and a profit after tax of ₹122 crore.

Why the Rating Matters

A stable 'A' rating shows MM Forgings has strong creditworthiness and can meet its financial commitments. This gives confidence to lenders and investors, potentially making it easier to access capital for future growth or operations. CARE Ratings expects MM Forgings to maintain its strong business profile in the medium term, despite current financial pressures.

Company Investments and Market Factors

MM Forgings has invested heavily in expanding its capacity, adding new press lines and machining capabilities to meet demand for heavier components. This capital expenditure has been largely funded by debt, increasing leverage and affecting financial metrics like interest coverage. The auto ancillary sector, a key market for MM Forgings, is growing but remains vulnerable to economic cycles and raw material price swings. CARE Ratings has noted similar strengths and challenges in previous reviews.

What This Means for the Company

Investors can expect continued financial oversight from CARE Ratings through periodic reviews. The stable outlook indicates the agency views the company's current operational and financial health as satisfactory. MM Forgings is expected to use its new heavy press lines and machining capacities to boost sales volumes and improve profit margins.

Key Risks to Watch

• Moderate debt levels, with overall gearing at 1.33x in FY25, up from 1.18x in FY24.
• High dependence on the automotive industry, with the commercial vehicle segment making up approximately 76% of FY25 revenue.
• Vulnerability to fluctuating raw material prices, as steel billets account for a significant portion (45-50%) of production costs.
• Customer concentration risk, with the top 10 clients generating about 62% of revenue in the first nine months of FY26.
• A lengthened operating cycle to 136 days in FY25 from 109 days in FY24, due to higher inventory and receivables.
• Impacts from geopolitical tensions and tariff uncertainties, which moderated US volumes in Q2 and Q3 of the first nine months of FY26.

Peer Comparison

MM Forgings competes with major players such as Bharat Forge, Ramkrishna Forgings, and Happy Forgings, all serving the automotive and industrial markets. While Bharat Forge is the largest, MM Forgings targets specific product segments and has enhanced its machining capabilities. Ramkrishna Forgings and Happy Forgings also serve similar industry needs, competing on capacity, product range, and technology.

Key Financial Metrics (FY25)

• Total Operating Income: ₹1,525 crore (FY25, Standalone)
• Profit After Tax: ₹122 crore (FY25, Standalone)
• PBILDT Margin: 19.41% (FY25, Standalone)
• Overall Gearing: 1.33x (FY25, Standalone)
• Interest Coverage: 4.95x (FY25, Standalone)

What to Track Next

Investors will be watching:

• How effectively MM Forgings uses its new heavy press lines and machining capacities to drive volume growth and improve profit margins.
• Progress in improving financial metrics like gearing and interest coverage to levels that could support a stronger rating outlook.
• Performance in key export markets, particularly the US, given past disruptions from geopolitical and tariff issues.
• Management's strategies to manage fluctuating raw material prices and customer concentration risks.
• Details on planned capital expenditure for FY27 and how it will be funded.