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Ramkrishna Forgings Ltd
Earnings Call Analysis
Q1-2025 Analysis
Ramkrishna Forgings Ltd
The forging market has shown robust growth, with projections indicating an increase from INR 94.74 billion in 2023 to INR 132.06 billion by 2028, reflecting a Compound Annual Growth Rate (CAGR) of 6.7%. The automotive sector constitutes around 61.8% of this market, expected to grow from approximately USD 3.6 billion in 2023 to about USD 5.4 billion by 2029 at a CAGR of 7.6%. This growth offers a positive backdrop for companies operating in the sector.
For the first quarter of FY '25, Ramkrishna Forgings reported a revenue of INR 868.5 crore, which represents a year-on-year growth of 4%. The EBITDA margin improved to 23.1%, up from 22.4% the previous year, marking a 70 basis point increase. The company aims to maintain margins above 23% in the upcoming quarters.
The net profit after tax for Q1 FY '25 was INR 73.1 crore, slightly down from INR 77 crore in Q1 FY '24. However, the improvement in EBITDA margins indicates effective cost management despite rising expenses, particularly shipping costs which have led to a one-off expense of INR 17.5 crore.
Looking ahead, Ramkrishna Forgings maintains a positive outlook with expectations of 15% to 20% volume growth for FY '25, supported by strong order inflows totaling INR 1,679 crore, with North America contributing INR 526 crore. This includes segments from commercial vehicles (CV) and light vehicles, among others. Confidence stems from a robust order book and expected increases in demand across sectors.
Despite positive trends, domestic revenue has faced a 3% decline due to raw material price decreases and lower customer demand. The company is adjusting its strategies to mitigate these effects while capitalizing on the growing export market, where price realizations have improved. Additionally, external factors such as the Red Sea shipping crisis continue to influence operational dynamics.
The company's subsidiaries, including Multitech Auto, reported a revenue of approximately INR 86 crore, with plans for improvements based on operational efficiencies. Ramkrishna Forgings has earmarked INR 500 crore for investments in its standalone operations and around INR 135 crore for subsidiary growth during FY '25.
Ramkrishna Forgings is actively pursuing acquisitions to bolster growth. While no specific acquisitions are in the pipeline currently, the management emphasizes continuous evaluation of opportunities to enhance market share, operational capabilities, and product offerings, aiming for incremental growth.
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Ladies and gentlemen, good day, and welcome to the Ramkrishna Forgings' Q1 FY '25 Earnings Conference Call hosted by Nuvama Wealth.
[Operator Instructions] I now hand the conference over to Mr. Raghunandhan from Nuvama Wealth Management. Thank you, and over to you, sir.
Good afternoon, everyone. On behalf of Nuvama Wealth Management, I would like to welcome you all to this earnings call of Ramkrishna Forgings. I would like to thank the management for giving us this opportunity. We have with us today, Mr. Naresh Jalan, Managing Director; Mr. Lalit Kumar Khetan, Whole Time Director and Chief Financial Officer; Mr. Chaitanya Jalan, Whole Time Director; Mr. Milesh Gandhi, Executive Director, Marketing; and Mr. Rajesh Mundhra, Vice President, Finance and Company Secretary.
Before we begin, may I remind you of the safe harbor. The management may be making some forward-looking statements that have to be understood in conjunction with the uncertainty and the risks the company faces.
I shall now hand over the call to Mr. Lalit Kumar Khetan for opening remarks. Over to you, Lalit, sir.
Raghu, I think lot of noise on the call right now. I'm having a lot of noise on the call. Rajesh, are you getting the same?
Lisa, can you look at it?
No, sir. No, sir. There is no noise.
Hello?
No. There is no noise in the background.
Okay. Let me start, okay? It's better. Ladies and gentlemen, good evening, and a very warm welcome to everyone present on the call. I'm honored to be joined by Mr. Naresh Jalan, our Managing Director; Mr. Chaitanya Jalan; and Mr. Milesh Gandhi, Whole Time Director; and Rajesh Mundhra, our Company Secretary.
I hope you all had got an opportunity to go through our financial results and [Technical Difficulty] Hello?
You're audible, Lalit.
Yeah, sorry. So I hope you all have got an opportunity to go through our financial results and investor presentation, which have been uploaded on the stock exchanges as well as on the company's website.
We are happy to report that the company has delivered steady results for the first quarter. Firstly, let me give you a brief into latest trends in the global market. The global forging market had experienced robust growth in recent years and with a projected increase from INR 94.74 billion in 2023 to INR 132.06 billion by year 2028. That reflects a CAGR growth of 6.7% over this period. The market is also going to reach 17.6 lakh metric tonne by 2028-'29 with a CAGR of 5.4% during the period '24 to 2029.
The automotive sector holds a significant share of about 61.8% of forged components within India and forging market in terms of volume for the year '23 in terms of value, the automotive sector contributed approximately USD 3.6 billion in 2023, and this is expected to grow to about USD 5.4 billion by 2029 at a CAGR of 7.6%.
Now, let's look at our financial performance for the quarter and year ended Q1 FY '25. In Q1 FY '25, we achieved a revenue of INR 868.5 crore on the standalone basis, which represents a year-on-year growth of 4%. Our EBITDA margin for Q1 FY '25 stands at 23.1%, adjusted for impact of one-off expense of INR 17.5 crore as compared to 22.4% in Q1 FY '24. The EBITDA margin expanded by 70 basis points year-on-year, and we are confident of sustaining margins of approximately this 23% plus for the forthcoming quarters.
Further, our net profit after tax stood at INR 73.1 crore for Q1 FY '25 compared to INR 77 crores in Q1 FY '24. Looking ahead, there is a lot of optimism for the future. We see positive trends across different areas, including freight movement, freight rates and activity in industry, cement and iron ore sectors. Major projects like dedicated freight corridors are also expected to boost sales of commercial vehicles. With government finances improving and focus on growth related programs, we can expect this positive trend to continue.
At Ramkrishna Forgings, we are ready to seize the growth opportunity by leveraging our strength in innovation, operational excellence and strategic partnerships. We are confident in our ability to adapt, innovate and create value for our stakeholders, while making a positive impact on the industry and society.
Thank you for your continued support. And before we go to the Q&A, I request my colleague, Mr. Milesh Gandhi, to update you all on the market. Over to you, Milesh.
Milesh, are you there?
Milesh is not there.
So let me update the audience on the market. So just for the benefit of the audience, we would like to -- we have got a visibility of new order inflow of INR 526 crores during the quarter from North America. That is out of that, CV contains INR 201 crore; LV, INR 109 crore; and EV at INR 16 crores; and balance is non-auto, that is INR 200 crores. That is from North America. If you look at Europe, we got an order inflow of [ INR 287 crores ], and that's mostly from the CV. EV was only miniscule, 1% of that.
Then coming to India, we have an inflow of INR 442 crore from the CV side and INR 284 crore from the railway side. And from -- sorry INR 442 crore order inflow is INR 362 crore from the CV side, INR 80 crore is non-auto. Apart from that railway is INR 284 crore. And apart from that, rest of the world, there is an inflow of about INR 140 crore of orders on the CV side. That's the visibility we have on the order in Q1 FY '25 on the additional order side.
That's all from my side. Thank you. And now we can take the Q&A.
[Operator Instructions] The first question is from the line of Mumuksh Mandlesha from Anand Rathi.
Can you hear me, sir?
Yes, we can hear you.
Yes. Sir, I just want to understand the rationale for this acquisition of the Resortes Libertad, Mexico company. Just want to understand what's the reason behind that acquisition, sir?
No, I think, we have -- this is just a company to start up in Mexico. It's -- this company has no business to set up a legal entity in Mexico for us, it would have taken us 1 year time and to start business. So, we have acquired a legal entity registered in Mexico, who has no manufacturing operations right now. So, basically, we have -- you may have seen that acquiring this, we have changed the name also of this entity. And now we will start our Mexico operations, which we had informed the investors in last year, in this entity.
Got it, sir. Sir, on the order book, congrats on a strong order book for this quarter, is it possible to share, sir, what would be the annual order book that would get executed, say, by FY '26 or '27, post this acquisition sir?
This -- 100% of this order book is executable in every year. This is total order book, which has been north of INR 1,200-plus-crores. It's basically a 4-year order. So, basically, if you see that almost INR 300-plus-crores is executable every year, starting next year onwards.
Okay. No, I mean, let's say cumulatively, sir, in the past year also, any cumulative number you would have, sir?
No, I -- we would not -- these are basically the new orders which we have got in this quarter. Previous -- past is already on stream and is already converted in businesses, and you will be able to see this in coming quarters in terms of incremental tonnages.
Got it, sir. Sir, coming on the results, sir, domestic revenue this quarter was very muted, broadly in line with the underlying industry. We didn't so much outperformance. Is there any mix impact, like the, a lower tonnage segment has grown more than the higher tonnage? Why is...
No, I think, basically, there is a small dip in the overall revenue, which you see in the domestic is a mix of basically lower offtake as well as raw material price decrease, which has happened in the domestic market.
Okay. And, sir, on the one-off of INR 175 million, which you mentioned in the presentation, what is this one-off, sir?
Lalit?
Yes. So, that INR 17.5 crores one-off expenditure is basically a contribution to electoral trust.
Sorry, can you repeat, sir?
The contribution to electoral trust. That's the INR 17.5 crores expenditure, one-off expenditure.
And, sir, this quarter, gross margin has seen improvement, while the broadly export and domestic revenue was Q-on-Q broadly unchanged mix-wise, what could have led the improvement, sir?
Well, you can see the price realization on the export side, if you see the export realization has improved, that has led to this kind of improvement.
And this price realization, basically the price hike which you've got?
It is a mix of price hike as well as it is a mix of new order wins, which you have started converting into businesses.
Next question is from the line of Mitul Shah from DAM Capital.
Hello. Am I audible, sir?
Yes, you're audible?
Sir, my first question is on the subsidiary. It seems that there is a decent margin improvement on Q-on-Q basis. So can you give more details on this? And if you can give subsidiary-wise, few key numbers?
So Mitul, coming to that, we just want to update you that we have started operations in JMT Auto and the name of JMT Auto has been changed to Ramkrishna Casting Solutions Limited. So that company has started operation. We have done an improvement in terms of margin in Multitech also, and the operations in ACIL is also being ramped up. So all the 3 contributed to this improvement in margin. And I can say the marginal improvement from all the subsidiaries has led to this kind of improvement in the consortium.
So it is the operational efficiency kind of thing or there is a raw material benefit also part of this?
No, it is only operational efficiency.
Okay.
And, Mitul, just to update you, it is just a start. I think, we had -- when we acquired these companies also, we had said that it is a start of a new journey for us. And going forward, with the experience we carry and with the team we have, it will be a continuous improvement in the subsidiaries in terms of margin improvements. And you -- and in the future also you will see the same trajectory being followed, and there is lot of headroom in terms of overall margin expansion in the subservice.
Okay. Sir, one clarification, this electoral trust related amount is sitting in the other expense, right?
Yes, Mitul, that is in other expense.
Okay. Sir, second question is on the railway side. What is the status on this Vande Bharat order, which earlier you highlighted about INR 270 crores executed over '25 and '26? And any further update on that in terms of potential in this year, getting more orders?
No, I think, in terms of Vande Bharat, it has just started. I think, we have already started making protos. And in the coming quarter, we are going to submit the protos for validation. And from then, what is the time -- whatever time it takes for validation and we have -- like we have said in 20 -- next year and the following year, we have to complete this order.
So this INR 270 crore would be in FY '26 and FY '27?
Yes. And it will be in line with whatever Vande Bharats are made. But this -- once this validation of bogie happens, it will open also new opportunities for us directly into the Indian Railways. This is a private sector order which we have got. But the -- once the validation and our design is approved, it will open also an opportunity after 6 months in current railway manufacturing of the Vande Bharat. And other private sector orders also, which government is in process of going forward.
Sir, which are these components? Can you highlight a few?
No, it is entirely assembled bogies in which -- under frame of the Vande Bharat. It is in full, complete assembly. So it is not a particular component, it's entire assembly, which we are going to make and sell.
Okay. Great, sir. Lastly on, sir, what is update on this Titagarh JV, and when we are expecting first product to come out operation to begin, and what can be the first year revenue potential?
So, I think, right now, it is moving as per our vision. And I think we look at FY '26 last quarter to be the first batch of productions for railway validation to start rolling out, and it is on track and on time.
The next question is from the line of Rohit Singh from Nvest Analytics Advisory.
My question on the demand outlook for the current year and what is the volume guidance for FY '25?
No, I think, in terms of demand, we still stand by our commitment of 15% to 20% volume growth year-to-year. So FY '24 to FY '25, we feel that we will be able to achieve and do better than what we have predicted it.
The next question is from the line of Akhil Gulecha from [ Pekaday Family & Office ].
So my question is a bit generic. So, pardon me for that. The last few years, a major growth has come from exports. So, can you please explain very specifically, like why have all of these export orders come to India, and why have they specifically come to us, Ramkrishna Forgings? What are we doing that is so different than our competitors in India or globally?
I think, I cannot answer your question why the customers are coming to India. I think, what we can say that we have set up a world-class facility, and we are marketing that accordingly in the global world, and the customer who are looking for diversification or introducing world-class technology are buying products from us.
Okay. Understood. So, is there anything specific? Because the growth has come recently in the last few years as opposed to earlier on. So, anything that has changed significantly? Is it the high energy prices globally? Is that why we are gaining market share, one of the reasons?
No, I think it has not come only in the last year. If you see last 4 to 5 years, we are constantly growing in terms of exports. And we continue -- I think we are thriving to continue to do that in next of the years.
Okay. Because even in domestically, when I compare you to other listed players in the similar industry, you have grown much faster than all of them. So there is something that you are doing right? So I'm just trying to understand, other than world-class facility or good process, what is it that you're doing right that others aren't able to replicate?
I cannot tell you why others cannot. But I can tell you, it means that we are doing good marketing and good -- we are good suppliers.
Okay. So, is there anything else in this industry, which gives a significant competitive advantage? Or is it just the process and efficiency that is better.
Yes, it is only a question of process and efficiency and a good marketing team.
Okay. Is there a significant pricing difference as well or is that similar across most players?
I'll not comment on anybody's pricing, sir, please. I think I would rather stick to what I am doing and what we can do.
Okay, okay. Understood. Understood. That's it from my side.
The next question is from the line of Balasubramanian from Arihant Capital.
Sir, how much volume growth in this quarter witnessed overall? And on the Titagarh side, earlier, the project cost is around INR 1,250 crores, INR 1,300 crores in that range. Is there any escalations in that project cost? These are my first question.
So right now, what we are looking at the project cost of the Titagarh side, the project is around INR 1,800-odd crores right now. So, the project cost is INR 1,800 crore.
Okay, sir. Sir, on the volume side, sir?
Volume side, I mean, in terms of?
The overall volume growth in this quarter? Because last time, we have guided 15% to 20% kind of volume growth for FY '25. So are we in the track?
Yes, yes. We are very much on the track for achieving the 15% to 20% volume growth for the FY '25.
Okay, sir. And sir, on the export side, we are targeting 50:50 kind of mix on domestic and exports. And I just want to understand which are the regions we are targeting, whether in Europe, Asia or U.S.? Like, what kind of opportunities we have, if you could share like an approximate mix region-wise?
No, I think, we are not targeting any specific region. We are marketing around the globe, wherever OEMs are there, wherever forging is required.
Okay, sir. Sir, on that Red Sea impact last quarter, we have seen some impact. We are also in the discussion with customers for 10% to 15% like rationalizations. So, what kind of impact we are seeing in this quarter?
I'm unable to understand your question.
Sir, last quarter, we had some impact because of Red Sea on the delayed shipments around INR 20 crore kind of impact.
No, the impact was -- I think impact was INR 20 crores, and I think still the impact remains similar -- in the similar range, and that has become a regular precedent. I think Red Sea issue, unless the war stops, I think there is nothing which can be done. So, it has become a regular course of business right now. So, INR 15 crore -- INR 20 crores to INR 25 crores will remain always in mid-sea or material -- so, that is the kind of capacity or inventory we have built in the system.
Got it, sir. Sir, like we're also in the discussion with customers to rationalize 10% to 15%. It is done or we are still in the discussion?
We are still in the discussion.
The next question is from the line of Vidrum Mehta from ASK Investment Managers.
Just want to understand on the demand front...
Your voice is not there. Can you speak a little loud, please? We cannot hear you.
Is it better?
Yes, it's better.
Sir, just wanted to understand on the demand front; so for Q1, our volume growth is 1%. For FY '25, we are guiding for a volume growth of 15% to 20%. So, what is helping us remain confident that for the remaining 9 months? Or if you can help us understand what is the visibility in terms of volume growth, which we can see in the remaining 9 months?
So, if you are saying it is 1%, I think you are comparing quarter-on-quarter. So, basically, for the full year basis may, I can -- we are very confident and we have the visibility of the complete order book as well as offtakes from the customer on a steady flow basis, we are seeing that happening. And that is the reason we are confident of achieving 15% to 20% volume growth.
So, is it because of the new order book, we remain confident of achieving this volume growth?
Past order wins have already started showing traction in terms of supplies. And we are very confident that overall, whatever volumes have been projected on those new orders are starting to show results. So, we are very confident that we will be able to meet expectation and do better than what we are estimating in terms of 15% to 20% volume growth.
Okay. And also, sir, if I look at the domestic revenue breakup. So, domestic market revenue is down 3%. And you alluded to the fact that it is partly attributable to the raw material price decrease and as well as lower offtake in your opening remarks. But in that case, so should we assume a lower realization per tonne, in the [ fundamental market ]?
Yes, I think we have already shared, I think if you can see in our presentation, we have given our domestic realization as well as export realization. And you can see that, in that domestic realization is on a downward -- that has gone down.
No. So, I am just asking from a full year point of view. So, for FY '25...
No, I think -- see, raw material prices is completely pass on for us. And basically, we cannot comment how the market will shape up into coming quarters. And in India, steel prices is completely not in sync with the global market. It is completely supply and demand curve. If the demand is -- in domestic market, is higher in the coming quarters, we may see increase also. So, in that case, realization may go up also. So currently, we don't see -- we cannot comment on what steel pricing is going to be there in India in coming quarters.
So, 15% to 20% growth is broadly what we are asking or we are estimating is, with respect to volume, and that should flow to revenue. That is what is a fair assumption.
Yes, 15% to 20% in terms of volume. Basically whatever raw material price is there, plus the conversion is going to flow into the revenue.
Okay. And sir, can you help us, subsidiary revenue for Multitech and ACIL for this quarter?
Coming to the Multitech, it's about INR 86 crore and for ACIL, it's about INR 17 crore of the revenue for the quarter.
INR 86 crore and INR 17 crore?
Yes.
INR 17 crores, 1-7.
1-7, INR 17 crores.
Yes. So, sir, if I look at the full year FY '24 Multitech revenue, I guess it reported INR 360-odd crores, correct? INR 353...
INR 350-odd crores, INR 353-odd-crores, yes.
So, are we seeing any signs of improvement? Because the run rate of INR 85 crores, INR 90 crores is broadly maintained in Q1 as well?
So, I think this is just the first quarter. And, as you know, first quarter, because of heat and everything, extreme summer, the casting production goes down. I think you will be able to see significant changes in coming quarters.
Sir, why I am asking is, basically because in the analyst meet, we had shared our vision for '25 and '26, wherein the revenue from Multitech was significantly higher. So, are we in that trajectory in terms of...
We still maintain the same.
Okay. Okay, and sir, if you could just repeat once again the order inflow, which you shared in your opening remarks, it would be really helpful?
I think, Milesh has joined, I think. Probably, Milesh can speak more on the order intake.
Yes. So, good evening. I wanted to convey that in this quarter, there has been a good order inflow with regard to the company's forward plan. We have been able to have good order wins across the globe, not only in India and also overseas, and both in auto and non-auto segments. To be specific, the order inflow are to be executed over a period of 4 years, except railways, where it is as per contract value.
Against the current order flow that we have received in this quarter, it is worth INR 1,679 crores, in which North America constitutes to around INR 526 crores order inflow wherein it comes from the CV segment is around INR 201 crores, from the light vehicle segment, it is INR 109 crores, and also from the EV in the auto side, it is worth INR 16 crores. And we have had order books inflows from non-auto segment for INR 200 crores that mainly comes from the mining, earthmoving and other segments.
Moving forward with Europe, we had an order inflow of around INR 287 crores, mainly coming from the CV side and from EV. In this, we had an order flow of about INR 3 crores. From the rest of the world, we find around INR 140 crore order flow from the CV market. And to mention about India. In India, we had an order flow of around INR 442 crores, in which CV is worth INR 362 crores and non-auto is around INR 80 crores. That is mainly from the farm equipment and other segments.
Lastly, with regard to railways, we are finding a good order flow too. And in this, we have an order flow around INR 284 crores. That is with regard to the undercarriage and other items that we supply to the railways. Thank you from my end.
The next question is from the line of Mitul Shah from DAM Capital.
Sir, my question is, again, on the average realization, wherein we are indicating a decline. But in export side, it has gone up. That is the first question. And second, sir, in terms of Q-on-Q, what is the [ directionally ] for Q2? Can we expect some further decline in average realization or what could be the quantum?
No, in terms of exports, I think, in terms of product mix change and addition of new customers, wherein order announcements had been made in previous years, have started showing traction, and that is the reason realization in exports have improved. In terms of domestic, seeing the current trend, what is available right now, we don't expect any reduction in terms of realization. But we never know what is going to happen with the steel market. And as of now, when we speak, I don't think any downside risk is there to realization for the quarter.
That means in export also, we have similar pass-through for all the clients or that is a mix of few [Indiscernible].
For raw material, in exports are not India-centric. It is basically in terms of exports indexes. In terms of North America, we follow North American index and for Europe, we follow European index. So based on those indexes, we don't see a major dip in terms of any realization happening in coming -- in current quarter.
Okay. Sir, considering the further investment required in the subsidiaries, what is the balance sheet situation at the end of first quarter in terms of net and gross debt? And how much investment we expect for next 3 quarters -- balance 3 quarter during the financial year in subsidiaries?
So, considering, Mitul, the gross debt and net debt for the quarter, if you look at it, is a little bit elevated by almost INR 100 crores on the consol basis due to the investment made in the subsidiaries. And we have already shared earlier also the debt levels will remain at the level what we are in the FY '24 in the full year -- by the end of full year. So, it will be more or less on the same level what we ended in FY '24.
And what will be full year investment and CapEx for '25?
So, we have already guided, if you remember, our last quarters, we have -- about INR 500 crore will be invested in RKFL stand-alone in terms of CapEx. Apart from that, about INR 135-crore-odd in the subsidiary, and there will be about INR 100-odd-crore investment in the joint venture of the railway project by way of investment that we have already guided and we were [ keen to ] stand by those numbers.
No change in that?
More change in that, yes.
The next question is from the line of Chirag Shah from White Pine Investment Management Private Limited.
So sir, 2 questions. Sir, one basically housekeeping question. So, in consolidated, we have a line item called cost of services. If you can just indicate what exactly it is? And does it move in line with your raw material costs or there is some lead/lag over there? And it pertains to what part of the business?
So you very well know that we have an hospitality business.
Yeah.
That adds to the cost of services business.
Okay, Okay. So I thought it is related to some services that you give in the export market, great. Sir, second question is just an update on how should we think about the ramp-up of the various subsidiaries. We are in the ramp-up phase and you have given an guidance earlier, I'm aware of that. But incrementally, how should one look at the ramp-up, at least from next 2 to 4 quarters' perspective? Because...
Chirag, I think in terms of our investor presentation, we stick to the guidance which we have made in that and we have nothing to add or say further to the investor presentation already made.
And sir, one last question, sir. On the railway side, or maybe even off-highway, if you want to expand? Is there any new product or anything that you are working or which is in advanced stage of approval or validation kind of a thing? If you would like to share, how are you looking to further expand our product bouquet?
No, I think, we have nothing to share in this. As a company, we have a policy to continue to work on products and new customers. So, I think as and when we have to add anything, we would usually come back to.
Okay, sir. Sir, margin -- on the margin side, on the subsidiary level margins, it is purely linked to the ramp-up, right? The operating leverage plus efficiency will be reflected as and when revenue scales up. That is the right way to look at?
It is already showing traction, I think.
Yeah. Yeah, it is. It is.
For the quarter itself, we have 23%-plus margin, basically operational efficiencies and cost reductions, whatever is going on, I think it's already showing traction in the balance sheet and it will continue to be showing going forward also.
The next question is from the line of [ Ankur Poddar ] from Swan Investments.
Sir, I have one question regarding the employee cost for the stand-alone business. So, we have seen almost [ 6% ] Y-o-Y increase in the employee cost, and on a Q-on-Q basis also, there is a 6%, 7% increase. So any -- similar to what you have mentioned that in other expenses, there is some extraordinary. So, any other -- is there any -- some one-offs sitting here, and what is the trajectory we should assume going forward?
So coming to the employee benefit expenses, if you're looking on quarter-on-quarter increase is about INR 3 crore increase, Ankur. So that's mainly on account of the pay-for-performance we pay to our employees, due to that, this increase is there. And we've already said there is a one-off expenses in the other expenses. That's why the elevation in other expenses.
Okay. But there is -- Y-o-Y that is around 18% increase from INR 44-odd crores in the last year to almost INR 52 crores. So, that is one. And also in other expenses INR 126 crores last year to INR 200 crores. So you said INR 17 crore was other expenses, was exceptional item. Apart from that, there is also other expense seems to be elevated a bit. So, can we throw some light there what strategy we can assume going forward here?
So, to be specific there, if you look at that, there is a growth in volume and fee. Our store space and processing charges also are part of this other expenses, and there has been increase in both. That is a significant increase during the year on the stores and processing charges. And then you can see the increase in shipping costs. When you are looking at Q1 FY '24 versus Q1 FY '25, there is a INR 17 crore increase in terms of shipping costs, INR 17.5 crores at one-time cost [Indiscernible] and other on the stores and processing. All these combined is the increase of INR 75 crores, if you look at Q1 versus Q1 year-on-year.
Okay. Okay. Okay. Sir, how are you seeing -- what is -- in the balance sheet, what is currently the working capital cycle? And how are you seeing this freight rate moving ahead in the second half of the year? Freight rate in terms of shipping rate, I'm trying to say?
So, shipping costs are right now hardening already -- hardened already and it's not softening so far. I think it has a lot to do with the Red Sea crisis and the ship movement. So it depends upon that. So, we don't know where we will end up at the end of year on the shipping cost side. But what was the another part of your question?
Working capital cycle for...?
Working capital is around 90 days. Net working capital is around 90 days, and that will continue to remain at 90 days cycle.
Okay. Okay. And sir, what would be the roughly cash balance in the balance sheet?
So, we do not carry any cash balance, maybe INR 20 crore, INR 25 crore kind of thing [Indiscernible], otherwise, right now, we don't have a cash balance. We have a lot of unutilized balance in terms of bank lines. So, we keep our bank lines unutilized rather than keeping cash on the balance sheet.
The next question is from Atul from ULJK Financial Services.
So, my question might be repeated. I would like to understand, we have reported a 3% decline on Y-o-Y basis in domestic revenues. So, what were the reasons behind this decline? That would be helpful.
I think we have already explained in the call. The reason is raw material price decrease as well as there has been a lower offtake from the customer. Both have basically added to the 3% decline in domestic output.
Okay. Yes, sir. And my second question is on our inorganic strategy, which you are following, sir. So, so far, this strategy has been working quite well for us. So in coming time, are we looking for any more acquisitions, if you could put light on that?
As a company, as a policy, we are always looking for opportunities wherein we can incrementally grow. So, as of now, we don't have anything in pipeline. As and when we have anything, we will surely come back to you.
[Operator Instructions] The next question is from the line of Balasubramanian.
Sir, in the Multitech Auto, we have seen some quarter-on-quarter decline, and we have guided around 20% growth in this year with a 200 basis point margin improvement. What is the current margin stand at, sir? And what kind of levers are there for margin improvement?
Lalit? Yes. So coming to -- I think your question is related to Multitech Auto?
Yes, sir. Right.
So Multitech Auto, see, what we have guided in terms of growth, revenue growth, the guidance remains the same, the 15% to 20% growth in terms of Multitech Auto also. Right now, we are currently operating at around 16% plus EBITDA margin, and there will be a further improvement of 100 basis points, 200 basis points in EBITDA in Multitech Auto going forward.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference to management for closing comments.
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On behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.