Event Participants
Executives
3 Atul Aggarwal (Managing Director), Anish Agarwal (Director), Jaydeep Wadhwa (Director)
Analysts
5 Amit Ahuja (PJ Capital), Dave V (Individual Investor), Deepak Sankara (Trustline Holdings), Nitin Gandhi (InnoQuest Advisors), Payal Shah (Billion Securities)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Income (Standalone) | ₹201.9 crores | +23.7% YoY, driven by increased wallet share with existing customers and deeper OEM relationships |
| EBITDA (Standalone) | ₹21.1 crores | +26.9% YoY, margin improved 40 bps to 15.4% from 15.0% |
| PAT (Standalone) | ₹16.4 crores | +48.4% YoY, margin improved to 8.1% supported by operational efficiencies and financial discipline |
| EBITDA Margin | 15.4% | +40 bps YoY, despite steel price increases and inflationary cost pressures |
| PAT Margin | 8.1% | Supported by continued operational efficiencies |
| Capacity Utilization (Fasteners) | 90-95% | Near full utilization, reflecting strong demand |
| Capex (Fasteners) | ₹88 crores | Expansion of existing facilities (Bangalore and two NCR plants), benefits kicking in from Q3 FY27 onwards |
| Debt Status | Net debt free | Standalone fasteners business remains strongly cash generative |
| Investment in SCM | ₹48-49 crores | Cash investment from holdco perspective |
| Investment in STML | ₹50 crores | Cash investment from holdco perspective |
Geographic & Segment Commentary
Fasteners Business (Standalone): Total income grew 23.7% YoY to ₹201.9 crores, outperforming the underlying automotive industry, which saw PV sales grow 25.9%, two-wheelers 20.3%, CV 18.3%, and three-wheelers 29.7% in Q1 FY27. Growth driven by increased wallet share, deeper OEM relationships, and traction in value-added products. Management noted steel price increases created cost pressure, with impact expected to be more visible in coming quarter as lower-cost inventory has been largely utilized.
Sterling Tools e-Mobility (SCM): Engaged in 33 active customer programs with leading OEMs, with increasing traction in the commercial vehicle segment. Received business confirmations from 4 OEMs. ~30-35% of planned revenue from two-wheelers/three-wheelers, ~65% from commercial vehicles. Onboard charger and multifunction unit production lines on track for commissioning in Q2 FY27, with commercial supplies expected December-January. Business expected to break even in FY28 at ~₹175 crores revenue level, with capacity for ~₹300 crores without further investment.
Sterling Tech Mobility Limited (STML): High voltage DC contactors and relays business focused on import substitution for EV, charging infrastructure, and energy storage applications. 7 customer programs secured, with commercial supplies commencing from Q2 FY27. Fully automated manufacturing facility in Bangalore with technology collaboration with GLBAC. Expected to break even in FY28 at ~₹70-odd crores revenue, with capacity for ~₹140 crores on a 3-shift basis.
Company-Specific & Strategic Commentary
EV Portfolio Expansion: SCM has evolved beyond motor control units to offer motors, integrated motor-controller solutions, onboard/offboard chargers, DC-DC converters, and rare earth-free motors. Integrated units for bus and heavy truck platforms run ~₹3-3.5 lakh per unit based on configuration, increasing per-vehicle content.
Capacity Expansion Initiative: ₹88 crores capex for fasteners business to expand existing facilities between Bangalore and two NCR plants, positioning the business to potentially reach ₹1,000 crores revenue. Additional ₹25-30 crores investment may be needed next year to fully achieve that target. Capex benefits will be felt from Q3 FY27 onwards.
ADAS & Driver Monitoring Partnership: Signed partnership with a Chinese company for ADAS solutions ahead of regulatory mandate from October 2027 for medium and heavy commercial vehicles. Passenger vehicle Level 2 ADAS regulation expected to be notified by 2029. Anish Agarwal is part of the committee drafting two-wheeler safety solutions standards.
STML Future Growth: Beyond domestic automotive customers, management targets exports as a "game changer" over next 2-3 years once domestic processes and quality are stabilized. Charging infrastructure, solar infrastructure, and exports are key focus areas.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Fastener Business Growth | 20%+ growth FY27 | Based on current estimates, unless automotive industry slows down |
| EV Businesses Revenue Growth | 20-30% growth FY27 | Combined SCM and STML revenue growth guidance |
| EV Businesses Revenue Growth | 30-40% growth FY28 | On top of FY27 based on customer acquisition momentum |
| SCM & STML Breakeven | FY28 | SCM at ~₹175 crores, STML at ~₹70-odd crores revenue; combined ~₹225-250 crores |
| EBITDA Margin (Standalone) | Hold current levels for FY27 | Despite steel and inflation pressures, supported by pass-through price increases and operational efficiencies |
| Onboard Charger Production | Commissioning Q2 FY27, supplies Dec-Jan | Lines commissioned by end of Q2, followed by |
| STML Commercial Supplies | From Q2 FY27 | 7 customer programs secured |
Risks & Constraints
| Risk | Context |
|---|---|
| Steel Price Increases | Increase in steel prices created cost pressure on fasteners business. Lower-cost inventory has been largely utilized, so impact expected to be more visible in Q2 FY27. Management expects pass-through mechanisms (2-4 month negotiation lag) to limit impact. |
| Inflationary Cost Pressures | Chemical prices, tungsten steel, and minimum wages have increased dramatically (up to 35% in some areas). Management has taken up the matter strongly with customers for the first time, receiving positive feedback for compensation. |
| SCM Customer Concentration History | SCM lost ~₹280 crores of revenue in one year when a key anchor customer insourced their product. This highlights concentration risk, though current diversification efforts (33 active programs, 4 new OEM confirmations) aim to mitigate this. |
| EV Ecosystem Dependency | India remains largely dependent on foreign technologies and supply chains for EV components. Ecosystem ramp-up is slow, which could temper growth expectations. |
| Regulatory Timing | ADAS regulation for commercial vehicles (October 2027) may be pushed to January 2028; passenger vehicle regulation not yet notified, though draft exists for 2029. |
| Geopolitical & Macro Factors | Geopolitical developments, commodity prices, and global supply chain disruptions remain key factors to monitor during FY27. |
Q&A Highlights
Standalone Margins & Cost Pressures
- Question: Gross margins increased 270 bps but EBITDA margins only 40 bps - any fixed cost increases? (Deepak Sankara, Trustline Holdings)
- Answer: No fixed cost increases. Pressure from steel price increase and dramatic inflationary cost increases (chemicals, tungsten steel, minimum wages up to 35%). Steel is a regular pass-through mechanism with 2-4 month negotiation lag. For the first time, management has strongly taken up inflation compensation with customers, receiving positive feedback. (Atul Aggarwal)
Capacity Utilization & Capex
- Question: Current capacity utilization and INR80 crore capex commissioning timeline? (Deepak Sankara, Trustline Holdings)
- Answer: Currently at 90-95% utilization, essentially fully utilized. The ₹88 crore capex, of which some has kicked in marginally in Q1, will substantially kick in during H2 FY27. Benefits will be felt starting last quarter and next year. Building capacities aggressively with a view of next 12-24 months. (Atul Aggarwal)
EV Business Growth & Margins
- Question: How should we think about EBITDA margin for standalone business and growth trajectory for SCM and STML? (Amit Ahuja, PJ Capital)
- Answer: Management confident of holding margin structures for full year despite steel and inflation, given advanced-stage price increase negotiations and good top-line growth trajectory. EV businesses expected to grow 20-30% in FY27 and 30-40% in FY28 on top, establishing growth platforms in both SCM and STML. (Atul Aggarwal)
Subsidiary Breakeven Levels
- Question: What are breakeven levels for SCM and STML, and when will they turn positive? (Nitin Gandhi, InnoQuest Advisors)
- Answer: Both SCM and STML expected to break even in FY28. SCM breakeven at ~₹175 crores revenue, STML at ~₹70-odd crores. Combined ~₹225-250 crores business breaks even. Operating margin at breakeven expected to be ~10%, give or take 2%. (Atul Aggarwal, Jaideep Wadhwa)
Investment & Exposure in Subsidiaries
- Question: What is total exposure including working capital for both subsidiaries? (Nitin Gandhi, InnoQuest Advisors)
- Answer: Current investment in STML is ₹50-odd crores, SCM investment from cash perspective is ~₹48-49 crores. (Atul Aggarwal)
Fastener Revenue Potential & Additional Investment
- Question: Will ₹88 crore capex build capacity to reach ₹1,000 crores revenue? (Nitin Gandhi, InnoQuest Advisors)
- Answer: With the ₹88 crore capex, another ₹25-30 crores investment next year may be needed to balance everything to arrive at potential revenue of ₹1,000 crores. (Atul Aggarwal)
EV Business Positive Surprises
- Question: Any positive surprise possible in subsidiaries in shorter duration? (Nitin Gandhi, InnoQuest Advisors)
- Answer: SCM is seeing success in LCV/HCV programs and public transport buses. If government spending picks up in public transport, revenue growth could be more attractive. STML is a safety product with 8-16 month testing/validation; game changer over next 2-3 years will be export market after stabilizing domestic processes. (Atul Aggarwal)
Onboard Charger Timeline
- Question: When will onboard charger and multifunction units contribute meaningfully to revenues? (Payal Shah, Billion Securities)
- Answer: Products already tested as completely imported units from China. Lines commissioned by end of Q2, then customers require ~4 months of on-road trials (about 50,000 km) before signing. Production/start of supplies expected December or January. (Jaydeep Wadhwa)
SCM Revenue Mix & Customer Diversification
- Question: Percentage split between two-wheeler, three-wheeler, and commercial vehicles in SCM? (Dave V, Individual Investor)
- Answer: About 30-35% from two-wheelers/three-wheelers, about 65% from commercial vehicles (including LCV, SUV, and public transport buses). (Atul Aggarwal)
SCM Losses & R&D Investment
- Question: Why is SCM making losses today? (Dave V, Individual Investor)
- Answer: SCM clocked ~₹380 crores revenue in FY25 backed by one large anchor customer who then insourced, causing loss of ~₹280 crores revenue in one year. Infrastructure and cost levels were based on larger revenue. Additionally, continued heavy investment in product engineering and R&D to strengthen technology capabilities and localization. More than half of the 130-person organization is in product or application engineering. (Atul Aggarwal, Anish Agarwal)
ADAS & Drive Monitoring Partnership
- Question: Don't existing companies already have ADAS technology? What is traction for this product? (Dave V, Individual Investor)
- Answer: ADAS regulation notified from October 2027 for medium and heavy commercial vehicles (~half a million units annually, five features). Implementation may be pushed to January 2028. Partnership signed with Chinese company to capture this market. Passenger vehicle Level 2 ADAS regulation expected 2029. Two-wheeler safety rider assistance standards under draft with Anish Agarwal part of the committee. (Anish Agarwal)
Key Takeaway
Sterling Tools delivered a strong Q1 FY27 with standalone total income up 23.7% to ₹201.9 crores and PAT growing 48.4% to ₹16.4 crores, outperforming the buoyant auto industry. The fasteners business continues to generate healthy cash flows at ~90-95% capacity utilization, with ₹88 crores capex positioned to drive revenue toward ₹1,000 crores. Cost pressures from steel and broad inflation are expected to be offset through pass-through mechanisms and operational efficiencies, maintaining margins. The EV businesses are pursuing growth of 20-30% in FY27 and 30-40% in FY28, with both SCM and STML targeting breakeven in FY28 at combined revenue of ~₹225-250 crores. Key strategic milestones include onboard charger commissioning in Q2 FY27 with supplies from December-January, STML commercial supplies commencing Q2 FY27, and ADAS partnerships ahead of regulatory mandates. Investors should monitor steel price impact on Q2 margins, SCM customer diversification beyond the 65% CV mix, and progress toward subsidiary breakeven timelines.