💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue grew 10% YoY to INR 1,029 Cr in FY2025. The standalone fastener business grew 6% YoY to INR 644 Cr, driven by 18% growth in 2W and 10% in PV segments. The EV subsidiary (SEMS) grew 19% YoY to INR 380 Cr in FY2025, though it faced a sharp 77% decline in Q1 FY2026 (INR 30 Cr vs INR 130 Cr) due to the loss of a major customer.

Geographic Revenue Split

The company is heavily domestic-focused, with 99% of revenues derived from the Indian market in FY2025. Export revenues have declined significantly from 7-9% in FY2020-2022 to just 1% in FY2025, primarily due to macroeconomic headwinds in European markets.

Profitability Margins

Standalone Operating Profit Margin (OPM) was 13.8% in FY2025, slightly down from 14% in FY2024. Consolidated Profit After Tax (PAT) margin for H1 FY2026 improved to 9.2% (INR 30.8 Cr) from 7.0% (INR 23.3 Cr) YoY, though this was bolstered by an exceptional gain of INR 9.5 Cr from enhanced compensation.

EBITDA Margin

Consolidated EBITDA margin stood at 12.7% in H1 FY2026. While standalone margins remain stable at ~14%, consolidated margins are under pressure due to SEMS, where margins plummeted from 6.8% in FY2025 to 1.2% in Q1 FY2026 following the insourcing of MCUs by its largest customer.

Capital Expenditure

Planned capital expenditure for FY2025 is approximately INR 75 Cr, covering capacity expansion for SEMS and STML, R&D, and maintenance. Previous FY2024 capex included INR 28 Cr for SGEM and INR 20-25 Cr for standalone plant maintenance.

Credit Rating & Borrowing

The long-term rating outlook was recently revised to Stable from Positive, reflecting slower-than-expected growth in the EV segment. The company maintains a strong credit profile with an interest coverage ratio of 11.7x and a net debt/OPBDITA of -0.1x as of March 31, 2025.

⚙️ Operational Drivers

Raw Materials

Steel is the primary raw material for the fastener business. While specific percentage of total cost is not disclosed, the company noted that steel price hikes are passed through to customers with a lag, though other conversion costs are harder to recover.

Import Sources

Not specifically disclosed in available documents, though the company noted exposure to European macroeconomic challenges affecting its export/import dynamics.

Capacity Expansion

SEMS plans to expand its Motor Control Unit (MCU) capacity to 6 lakh units per annum by the end of FY2025, up from 4 lakh units in Q1 FY2025, to support new customer acquisitions and volume recovery.

Raw Material Costs

Raw material costs are managed through price-pass-through mechanisms with OEMs. In FY2024, the company maintained higher-priced steel inventory to ensure supply, which impacted margins as market prices softened later in the year.

Manufacturing Efficiency

The company operates 3 manufacturing plants (Faridabad, Prithla, Bengaluru) and 1 wire drawing unit. It utilizes 18 strategic warehouses to maintain a 100+ distributor network for aftermarket efficiency.

Logistics & Distribution

The company utilizes 18 warehouses and a 100+ distributor network to ensure aftermarket coverage across India.

📈 Strategic Growth

Expected Growth Rate

5-7%

Growth Strategy

Growth will be driven by the fastener business outperforming industry averages through new customer acquisitions (e.g., Hyundai) and expanding the EV portfolio. The company is pivoting SEMS to reduce dependency on its former anchor customer by targeting 40+ active EV customers and increasing MCU capacity to 6 lakh units.

Products & Services

High-tensile cold-forged fasteners for engines and transmissions; Motor Control Units (MCUs) for electric two-wheelers.

Brand Portfolio

Sterling Tools Limited (STL), Sterling E-Mobility Solutions (SEMS).

New Products/Services

New product additions in the EV segment and value-added specialized fasteners for engine and transmission systems are expected to drive future growth.

Market Expansion

Expansion into the EV component market via SEMS and targeting new OEM clients like Hyundai to deepen market penetration in the PV segment.

Market Share & Ranking

Second largest automotive fastener manufacturer in India.

Strategic Alliances

Joint venture (STML) positioned to cater to both domestic and export markets, expected to commence by Q3 FY2026.

🌍 External Factors

Industry Trends

The industry is shifting toward Electric Vehicles (EVs). STL is positioning SEMS to capture this by supplying MCUs, though the trend of OEMs insourcing critical EV components (like MCUs) poses a significant disruption risk.

Competitive Landscape

Competes in a cyclical market as the #2 player in India; faces competition from both traditional fastener manufacturers and emerging EV component tech firms.

Competitive Moat

Durable advantage stems from a 45-year track record as a Tier-1 supplier and high technical barriers in manufacturing critical engine/transmission fasteners, which ensures high customer stickiness with major OEMs like Maruti Suzuki and Tata Motors.

Macro Economic Sensitivity

Highly sensitive to domestic GDP and automotive industry cycles, as 99% of revenue is domestic. A sharp downturn in FY2020-2021 significantly impacted revenues before the FY2022-2023 recovery.

Consumer Behavior

Shift toward electric two-wheelers is driving demand for SEMS products, while steady demand for PVs and 2Ws supports the core fastener business.

Geopolitical Risks

Macroeconomic challenges in Europe are cited as the primary reason for the decline in export revenues to 1%.

⚖️ Regulatory & Governance

Industry Regulations

Operations are subject to automotive manufacturing standards and safety norms for high-tensile fasteners. EV components must meet specific domestic value addition and technical standards.

Taxation Policy Impact

Tax expense for H1 FY2026 was INR 10.1 Cr on a PBT of INR 41.0 Cr, implying an effective tax rate of approximately 24.6%.

Legal Contingencies

The company has disclosed pending litigations in Note 41(B)(I). An audit exception was noted regarding the preservation of the audit trail (edit log) facility in the accounting software for FY2025.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the volatility of the EV segment; the loss of a key anchor customer in SEMS led to a 32% consolidated revenue decline in Q1 FY2026.

Geographic Concentration Risk

99% of revenue is concentrated in India, making the company vulnerable to domestic economic shifts.

Third Party Dependencies

High dependency on major automotive OEMs; the top 5 customers account for 61% of standalone revenue.

Technology Obsolescence Risk

Risk of EV OEMs insourcing MCU production, which could render third-party supply models obsolete for certain high-volume platforms.

Credit & Counterparty Risk

The company maintains a net cash position of INR 5.8 Cr, suggesting low counterparty credit risk and strong liquidity.