Q1 2027 Sterling Tools Ltd Earnings Call

August 6, 2026

Speaker #1: Ladies and gentlemen, good day and welcome to the Q1 FY27 earnings call of Sterling Tools Ltd. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call.

Operator: Ladies and gentlemen, good day and welcome to the Q1 FY27 earnings call of Sterling Tools Limited. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involves risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be on the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Speaker #1: These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be on listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded.

Operator: Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Atul Aggarwal, Managing Director of Sterling Tools Limited. Thank you, and over to you, sir.

Speaker #1: I now hand the conference over to Mr. Atul Agarwal, Managing Director of Sterling Tools Ltd. Thank you, and over to you, sir.

Speaker #2: Thank you, Nastya. Good morning, everyone, and welcome to Sterling Tools Ltd.'s Q1 FY27 earnings call. I'm joined today by Mr. Jaydeep Vadwa, Director, and Mr. Anish Agarwal, Director.

Atul Aggarwal: Thank you, Nessia. Good morning, everyone, and welcome to Sterling Tools Limited's Q1 FY27 earnings call. I am joined today by Mr. Jaideep Wadhwa, Director, Mr. Anish Agarwal, Director, and Strategic Growth Advisors, our investor relations advisors. Our earnings presentation has been uploaded on our website and the stock exchanges. I hope everyone has had the opportunity to go through the same. I would like to begin with industry overview. The Indian automobile industry delivered a record-breaking start to FY27, with the highest-ever quarter sales across passenger vehicles, commercial vehicles, and three-wheelers. The strong performance was supported by lower GST rates, easier financing, new model launches, and improving consumer demand, along with a favorable base from the previous year. Passenger vehicle sales grew 25.9% Y-o-Y to 1.27 billion units, led by continued strength in utility vehicles.

Speaker #2: And Strategic Growth Advisors are our investor relations advisors. Our earnings presentation has been uploaded on our website and the stock exchanges, and I hope everyone has had the opportunity to go through the same.

Speaker #2: I would like to begin with the industry overview. The Indian automobile industry delivered a record-breaking start to FY27, with the highest-ever quarterly sales across passenger vehicles, commercial vehicles, and three-wheelers.

Speaker #2: The strong performance was supported by a lower GST rate, easier financing, new model launches, and improving consumer demand, along with a favorable base from the previous year.

Speaker #2: Passenger vehicle sales grew 25.9% year-on-year to 1.27 million units, led by continued strength in utility vehicles. Two-wheeler sales increased 20.3% year-on-year to 5.63 million units, with scooters significantly outperforming motorcycles.

Atul Aggarwal: Two-wheeler sales increased 20.3% year-on-year to 5.63 million units, with scooters significantly outperforming motorcycles. Commercial vehicle sales rose 18.3% year-on-year, driven by replacement demand and higher activity across infrastructure-linked sectors. While three-wheeler sales grew 29.7% year-on-year, supported by healthy demand both in passenger and goods carrier segments. Exports also recorded their first ever strongest quarter performance across all major vehicle categories, reflecting improving global demand. Looking ahead, the industry outlook for FY27 remains positive, supported by the upcoming festive season, lower vehicle ownership costs following GST 2.0, easier financing, and steady consumer sentiment. At the same time, geopolitical developments, commodity prices, and global supply chain disruptions remain key factors to monitor during the year.

Speaker #2: Commercial vehicle sales rose 18.3% year-on-year, driven by replacement demand and higher activity across infrastructure-linked sectors. Meanwhile, three-wheeler sales grew 29.7% year-on-year, supported by healthy demand in both the passenger and goods carrier segments.

Speaker #2: Exports also recorded their strongest-ever quarterly performance across all major vehicle categories, reflecting improving global demand. Looking ahead, the industry outlook for FY27 remains positive, supported by the upcoming festive season.

Speaker #2: Lower ownership, lower vehicle ownership costs following GST 2.0, easier financing, and steady consumer sentiment. At the same time, geopolitical developments, commodity prices, and global supply chain disruptions remain key factors to monitor during the year.

Speaker #2: Coming to our standalone partner business, we continued to build on the strong momentum witnessed last year and delivered another quarter of healthy performance. Our growth was driven by an increase in wallet share with existing customers, deeper OEM relationships, and continued traction in value-added products.

Atul Aggarwal: Coming to our standalone fastener business, we continue to build on the strong momentum witnessed last year and delivered another quarter of healthy performance. Our growth was driven by an increase in wallet share with existing customers and deeper OEM relationships and continued traction in value-added products, enabling us to outperform the underlying automotive industry. Backed by our focus on customer diversification, operational excellence, and cost efficiencies, we continue to deliver healthy profitability and strong cash flow generation despite the evolving business environment. Our standalone business delivered a robust performance during Q1 FY27. Total income grew by 23.7% year on year to INR 201.9 crore. While EBITDA increased by 26.9% year on year to INR 31.1 crore, with EBITDA margins improving to 15.4% compared to 15% last year.

Speaker #2: This has enabled us to outperform the underlying automotive industry. Backed by our focus on customer diversification, operational excellence, and cost efficiencies, we continue to deliver healthy profitability and strong cash flow generation, despite the evolving business environment.

Speaker #2: Our standalone business delivered a robust performance during Q1 FY27. Total income grew by 23.7% year-on-year to ₹201.9 crore, while EBITDA increased by 26.9% year-on-year to ₹31.1 crore, with EBITDA margins improving to 15.4% compared to 15.0% last year.

Speaker #2: Profit after tax grew by 48.4% year-on-year to ₹16.4 crore, with margins improving to 8.1%, supported by continued operational efficiencies and financial discipline. Importantly, our standalone partner's business continues to remain strongly cash-generative and net debt-free.

Atul Aggarwal: Profit after tax grew by 48.4% year on year to INR 16.4 crore, with margins improving to 8.1%, supported by continued operational efficiencies and financial discipline. Importantly, our standalone fasteners business continues to remain strongly cash generative and net debt-free, providing a solid financial foundation to internally support our long-term investments across EV and technology-led growth initiatives. As we continue to strengthen our legacy business, customer diversification remains one of our key focus areas. During the quarter, we have made further progress in expanding our presence across commercial vehicle programs with significant inroads into both LCV and HCV segments. Combined with our growing portfolio of critical and value-added fasteners, this positions the business well to continue outperforming the broader automotive industry. During the quarter, we have witnessed an increase in steel prices, which created some cost pressure on our fasteners business.

Speaker #2: Providing a solid financial foundation to internally support our long-term investments across EV and technology-led growth initiatives. As we continue to strengthen our legacy business, customer diversification remains one of our key focus areas.

Speaker #2: During the quarter, we made further progress in expanding our presence across commercial vehicle programs, with significant inroads into both LCV and HCV segments. Combined with our growing portfolio of critical and value-added fasteners, this positions the business well to continue outperforming the broader automotive industry.

Speaker #2: During the quarter, we witnessed an increase in steel prices, which created some cost pressure on our partners' business. However, our disciplined cost management, effective inventory management, and existing pricing arrangements with customers helped limit the overall impact.

Atul Aggarwal: Our disciplined cost management, effective inventory management, and existing pricing arrangements with customers helped limit the overall impact. As a lower cost inventory has now been largely utilized, the impact of higher steel prices is expected to be more visible in the coming quarter. That said, we remain confident that our pass-through mechanism, along with our continued focus on operational efficiencies and value engineering, will help manage these cost pressures while maintaining a healthy margin profile. Coming to Sterling E-Mobility, we continue to strengthen our position as a comprehensive EV powertrain and power electronics solutions provider. Over the last few years, the business has evolved well beyond Motor Control Units and today offers an integrated portfolio comprising motors, integrated motor and controller solutions, On-Board Chargers, Off-Board Chargers, DC-DC converters, rare earth magnet-free motors.

Speaker #2: As lower-cost inventory has now been largely utilized, the impact of higher steel prices is expected to be more visible in the coming quarter.

Speaker #2: That said, we remain confident that our path through mechanism, along with our continued focus on operational efficiencies and value engineering, will help manage these cost pressures while maintaining a healthy margin profile.

Speaker #2: Coming to Sterling E-Mobility, we continue to strengthen our position as a comprehensive EV powertrain and power electronics solutions provider. Over the last few years, the business has evolved well beyond motor control units and today offers an integrated portfolio comprising motors, integrated motor and controller solutions, onboard chargers, offboard chargers, DC-DC converters, and rare-earth and rare-earth magnet-free motors.

Speaker #2: This diversified portfolio enables us to participate across multiple EV platforms while increasing the content we supply per vehicle. We've also witnessed encouraging progress across our customer programs.

Atul Aggarwal: This diversified portfolio enables us to participate across multiple EV platforms while increasing the content we supply per vehicle. We are also witnessing encouraging progress across our customer programs. Today, SEM is engaged in 33 active customer programs with strong relationships across leading OEMs. Customer diversification continues to improve with increasing traction in the commercial vehicle segment. We also received business confirmations from four OEMs, further strengthening our order pipeline and enhancing our long-term visibility. Our strategy continues to revolve around increasing wallet share with existing customers while adding new customers across vehicle segments. Our motor and Off-Board Charger programs continues to progress well, and we remain focused on expanding our presence across higher value integrated power electronic solutions. An important milestone for the business during the year will be the commissioning of our On-Board Charger and multifunction unit production lines, which remain on track for Q2 FY27.

Speaker #2: Today, SEM is engaged in 33 active customer programs with strong relationships across leading OEMs. Customer diversification continues to improve, with increasing traction in the commercial vehicle segment.

Speaker #2: We also received business confirmations from four OEMs, further strengthening our order pipeline and enhancing our long-term visibility. Our strategy continues to revolve around increasing wallet share with existing customers, while adding new customers across vehicle segments.

Speaker #2: Our motor and off-board charger programs continue to progress well, and we remain focused on expanding our presence across higher-value integrated power electronics solutions.

Speaker #2: An important milestone for the business during the year will be the commissioning of our onboard charger and multifunction unit production lines, which remain on track for Q2 FY27.

Speaker #2: These new product lines will significantly broaden our addressable market while strengthening our capabilities in next-generation EV architectures. Backed by our technology partnerships, we believe SEM is well positioned to address the evolving requirements of electric mobility, while continuing to build long-term value through technology, localization, and product innovation.

Atul Aggarwal: These new product lines will significantly broaden our addressable market while strengthening our capabilities in next generation EV architectures. Backed by our technology partnerships, we believe SEM is well-positioned to address the evolving requirements of electric mobility while continuing to build long-term value through technology localization and product innovation. Moving to Sterling Tech-Mobility Limited, our newest growth platform, we continue to make steady progress in establishing a domestic manufacturing ecosystem for High Voltage DC Contactors and relays. The business remains focused on import substitution in a segment that is expected to witness significant demand with increasing electrification across electric vehicles, charging infrastructure, and energy storage applications. Our customer engagements continue to progress well, with seven customer programs already secured. Commercial supplies are scheduled to commence from Q2 FY27, marking an important milestone for the business.

Speaker #2: Moving to Sterling Tech Mobility Limited, our newest growth platform, we continue to make steady progress in establishing a domestic manufacturing ecosystem for high-voltage DC contactors and relays.

Speaker #2: The business remains focused on import substitution in a segment that is expected to witness significant demand with increasing electrification across electric vehicles, charging infrastructure, and energy storage applications.

Speaker #2: Our customer engagements continue to progress well, with seven customer programs already secured. Commercial supplies are scheduled to commence from the second quarter of FY27, marking an important milestone for the business.

Speaker #2: We're also systematically increasing localization, which will enhance value addition, improve cost competitiveness, and support margin expansion over time. With our fully automated manufacturing facility in Bangalore and technology collaboration with GLBAC, we believe STML is well positioned to capitalize on this emerging opportunity as the Indian EV ecosystem continues to mature.

Atul Aggarwal: We are also systematically increasing localization, which will enhance value addition, improve cost competitiveness, and support margin expansion over time. With our fully automated manufacturing facility in Bangalore and technology collaboration with Guelb und Co. GmbH & Co. KG, we believe STML is well-positioned to capitalize on this emerging opportunity as the Indian EV ecosystem continues to mature. To conclude, we have entered FY27 with a strong momentum across our businesses. Our legacy partner business continues to generate healthy cash flows and remains financial backbone of the group. Our investments in electric mobility and next generation technologies continue to strengthen our long-term growth platform. Supported by strong customer relationships, expanding product capabilities, disciplined execution, and a robust balance sheet, we remain confident of creating sustainable value for all our stakeholders. With that, I would like to thank all our shareholders, customers, employees, business partners for their continued support and trust.

Speaker #2: To conclude, we have entered FY27 with strong momentum across our businesses. Our legacy fasteners business continues to generate healthy cash flows and remains the financial backbone of the group.

Speaker #2: While our investments in electric mobility and next-generation technologies continue to strengthen our long-term growth platform, supported by strong customer relationships, expanding product capabilities, disciplined execution, and a robust balance sheet, we remain confident of creating sustainable value for all our stakeholders.

Speaker #2: With that, I would like to thank all our shareholders, customers, employees, and business partners for their continued support and trust. We remain committed to executing our long-term strategy with consistency and discipline.

Atul Aggarwal: We remain committed to executing our long-term strategy with consistency and discipline. Thank you once again. We'll be happy to take your questions now.

Speaker #2: Thank you once again, and we’ll be happy to take your questions now.

Speaker #1: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone.

Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Deepan Sankara from Trustline Holdings Private Limited. Please go ahead.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Deepan Sankara of Trustline Holdings Private Limited.

Speaker #1: Please go ahead.

Speaker #3: Thank you for the opportunity. Good morning, everyone, and congratulations on a very strong set of standalone numbers. Firstly, in the standalone business, we have seen gross margin increase sharply by 270 basis points.

Deepan Sankara Narayanan: Thank you for the opportunity. Good morning, everyone, and congratulations for a very strong set of standalone numbers. Firstly, in the standalone business, we have seen gross margin increase sharply by 270 basis points. Overall, EBITDA increase has been limited to 40 basis points. Any one-off expenses in the fixed cost for the current quarter?

Deepan Sankara: Thank you for the opportunity. Good morning, everyone, and congratulations for a very strong set of standalone numbers. Firstly, in the standalone business, we have seen gross margin increase sharply by 270 basis points. Overall, EBITDA increase has been limited to 40 basis points. Any one-off expenses in the fixed cost for the current quarter?

Speaker #3: But overall, EBITDA increase has been limited to 40 bps, due to any one-off expenses in the fixed cost for the current quarter.

Speaker #2: So I think, let me just say firstly, there are no fixed cost increases. I think, on a standalone basis, our margin was 15% last year.

Atul Aggarwal: Firstly, there are no fixed cost increases. I think on a standalone basis, our margin was 15% last year. It's up to 15.4% this year. I'm not able to understand the question when you're saying it's not improved. Can you repeat that question again?

Speaker #2: It's up to 15.4% this year. So I'm not able to understand the question when you're saying it's not improved. Can you repeat that question again?

Deepan Sankara Narayanan: Sir, overall, the gross margins has increased by almost 2.7%, EBITDA margins has increased only by 40 basis points.

Deepan Sankara: Sir, overall, the gross margins has increased by almost 2.7%, EBITDA margins has increased only by 40 basis points.

Speaker #3: Sir, overall, the gross margin has increased by almost 2.7%. But EBITDA margin has increased only by 40 bps.

Speaker #2: Yeah. So, just to give you a sense—which I did cover in my opening speech—there have been two pressures coming this year.

Atul Aggarwal: Just to give you a sense, which I did cover in my opening speech, which was there have been two pressures coming this year. One is the steel price increase, and second, the big one also is, which is very unique this year, is the inflationary cost increase. All commodities besides steel, which is chemicals, tungsten, steel, even wages, minimum wages have gone up dramatically this year by as high as 35% in some areas. Chemicals, everything has gone up. That is impacting our GM numbers accordingly, we feel that despite those pressures, we have been able to generate some efficiencies on the shop floor. Now, having said that, our steel is a regular pass-through mechanism. Normally, those negotiations take two to four months. We are at a very mature stage of negotiations for price increases on account of steel.

Speaker #2: One is a steel price increase, and the second, the big one also, which is very unique this year, is the inflationary cost increase. All commodities, besides steel—for example, chemicals, tungsten, even wages—minimum wages have gone up dramatically this year, as high as 35% in some areas.

Speaker #2: And chemicals—everything has gone up. So that is impacting our GM numbers accordingly. But we feel that, despite those pressures, we have been able to generate some efficiencies on the shop floor.

Speaker #2: Now, having said that, our steel is a regular pass-through mechanism. Normally, those negotiations take two to four months. So, we are at a very mature stage of negotiations for price increases on account of steel.

Speaker #2: And for the first time this year, after a long time—since the impact of inflation has been dramatic—we have taken up this matter strongly with all our customers.

Atul Aggarwal: For the first time this year, after a long time, since the inflation impact has been dramatic, we have taken this matter up strongly with all our customers, and we are getting quite a positive feedback from a large number of them that they'll compensate us for the inflationary impact we have this year. Like I said, these are all two to four months of lag time before we conclude and before they translate into our P&L.

Speaker #2: And we are getting quite positive feedback from a large number of them that they'll compensate us for the inflationary impact we have this year.

Speaker #2: So, like I said, these are all two to four months of lag time before we conclude, and before they translate into our P&L.

Deepan Sankara Narayanan: Okay, sir. Noted. Sir, what is the kind of current capacity utilization we have in our standalone business? I noted down that INR 80 crore of CapEx we are putting up for this calendar month. When that capacity will get commission?

Deepan Sankara: Okay, sir. Noted. Sir, what is the kind of current capacity utilization we have in our standalone business? I noted down that INR 80 crore of CapEx we are putting up for this calendar month. When that capacity will get commission?

Speaker #3: Thank you, sir. Noted. And sir, what is the current capacity utilization we have in our standalone business? Also, I have noted that ₹80 crore of capex we are putting up for this standalone.

Speaker #3: So, when will that capacity get commissioned?

Speaker #2: So currently, as of today, I think we are probably at 90–95 percent utilization, which is a very high number, keeping in mind the product mix issues we have.

Atul Aggarwal: Currently, as of today, I think we are probably at 90% and 95% utilization, which is a very high number, keeping in mind the product mix issues we have. You can pretty much say we are fully utilized right now. This INR 88 crore CapEx we have for this year, some of it has already kicked in in Q1 marginally, but substantially, a large part of that CapEx will kick in in H2 of the year. The benefits of the full CapEx will not be felt on a full year basis. They will be felt starting maybe last quarter and the year going forward.

Speaker #2: So, you can pretty much say we are fully utilized right now. But this ₹88 crore capex we have for this year—some of it has already kicked in during the first quarter, marginally. But substantially, a large part of that capex will kick in during the second half of the year.

Speaker #2: So, the benefits of the full capex will not be felt on a full-year basis. They will be felt starting maybe last quarter, and in the year going forward.

Speaker #2: So, we invest in our capacities a year ahead of current requirements, keeping in mind the strong tailwinds we have in this business and the feedback we have from our customers.

Atul Aggarwal: We invest into our capacities. Keeping in mind the strong tailwinds we have in this business and the feedback we have from our customers, I think we are taking an aggressive posturing and building capacities with a view of the next 12 to 24 months.

Speaker #2: I think we are taking an aggressive posture and building capacities with a view to the next 12 to 24 months.

Speaker #3: Thank you. Sir, lastly from my side, what kind of guidance are we providing for the non-fastener business for the full year FY27?

Deepan Sankara Narayanan: Okay. Sir, lastly from my side, what is the kind of guidance we are providing for non-fastener business for full year FY27?

Deepan Sankara: Okay. Sir, lastly from my side, what is the kind of guidance we are providing for non-fastener business for full year FY27?

Speaker #2: You talked about, non—the step-down subsidiary business, the EV business.

Atul Aggarwal: You're talking about the step-down subsidiary business, EV business.

Speaker #3: Yes. Yes.

Speaker #2: So, I think—let me just say it like this: our fastener business will grow like we've been getting. We are up, I think, 20% plus in the first quarter.

Deepan Sankara Narayanan: Yes.

Deepan Sankara: Yes.

Atul Aggarwal: I think, let me just say it like this, that our fastener business will grow like we have been getting. We are up, I think, 20% plus the Q1. Based on estimates we have right now, the near term looks very similar going forward, unless there is something, unless automotive industry slows down. The industry is growing as fast as well. Going to our EV businesses, we believe that those businesses, in terms of revenue, will be up maybe at that level of about 20% to 30% as well on a full EV platform perspective. That's the kind of number we are looking at growth in our EV businesses, between 20% and 30%.

Speaker #2: And based on estimates we have right now, in the near term, it looks very similar. Going forward, unless there is something—unless the automotive industry slows down—the industry is growing just as fast as well.

Speaker #2: Going to our EV businesses, we believe that those businesses, in terms of revenue, will be up maybe at that level of about 20% to 30% as well, on a full AV platform perspective.

Speaker #2: So that's the kind of number we are looking at for growth in our EV businesses—between 20 and 30 percent.

Speaker #3: Thanks a lot, sir. I'll join, Dr.

Deepan Sankara Narayanan: Thanks a lot, sir. I'll wind up here.

Deepan Sankara: Thanks a lot, sir. I'll wind up here.

Speaker #2: Yeah. Thank you.

Atul Aggarwal: Yeah. Thank you.

Speaker #1: Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. A reminder to all participants to ask a question.

Operator: Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. A reminder to all the participants to ask a question, to press star and one. The next question is from the line of Amit Ahuja from PJ Capital. Please go ahead.

Speaker #1: To press star and one. The next question is from the line of Amit Ahuja from PJ Capital. Please go ahead.

Speaker #4: Hello. Am I audible?

Amit Ahuja: Hello, am I audible?

Speaker #2: Yes.

Atul Aggarwal: Yes.

Speaker #1: Yes.

Operator: Yes.

Speaker #4: Yes, thank you for this opportunity. And congratulations on the strong set of numbers. I have two questions. You indicated that the benefit of low steel inventory has largely been exhausted.

Amit Ahuja: Yeah. Thank you for this opportunity, Congratulations for the strong set of numbers. I'll be asking two questions. You indicated that the benefit of low steel inventory has largely been exhausted. How should we think about EBITDA margin for the standalone business over the rest of FY27? My second question is: How should we think about the growth trajectory of the new business lines in SEM and STML? Could you provide a broad timeline for each business and outline their expected growth journey?

Speaker #4: So, how should we think about EBITDA margin for the standalone business over the rest of FY27? And my second question is, how should we think about the growth trajectory of the new business lines in SEM and STML?

Speaker #4: So, could you provide a broad timeline for each business and outline their expected growth journey? Thank you.

Atul Aggarwal: Yeah.

Amit Ahuja: Thank you.

Speaker #2: So, on the fastener business, you talked about our lower-cost inventory getting consumed. I also said that we are expecting pass-through mechanism price increases from our customers on the steel.

Atul Aggarwal: On the fastener business, you talked about our lower cost inventory getting consumed. I also said that we are expecting pass-through mechanism price increases from our customers on the steel. From that perspective, I don't see our EBITDA as getting any weaker. Despite the pressures, we are quite confident that we'll be able to hold our margin structures on a full year basis, despite the steel and inflation, because we expect to get price increases from customers which are in a very advanced stage. Also, at the same time, we have good growth trajectory on the overall top-line revenue. Keeping everything in mind, we are quite positive that we'll be able to hold our margin structures for the full year. On your second question of EV businesses, like I said, we are looking at anywhere between 20% to 30% growth in the EV businesses this year.

Speaker #2: So, from that perspective, I don't see our EBITDA getting any weaker. We hope, despite the pressures, we are quite confident we'll be able to hold our margin structures on a full-year basis despite the steel and inflation because we expect to get price increases from customers.

Speaker #2: We are at a very advanced stage. Also, at the same time, we have a good growth trajectory on the overall top-line revenue. So, keeping everything in mind, we are quite positive that we'll be able to hold our margin structures for the full year.

Speaker #2: On your second question about the EV businesses, as I said, we are looking at anywhere between 20% to 30% growth in the EV businesses this year.

Speaker #2: And with the momentum we have on customer acquisition in both our SEM and STML business, I think we are looking at maybe another 30% to 40% growth next year, on an FY28 basis.

Atul Aggarwal: With the momentum we have on customer acquisition, both in our SEM and STML business, I think we are looking at maybe another 30% to 40% growth next year, FY28 basis. I think we are establishing the growth platform in both our SEM business and STML. Just to summarize, about 20% to 30% growth this year in FY27, and maybe 30% to 40% growth on top of that next year, in FY28.

Speaker #2: So, I think the growth we have, establishing the growth platform in both our SEM business and STML, just to summarize, is for 20 to 30 percent growth this year in FY27, and maybe 30 to 40 percent growth on top of that next year.

Speaker #2: In FY28.

Speaker #4: Great. Thank you.

Amit Ahuja: Okay. Thank you.

Speaker #1: Thank you. The next question is from the line of Nithin from InnoQuest Advisors Private Limited. Please go ahead.

Operator: Thank you. The next question is from the line of Nitin from Unicus Advisors Private Limited. Please go ahead.

Speaker #4: I doubt said, thanks for taking my question. Just continuing on the same subsidiary-related performance, we continue to burn approximately ₹10 crore a quarter, and we also have continued momentum in Q1.

[Analyst] (Inocues Advisors Private Limited): Hi, Dhawcset. Thanks for taking my question. Just continuing the same subsidiary related performance, we continue to burn approximately INR 10 crore a quarter, and we also have continued momentum in the Q1. What are the break-even levels and with whatever growth rate you are saying, 20% to 30% for this year and 33% for next year, when do we see, from which quarter onwards are we seeing a positive or at least break-even scenario for both the subsidiary, maybe independently both, each of them, if you can share?

Nitin Gandhi: Hi, Dhawcset. Thanks for taking my question. Just continuing the same subsidiary related performance, we continue to burn approximately INR 10 crore a quarter, and we also have continued momentum in the Q1. What are the break-even levels and with whatever growth rate you are saying, 20% to 30% for this year and 33% for next year, when do we see, from which quarter onwards are we seeing a positive or at least break-even scenario for both the subsidiary, maybe independently both, each of them, if you can share?

Speaker #4: What are the break-even levels? And with whatever growth rate you are saying, 20, 30 percent for this year and 30 for next year, when do we see from which quarter onwards are we seeing a positive at least or at least break-even scenario for those both the subsidiary maybe independently both each of them if you can share?

Speaker #2: So I think both SEM and STL—we expect them to break even in FY28. This year, yes, both of them will lose money.

Atul Aggarwal: I think both SEM and STML, we expect them to break even FY28. This year, yes, both of them will lose money. Based on the trajectory we have in terms of revenue and our working, we believe both SEM and STML will both break even in FY28.

Speaker #2: But based on the trajectory we have in terms of revenue and our working, we believe both SEM and STML will break even in FY28.

Speaker #4: Can you share the revenue for each of them separately? At what level of revenue will they break even?

[Analyst] (Inocues Advisors Private Limited): Can you share revenue for each of them separately? What level of revenue they will break even?

Nitin Gandhi: Can you share revenue for each of them separately? What level of revenue they will break even?

Speaker #2: On an SEM basis, we'll probably break even at a level of maybe ₹175 crore. And STML at about maybe ₹70-odd crore. So you can say about ₹225, ₹240, ₹250 crore business, both put together, will break even.

Atul Aggarwal: On an SEM basis, we'll probably break even at a level of maybe INR 175 crore and STML at about maybe INR 70-odd crore. You can say about INR 225, INR 240, INR 250 crore business, both put together, will break even.

Speaker #4: Okay. And based on our current capacity—what we have built in each—what is the peak revenue potential of these subsidiaries?

[Analyst] (Inocues Advisors Private Limited): Okay. Based on our current capacity, what we have built in each, what is the peak revenue potential of these subsidiaries?

Nitin Gandhi: Okay. Based on our current capacity, what we have built in each, what is the peak revenue potential of these subsidiaries?

Speaker #2: So Jerry, you want to take it by SEM, and I'll come to Anish for STML. Jerry?

Atul Aggarwal: Jaideep, you want to take it for SEM, and I'll come to Anish for STML. Jaideep?

Speaker #3: So, our business is going through an evolution in terms of the changing of the capacity. But we believe that we've got capacity right now for about over ₹300 crores without any further investments.

Jaideep Wadhwa: Our business is going through an evolution in terms of the changing of the capacity, we believe that we've got capacity right now for about over INR 300 crore without any further investments.

Speaker #4: In STML?

[Analyst] (Inocues Advisors Private Limited): In STML?

Nitin Gandhi: In STML?

Jaideep Wadhwa: At SEM.

Speaker #3: SEML. At SEM.

Atul Aggarwal: At SEM. Anish for STML.

Speaker #2: At SEM, Anish, STML, we can do around ₹140 crore on a three-shift basis. This is based on current capex and current capacities on the floor for both businesses.

Anish Agarwal: At STML, we can do around 140 crores on a three-shift basis.

Atul Aggarwal: This is based on current CapEx and current capacities on the floor for both the businesses.

[Analyst] (Inocues Advisors Private Limited): How much CapEx is?

Speaker #2: So basically, both businesses put together, about a 340 crore revenue is the current capacity installed to 300 sorry, 440 crores, apologies. About 300 crores for SEM and about 140 odd crores for STML.

Nitin Gandhi: How much CapEx is?

Atul Aggarwal: Basically, both businesses put together, about a INR 340 crore revenue is the current capacity installed. Jaideep, it's INR 300. Sorry, INR 440 crores.

[Analyst] (Inocues Advisors Private Limited): INR 440 crores.

Nitin Gandhi: INR 440 crores.

Atul Aggarwal: Apologies.

[Analyst] (Inocues Advisors Private Limited): Yeah.

Nitin Gandhi: Yeah.

Atul Aggarwal: INR 300 crore for SEM and about INR 140-odd crore for STML. INR 400 crore plus is the current capacities on the floor.

Speaker #2: So, ₹400 crores plus is the current capacity on the floor.

Speaker #4: Okay. And operating margin—I presume it will be somewhere at least 18%, or sorry, low teens at least when we start.

[Analyst] (Inocues Advisors Private Limited): Okay. Operating margin, I presume it will be somewhere at least high teens or low teens at least for when we start.

Nitin Gandhi: Okay. Operating margin, I presume it will be somewhere at least high teens or low teens at least for when we start.

Speaker #2: It should be about 10 percent, give or take, plus or minus two. We'll try and keep it double-digit—10 percent plus levels.

Atul Aggarwal: It should be about 10%, give or take ±2. We'll try and keep it double digit, 10% plus levels.

Speaker #4: And what is your total exposure, including working capital, for each of the subsidiaries?

[Analyst] (Inocues Advisors Private Limited): What is our total exposure, including working capital for both the subsidiaries?

Nitin Gandhi: What is our total exposure, including working capital for both the subsidiaries?

Speaker #2: The exposure from a hold-call perspective?

Atul Aggarwal: Exposure from a holdco perspective?

Speaker #4: Yeah.

[Analyst] (Inocues Advisors Private Limited): Yeah.

Nitin Gandhi: Yeah.

Speaker #2: So, we have invested—our current investment in STML is around ₹50 crore. And our current investment in SEM, also from a cash investment perspective, is again about ₹48–49 crore.

Atul Aggarwal: We have invested, our current investment in STML is INR 50-odd crores and our current investment in SEM, also from a cash investment perspective, is again about INR 48, 49 crores.

Speaker #4: Okay. Thank you.

[Analyst] (Inocues Advisors Private Limited): Okay. Thank you very much.

Nitin Gandhi: Okay. Thank you very much.

Speaker #2: So, basically, cash investment in both the businesses.

Atul Aggarwal: Basically INR 100 crores cash investment in both the businesses.

Speaker #4: Right. And last comment, with the CapEx which we are doing in fasteners—88 crores—I think we will be building capacity to reach 1,000 crores in that, right?

[Analyst] (Inocues Advisors Private Limited): Right. Last comment, with CapEx, which we are doing in Fastener, INR 88 crore, I think we'll be building a capacity to reach INR 1,000 crore in that.

Nitin Gandhi: Right. Last comment, with CapEx, which we are doing in Fastener, INR 88 crore, I think we'll be building a capacity to reach INR 1,000 crore in that.

Atul Aggarwal: Yes.

Speaker #2: Yes. I think with this 88 crore capex, we believe to touch a if the markets and the customer support us, to touch a revenue of 1,000 crores, we may have to do anywhere between 25 to 30 crore investments next year just to balance out everything to arrive at a capacity of to arrive at a potential revenue of 1,000 crores.

[Analyst] (Inocues Advisors Private Limited): Right?

Nitin Gandhi: Right?

Atul Aggarwal: I think with this INR 88 crore CapEx, we believe if the markets and the customers support us, to touch a revenue of INR 1,000 crore, we may have to do anywhere between INR 25 crore to 30 crore investments next year, just to balance out everything to arrive at a potential revenue of INR 1,000 crore.

Speaker #4: I'm sure that you will do it in '28. Wish you all the best.

[Analyst] (Inocues Advisors Private Limited): I'm sure that you will do it in 2028. We wish you all the best.

Nitin Gandhi: I'm sure that you will do it in 2028. We wish you all the best.

Speaker #2: Yeah. We have good traction, good cash flows, and good revenue growth. So we are currently thinking along similar lines as well.

Atul Aggarwal: Yes. We have a good traction, good cash flows, good revenue growth. We are currently thinking on similar lines as well.

Speaker #4: All right. Is there any positive surprise that could come in either of these subsidiaries in the near term, or any such positive announcement or significant change that could happen soon?

[Analyst] (Inocues Advisors Private Limited): Right. Is there anything which is a positive surprise, which can come in both these subsidiaries in a shorter duration or any such positive announcement or some great change there can come soon?

Nitin Gandhi: Right. Is there anything which is a positive surprise, which can come in both these subsidiaries in a shorter duration or any such positive announcement or some great change there can come soon?

Speaker #2: So, I think for SEM, I would say we're getting a lot of success in our LCB and HCB programs, public transport buses programs.

Atul Aggarwal: I think for SEM, I would say, we're getting a lot of success in our LCV and HCV programs, public transport buses programs. If the government spending picks up in terms of public transport and with this current momentum of oil prices being very high, there's a lot of traction for electric vehicles across the board. If that swing maintains and picks up momentum, I think our revenue growth numbers can be a lot more attractive than what I've said currently. On STML, because this is a safety product, the testing validation is anywhere from 8 months to 16 months, depending on customer to customer needs. Once we are certified, we believe that the revenue growth numbers can be very attractive. I think the missing piece there is we are attracting domestic customers only right now.

Speaker #2: If the government spending picks up in terms of public transport, and with this current momentum of oil prices being very high, there's a lot of traction for electric vehicles across the board.

Speaker #2: If that swing maintains and picks up momentum, I think our revenue growth numbers can be a lot more attractive than what I've said currently.

Speaker #2: And on STML, because this is a safety product, the testing and validation process is anywhere from eight to sixteen months, depending on customer needs. Once we are certified, we believe that the revenue growth numbers can be very attractive.

Speaker #2: I think the missing piece there is, we are attracting domestic customers only right now. Once we stabilize the processes and build some revenue with domestic customers, the game changer for that business over the next two to three years would be export markets.

Atul Aggarwal: Once we stabilize the processes and build some revenue with domestic customers, the game changer for that business over the next 2, 3 years would be export markets. We want to target exports also going forward.

Speaker #2: We want to target exports as well going forward.

[Analyst] (Inocues Advisors Private Limited): Is there any number which you would like to say what is the potential of export business for us?

Nitin Gandhi: Is there any number which you would like to say what is the potential of export business for us?

Speaker #4: Is there any number you would like to share regarding the potential of the export business for us?

Speaker #2: No, it's too early. I won't hazard a guess on that right now, because we haven't really done much customer interaction on that. We want to stabilize the product, the processes, and quality domestically, and work closely with them.

Atul Aggarwal: No, it's too early. I won't hazard a guess on that right now because we haven't really done much customer interaction on that. We want to stabilize the product, the processes, quality domestically, work closely with them, build confidence in ourselves and our teams and our customers, which will give us the leverage to go outside and sell our product more aggressively.

Speaker #2: Build confidence in ourselves, in our teams, and in our customers, which will give us the leverage to go outside and sell our product more aggressively.

Speaker #4: Thank you for sharing all your valuable insights. And they will be very helpful. Wish you all the best.

[Analyst] (Inocues Advisors Private Limited): Thank you for sharing all your valuable insights, and it will be very helpful.

Nitin Gandhi: Thank you for sharing all your valuable insights, and it will be very helpful.

Atul Aggarwal: Thank you.

[Analyst] (Inocues Advisors Private Limited): Wish you all the best.

Nitin Gandhi: Wish you all the best.

Speaker #2: Thank you.

Atul Aggarwal: Thank you.

Speaker #1: Thank you. A reminder to all participants to press star and one to ask a question. The next question is from the line of Payal Shah from Billion Securities.

Operator: Thank you. A reminder to all the participants to press star and one to ask a question. The next question is from the line of Payal Shah from Billion Securities. Please go ahead.

Speaker #1: Please go ahead.

Speaker #5: Yeah. Thank you so much for the opportunity. I have a few questions. First, regarding the announced capex of ₹80 crore for the fasteners business.

Payal Shah: Yeah, thank you so much for the opportunity. I have a few set of questions. First being the announced CapEx of INR 80 crore for the fasteners business. Could you clarify whether this will be a greenfield investment or an expansion of the existing facilities?

Speaker #5: So, could you clarify whether this will be a greenfield investment or an expansion of the existing facilities?

Speaker #2: This will be purely expansion in existing facilities. The biggest benefit of that is that the lead time to activate them is much shorter.

Atul Aggarwal: This will be purely expansion in existing facilities. The biggest benefit of that is that the lead time to activate them is much shorter. It's all in existing facilities.

Speaker #2: So it's all in existing facilities between Bangalore and our two plants in NCR.

Payal Shah: Okay.

Atul Aggarwal: Bangalore and our two plants in NCR.

Speaker #5: Okay, so my next question is: What are the key milestones that one should look after or monitor over the next three to four quarters, or a span of two years, across our SEM and STML business?

Payal Shah: Okay. My next question is, what are the key milestones that one should look after or monitor over the next three, four quarters or a span of two years across our SEM and STML business?

Speaker #2: So I think that on both SEML and STML, the parameters we focus on are customer acquisition and, within that, what products we are doing.

Atul Aggarwal: I think on both SEM and STML, I think the parameters which we focus on is customer acquisition. Within that, what products we are doing. SEM has graduated from a pure MCU maker to a multi-unit maker, where we have got a lot of success, like I said, in our LCV, HCV business. We want to focus on that. There's other product lines which are under testing and proof of concept with other incumbent customers in India. We are focusing substantially on getting success with additional incumbent customers across LCV, HCV, passenger vehicles, and two-wheelers. That's one. Finally, how that revenue trajectory is looking in that. In STML, there's a lot of work being already done on the automotive side. We have done a lot of testing and validation and customer acquisition with incumbent customers on the automotive side.

Speaker #2: SEM has graduated from a pure MCU maker to a multi-unit maker, where we have had a lot of success, like I said, in our LCB and HCB business.

Speaker #2: We want to focus on that. There are other product lines which are under testing and proof of concept with other incumbent customers in India.

Speaker #2: So, we are focusing substantially on achieving success with additional incumbent customers across LCV, HCV, passenger vehicles, and two-wheelers. So, that's one. And finally, how that revenue trajectory is looking in that.

Speaker #2: In STML, there's a lot of work already being done on the automotive side. We have done a lot of testing and validation and customer acquisition.

Speaker #2: With the incumbent customers on the automotive side, we want to focus on moving forward once we stabilize this. Like I said, we want to focus on charging infrastructure, solar infrastructure, and exports after that.

Atul Aggarwal: We want to focus on going forward once we stabilize this. Like I said, we want to focus on charging infrastructure, solar infrastructure, and exports after that. You got to keep in mind that these EV businesses have very poor EV ecosystem in India. India is still largely dependent on technologies and supply chains from overseas. We are trying to build our capability, our competencies in the entire EV ecosystem. Even the customers are graduating accordingly. The whole system is ramping up its entire ecosystem and supply chain. This is going to be slow at the same time. Once all the placeholders are there, once all the technologies are in place, we believe we'll be very well positioned to grow on top of the foundations we have laid.

Speaker #2: So you've got to keep in mind that this EV business has a very poor EV ecosystem in India. India is still largely dependent on technologies and supply chains from overseas.

Speaker #2: So, we are trying to build our capability and our competencies in the entire EV ecosystem. Even the customers are graduating accordingly, so the whole system is ramping up.

Speaker #2: It's the entire ecosystem and supply chain, so this is going to be slow. At the same time, once all the placeholders are there and once all the technologies are in place, we believe we'll be very well positioned to grow on top of the foundations we have laid.

Speaker #5: Understood, understood. So, my next question is about the onboard charger and the multifunction unit production that are expected to commence in Q2 of this year.

Payal Shah: Understood. My next question is, the On-Board Charger and the multifunction units production that are expected to commence in Q2 of this year. When do you expect these products to contribute meaningfully to our revenues and profitability?

Speaker #5: So, when do you expect these products to contribute meaningfully to our revenues and profitability?

Speaker #2: Yeah, if you want to take that?

Atul Aggarwal: Jaideep, you want to take that?

Speaker #4: Yeah, good morning. So, we have these products that have already been tested as completely imported units from China. Our lines will get commissioned by the end of this quarter.

Jaideep Wadhwa: Yeah. Good morning. These products have already been tested as completely imported units from China. Our lines will get commissioned by the end of this quarter. Once we give samples from these lines, typically, customers have to do on-road trials, which could take us about 4 months to do. The companies would typically want to do about 50,000 kilometers of road trials before they will sign on such an important component of their vehicle. Looking at that, I feel that we will be in production, or we will start supplies sometime in December or January.

Speaker #4: Once we give samples from these lines, typically customers have to do on-road trials, which could take us about four months to do. I mean, the companies would typically want to do about 50,000 kilometers of road trials before they will sign on such an important component of their vehicle.

Speaker #4: So, looking at that, I'm saying that I feel we will be in production, or we will start supplies, sometime in December or January.

Speaker #5: Okay, okay. And my last question is, how do you see content per vehicle evolving as your portfolio expands beyond motor controllers and into integrated power electronic solutions?

Payal Shah: Okay. My last question is, how do you see content per vehicle evolving as your portfolio expands beyond motor controllers and into integrated power electronic solutions?

Speaker #4: So as of now, some of the integrated units that we are providing for the heavy bus and for the bus and heavy truck platforms, typically run about three and a half anywhere between three and three and a half or lakh rupees per unit based on configuration.

Jaideep Wadhwa: As of now, some of the integrated units that we are providing for the bus and heavy truck platforms typically run anywhere between three and three and a half lakh INR per unit based on configuration.

Speaker #5: Thank you so much for the answers. Thank you. That's it from me.

Payal Shah: Thank you so much for the answers. Thank you. That's it from me.

Speaker #2: Thank you.

Atul Aggarwal: Thank you.

Speaker #1: Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. A reminder to all participants to press star and one to ask a question.

Operator: Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. A reminder to all the participants to press star and one to ask a question. The next question is from the line of Dave V., an individual investor. Please go ahead.

Speaker #1: The next question is from the line of Dave V., an individual investor. Please go ahead.

Speaker #2: Yeah. Hi, thanks for the opportunity. In the SEM division, what would be the percentage split between two-wheelers, three-wheelers, and commercial vehicles?

Dave V.: Yeah, hi. Thanks for the opportunity. In the SEM division, what would be the percentage between two-wheeler, three-wheeler, and commercial vehicles?

Speaker #6: Currently, as per our plan this year, about one-third—about 30 to 35 percent—is coming from two-wheelers and three-wheelers, and about 65 percent is coming from commercial vehicles.

Atul Aggarwal: Currently, as per our plan this year, about one-third, about 30%-35% is coming from two-wheeler, three-wheeler, about 65% is coming from commercial vehicles. Commercial vehicles includes LCV, HCV, and public transport buses.

Speaker #6: Commercial vehicles include LCV, HCV, and public transport buses.

Speaker #2: Okay. In the two-wheeler sector, sir, if we actually see, you don't have any of the large ones, or the ones that have a higher market share, like—either I don't want to take names, but there are companies like, either Hero, TVS, etc.

Dave V.: Okay. In the two-wheeler, sir, if we actually see, you don't have any of the large, or the ones that have a few higher market share like Ather. I don't want to take names, but there are these companies like Ather, Hero, TVS, et cetera. Is there any specific reason why we have not been able to penetrate them?

Speaker #2: Is there any specific reason why we have not been able to penetrate there?

Speaker #6: No, I think in those incumbent or large existing customers, some of them have in-house production, and some of them have long-standing relationships with suppliers.

Atul Aggarwal: No, I think, in those incumbent or large existing customers, some of them have in-house production, and some of them have longstanding relationships with suppliers they've been working over the years. There are two programs we are working on for two different two-wheeler makers. They are at a very advanced stage. We are hopeful, in the next few months, we'll probably get a positive response from one of the makers. That's one, for a new program. Secondly, the current penetration level is going to almost 10% in India for two e-wheelers. The volumes are really going up, as you can see. We believe as the volumes go up in the EV segment, a lot of these incumbent or large existing customers will start doing second sourcing of products, which is where we believe we are well-positioned to acquire that business.

Speaker #6: They've been working over the years, but there are two programs they're working on for two different two-wheeler makers. They're at a very advanced stage.

Speaker #6: We are hopeful that in the next few months, we'll probably get a positive response from one of the makers. That's one for a new program.

Speaker #6: Secondly, the current penetration level is going to almost 10 percent in India for two e-wheelers. The volumes are really going up, as you can see.

Speaker #6: We believe, as the volumes go up in the EV segment, a lot of these incumbent or large existing customers will start doing second sourcing.

Speaker #6: ...of products, which is where we believe we are well-positioned to acquire that business.

Speaker #2: One follow-up question on this. I haven't been following your company for quite a bit. Earlier, in the SEM business, if you could just give us a brief on why we are making losses today.

Dave V.: One follow-up question on this. I've not been following your company for quite the earlier period. In the SEM business, if you can just give us a brief of why are we making losses today? Is it because of the historic business that we have done with one of the large two-wheeler companies, or is it because of the investments that we have made in terms of R&D in the EV ecosystem?

Speaker #2: Is it because of the historic business that we have done with one of the large two-wheeler companies, or is it because of the investments that we have made in terms of R&D in the EV ecosystem?

Speaker #6: So in FY25, the SEM business had clocked about ₹380 crore of revenue, backed by one large key anchor customer. But that key anchor customer insourced their product.

Atul Aggarwal: In FY25, SEM business had clocked about INR 380 crore of revenue, backed on one large key anchor customer. That key anchor customer insourced their product. We lost close to INR 280 odd crore of revenue in just one year. That was a huge drop in our revenue, and our infrastructure, our cost levels were based on that larger revenue. That's one. Second big factor, which is what we still continue to do, we still continue to invest a lot into product engineering, into design and development, basically research and development to strengthen our own tech capabilities. Despite the loss in revenue, we continue to invest in engineering capabilities to make ourselves more and more independent, to make ourselves strong in terms of localization, et cetera. It's an investment we are doing in the future and for the future.

Speaker #6: We lost close to 280-odd crores of revenue in just one year. That was a huge drop in our revenue, which also impacted our infrastructure and our cost levels, which were based on that larger revenue. That's one.

Speaker #6: The second big factor is this, which is what we still continue to do. We continue to invest a lot into product engineering, into design and development—basically, research and development—to strengthen our own tech capabilities.

Speaker #6: So, despite the loss in revenue, we continue to invest in engineering capabilities to make ourselves more and more independent, to make ourselves strong in terms of localization, etc., etc.

Speaker #6: So, it's an investment we are making in the future, and for the future. In the short term, yes, there is some pain, but we believe we are on the right track.

Atul Aggarwal: Short term, yes, there is some pain, but we believe we are on the right track. We need to do these investments in R&D to help us acquire customers, help us make a better product line, and help us build our future.

Speaker #6: We need to do these investments in R&D to help us acquire customers, help us make a better product line, and help us build our future.

Speaker #4: Actually, if I could add to that, sorry.

Jaideep Wadhwa: Ashwin, Sorry.

Speaker #6: Yeah. Go ahead.

Atul Aggarwal: Yeah, go ahead, Dinesh.

Speaker #4: Actually, if I may add to that, just to give you a perspective: we have about 130 people in our organization, and more than half are in product or application engineering.

Jaideep Wadhwa: Ashwin, if I may add to that. Just to give you a perspective, we have about 130 people in our organization. More than half are in product or application engineering. Okay? That investment is crucial for the future. The other thing we need to keep in mind is that as we are launching these new products, there is a huge investment that is going into product testing and validation. Each product that is localized, and at each stage of localization, we need to test a product. If we import a product and give it to a customer and say, "Please try this out," then we have to do some level of testing to make sure that the product meets Indian regulations and Indian test standards. We obviously have the China test standards or the China DVP. We then do a whole set of validations in India.

Speaker #4: Okay. And that investment is crucial for the future. The other thing we need to keep in mind is that as we are launching these new products, there is a significant investment going into product testing and validation.

Speaker #4: Because each product that is localized, and at each stage of localization, we need to test the product. So if we import a product and give it to a customer and say, "Please try this out," then we have to do some level of testing to make sure that the product meets Indian regulations and Indian test standards.

Speaker #4: So, we obviously have the China test standards, or the China DVP. We then do the India—we do a whole set of validations in India.

Speaker #4: We then migrate to a CKD program, where we bring in completely knock-down pieces and assemble them. We go through the entire test and validation process again.

Jaideep Wadhwa: We then migrate to a CKD program, where we bring in completely knocked-down pieces and assemble them. We go through the entire test and validation again, and then we localize. When we localize, we go through that entire test and validation again, and you're talking INR lakhs per SKU. It's all that part of that same engineering investment that we are doing to basically build our future as a comprehensive powertrain and power electronics company.

Speaker #4: And then we localize. And when we localize, we go through that entire test and validation again. And you're talking lakhs of rupees per SKU.

Speaker #4: So it's all part of that same engineering investment that we are making to basically build our future as a comprehensive powertrain and power electronics company.

Speaker #2: I understand. Thank you for the clarification. One last question: we have recently signed for ADAS and drive monitoring solutions. I just wanted to understand, these are primarily used in four-wheelers, right?

Dave V.: I understand. Thank you for the clarification. One last question. We have recently signed for ADAS and driver monitoring solutions. I just wanted to understand, these are primarily used in four-wheelers, right? Do the current companies that are producing vehicles, don't they already have these technologies? What is the traction that we are seeing in terms of being able to accept a new product or a new solution?

Speaker #2: So, do the current companies that are producing vehicles—don't they already have these technologies? What is the traction that we are seeing in terms of being able to accept the new product or the new solution?

Speaker #6: So, Anish, yeah, Anish will take this question. Yeah. In ADAS, there's a regulation which has been notified, which is kicking in from October 2027.

Atul Aggarwal: Anish?

Anish Agarwal: Yeah.

Atul Aggarwal: Anish will take this question. Yeah.

Anish Agarwal: Yeah. In ADAS, there is a regulation which has been notified, which is kicking in from October 2027 in medium and heavy commercial vehicles, which is probably half a million units a year, across five different features, driver monitoring, forward collision warning, blind spot, et cetera.

Speaker #6: In medium and heavy commercial vehicles—which is probably half a million units a year—across five different features of driver monitoring, front collision warning, blind spot, etc.

Speaker #6: So, to capture that market, we have signed this partnership with a company in China. I think the implementation from October may be pushed through January 2028, but it has already been notified.

Anish Agarwal: To capture that market, we have signed this partnership with a company in China. I think the implementation from October may be pushed to January 2028, but it has already been notified, and with that regard, we are actually working on. In terms of the existing models which already have these technologies, it is in passenger vehicles, that too in the premium trims of, say, Mahindra, Tata Motors, or the Korean companies that are offering ADAS Level 2 solutions. There is no regulation which is on passenger vehicles right now, but we feel 2029, the regulation is already in draft. It will also be notified mandating all vehicles to have Level 2 ADAS starting 2029 here for the Indian market. Barring passenger vehicles and commercial vehicles, even two-wheelers regulation is under draft at ACMA as well as the Ministry of Road Transport and Highways in cooperation with ARAI and ICAT.

Speaker #6: And with that regards, we are actually working on it. In terms of the existing models which already have these technologies, it's in passenger vehicles, that too in the premium trims of, say, Mahindra, Tata Motors, or the Korean companies.

Speaker #6: That are offering ADAS level two solutions. There is no regulation which is on passenger vehicles right now, but we feel 2029, the regulation is already in draft.

Speaker #6: It will also be notified, mandating all vehicles to have Level 2 ADAS starting 2029 here for the Indian market, barring passenger vehicles and commercial vehicles.

Speaker #6: Even two-wheeler regulation is under draft, at ACMA as well as the Ministry of Road Transport and Highways, in cooperation with ERA and ICAT. I'm also part of that committee which is drafting the standard for two-wheeler safety rider assistance solutions.

Anish Agarwal: I'm part of that committee also, which is drafting the standard for two-wheeler safety rider assistance solutions.

Speaker #2: Got it. Thank you.

Dave V.: Got it. Thank you.

Speaker #5: Thank you. A reminder to all the participants to press star and one to ask a question. Ladies and gentlemen, if you wish to ask a question, you may press star and one.

Operator: Thank you. A reminder to all the participants to press star and one to ask a question. Ladies and gentlemen, if you wish to ask a question, you may press star and one. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Speaker #5: As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Anish Agarwal: Thank you very much for your time today. These interactions help us convey our strategy going forward and also helps us understand the investor concerns around the company and help us tweak our strategy going forward. Once again, thank you very much.

Speaker #6: Thank you very much for your time today. These interactions help us convey our strategy going forward, and also help us understand investor concerns around the company, which allows us to tweak our strategy as we move forward.

Speaker #6: Once again, thank you very much.

Speaker #5: On behalf of Strategic Dot Advisors Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Operator: On behalf of Strategic Growth Advisors Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Anish Agarwal: Thank you.

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