Operator: Ladies and gentlemen, good day, and welcome to Sterling Tools Limited Q2 H1 FY 2027 Earning Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinion, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the 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: I now hand the conference over to Mr. Atul Agarwal. Thank you, and over to you, Mr. Agarwal.
Atul Aggarwal: Thank you. Good morning, everybody. Thank you for joining us on the call this morning. Welcome to Sterling Tools Limited's Q2 and HY 2027 Earnings Call. I am joined today by Mr. Jaideep Wadhwa, Mr. Anish Agarwal, and our newly appointed CFO, Mr. Amit Dhadda, and Strategic Growth Advisors, our investor relations advisors. Our earnings presentation has been uploaded on our website at the stock exchanges, and I hope everyone had the opportunity to go through it. I would like to begin with the industry overview. The Indian automobile industry recorded its highest-ever second-quarter sales across major vehicle segments in Q2 FY 2027. Domestic sales grew approximately 18% year-on-year to 83.88 lakh units, supported by improved affordability following GST 2.0, healthy rural and urban demand, and vehicle replacement.
Atul Aggarwal: According to SIAM, the industry is expected to maintain positive growth momentum in H2 FY 2027, supported by festive demand, new launches, infrastructure spending, and fleet replacement. However, inflation, potential interest rate increases, and geopolitical uncertainties remain important factors to watch. Turning to our performance at a standalone level, we are pleased to report our highest-ever quarterly and half-yearly revenue, along with our highest-ever half-yearly EBITDA. We have outperformed the broader automobile industry. While industry sales grew by approximately 18% in Q2 FY 2027, our standalone revenue increased by around 32% year-on-year basis. For HY 2027, against industry growth of approximately 20%, our standalone revenue grew by around 28%. A key driver has been strong traction in the CV segment, particularly high volumes from a marquee customer. This reflects the benefits of our customer relationships and our continued efforts to diversify across vehicle segments.
Atul Aggarwal: Our H1 EBITDA increased by 17% year-on-year to INR 58.7 crores, whereas for Q2 FY 2027, EBITDA increased to INR 27.7 crores, reflecting a growth of around 8% YOY. Profit after tax stood at INR 13.6 crores in Q2 FY 2027 compared to INR 19.8 crores in Q2 FY 2026 and INR 30 crores in H1 FY 2027 compared to INR 30.8 crores in the same period previous year. However, it is important to note that Q2 FY 2026 and H1 FY 2026 contain an exceptional gain of INR 9.5 crores. While revenue growth has been strong, profitability has faced near-term pressure. As discussed on our previous earning calls, we exhausted most of our earlier low-cost inventory in Q1. At the same time, commodity and non-commodity input costs have increased significantly amid the ongoing West Asia conflict. Our pricing arrangements with OEMs provide for pass-through of input cost increases. However, these recoveries typically come with a time lag, temporarily affecting margins.
Atul Aggarwal: As the higher costs are progressively recovered, we expect margins to improve over the coming quarters, subject to input price movements and broader operating environment. We remain focused on strengthening our core fastener businesses through customer diversification, capacity expansion, and disciplined investment. Against our earlier CapEx plan of INR 80 crores for fastener business, we have already incurred about INR 25 crores, and our total fastener CapEx plans are in the range of about INR 110 crores now. We are also increasing our overall FY 2027 CapEx to about INR 150 crores across all our businesses of fasteners, DC contactors, and MCUs. Our fastener business continues to provide a strong foundation for the group, supported by the healthy demand, expanding customer relationships, and a continued focus on operational execution. Moving to SEM, Sterling E-Mobility Solutions Limited, revenue from this business stood at approximately INR 23 crores in Q2 FY 2027, taking HY 2027 revenue to around INR 37 crores.
Atul Aggarwal: This quarterly growth has primarily come from higher volumes and new customer additions. The business has made encouraging progress, particularly in the commercial vehicle and light commercial vehicle segments. Our focus remains on higher value applications and expanding our presence in commercial vehicles. The production lines for onboard chargers and multifunction units scheduled for commissioning in Q2 have been commissioned as planned. Our priorities remain increasing volumes, broadening the customer base, and strengthening the position in higher value electric mobility solutions. At STML, Sterling Tech-Mobility Limited, we have made steady progress in commercializing our high voltage DC contactors and relays business. Commercial supplies, which were scheduled to begin in Q2 FY 2027, have now commenced. This marks an important milestone as we move from development towards commercial execution. To conclude, our fastener business remains at the core of Sterling Tools' growth strategy.
Atul Aggarwal: Long-standing customer relationships, opportunities across vehicle segments, customer diversification, and planned capacity investments position us to pursue the next phase of growth. While near-term input cost pressures have affected profitability, we remain focused on execution, disciplined capital allocation, and strengthening our competitiveness across our businesses. Our priority is to build a more resilient business and deliver sustainable long-term value for our stakeholders. Before we move to the question and answer session, I would like to introduce our newly appointed CFO, Mr. Amit Dhadda. Mr. Dhadda brings nearly three decades of experience across finance, taxation, audit, corporate reporting, and financial control. He has held senior positions at organizations including Spark Minda, One 97 Communications, and spent over 14 years with Pricewaterhouse, including international experience in the UK. His experience in manufacturing, finance, regulatory compliance, fundraising, and corporate governance will be valuable as we continue to strengthen our financial and operational capabilities.
Atul Aggarwal: We warmly welcome him to Sterling Tools, and now invite Amit to introduce himself.
Amit Dhadda: Thank you, Atulji, and good morning, everyone. I am delighted to join Sterling Tools Limited at its important stage in its growth journey. The company has built strong foundation in the fastener business while steadily expanding into electric mobility and newer technology-led opportunities. At Sterling Tools, I look forward to working closely with the management team to strengthen the financial discipline, support business growth, and maintain strong standards of governance and reporting. I look forward for interacting with all of you and contributing to the company's continued progress. Thank you. With that, we will be happy to take your questions.
Operator: Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Dave, who is an individual investor. Please go ahead.
[Shareholder] (Private Investor): Yeah, hi. Thanks for the opportunity. Can you confirm the growth in the SEM and STML business vis-à-vis Q1 of this year?
Atul Aggarwal: Can you repeat that question? I cannot hear you.
[Shareholder] (Private Investor): Can you confirm the growth in SEM and STML business vis-à-vis the Q1 of this year?
Atul Aggarwal: I am sorry. I am not able to understand. I can hear you, but I am not able to understand your question. Do you want to repeat that again? Apologies for that.
[Shareholder] (Private Investor): Atul, I was checking on the SEM and STML stream of business. What is the growth in Q2 versus Q1 of this year?
Atul Aggarwal: Jaideep, you want to take that SEM question?
Jaideep Wadhwa: Yeah, it is 26%.
[Shareholder] (Private Investor): It is 26%, and it is largely the SEM. Okay, and for STML?
Atul Aggarwal: Yeah. This number is Q2 over Q1. Am I right, Jaideep?
Jaideep Wadhwa: Correct. That's correct, Atul.
Atul Aggarwal: Yeah.
[Shareholder] (Private Investor): Okay.
Atul Aggarwal: STML has just started its operation in Q2 only, where the total turnover is mainly in Q2 only.
[Shareholder] (Private Investor): Okay. What is the loss per quarter that you are incurring in both of these businesses as of now, and are they largely fixed costs or operational in nature?
Atul Aggarwal: I think there are losses in both the business. SEM, a substantial part is operational in nature, and yes, fixed cost always has an element to that. But yeah, we need to bump up the revenue. Once we reach a revenue of INR 150 crores plus, we'll probably achieve breakeven point at that point in time.
Jaideep Wadhwa: Sorry, Dev, my apologies. I gave you the volume growth number.
[Shareholder] (Private Investor): Okay.
Jaideep Wadhwa: Which is not representative of this thing because we are moving from lower value two-wheeler, three-wheeler businesses to the much higher value HCV. The growth is about 80%.
[Shareholder] (Private Investor): Growth is 80%.
Atul Aggarwal: Quarter over.
[Shareholder] (Private Investor): What is the total value revenue in the SEM business today?
Amit Dhadda: For the H1, as Atul mentioned, it is INR 37 crores.
[Shareholder] (Private Investor): Okay. We are expecting this above INR 150 crores, we turn profitable, right?
Atul Aggarwal: Correct.
Jaideep Wadhwa: That is correct.
[Shareholder] (Private Investor): Okay. What are the challenges that you see in the SEM business in terms of scaling? This is my last question.
Atul Aggarwal: Jaideep?
Jaideep Wadhwa: In the SEM business?
[Shareholder] (Private Investor): Yeah.
Jaideep Wadhwa: Yeah. As of today, I think a lot of the hard work has already been done in developing the new product portfolio. For us, now it is ramping up of volumes from our new production lines. Our revenue, as of today, what we look at for Q4, because most of the programs that we are working on will go live in Q4. I will just explain why, because we installed our machines, as Atul mentioned, in Q2. In Q3, we are going to be doing the final validation of these products with our customers. From Q4, we start supplying. Starting from Q4 of this year and for most of next year, we already have confirmed businesses from several of our customers.
Jaideep Wadhwa: As long as they are able to meet their production targets, we do not see much of a challenge except the operational and supply chain challenges in meeting the numbers.
[Shareholder] (Private Investor): Thank you. One last follow-up. When Mr. Atul mentioned at INR 150 crore and above, we turn profitable, are we talking about annual numbers?
Atul Aggarwal: Yes.
[Shareholder] (Private Investor): Okay. We expect to do that by Q2 of next year?
Atul Aggarwal: Yeah, I think we expect to outperform that number in FY 2028.
[Shareholder] (Private Investor): FY 2028. Thank you.
Operator: Thank you. A reminder to all the participants that you may press star and 1 to ask the question. The next question is from the line of Mihir from MB Securities. Please go ahead.
[Analyst] (MB Securities): Yes, good morning, sir. Congratulations on a good quarter number. I wanted to ask that our revenue grew 32.4% in Q2, but our EBITDA grew only 8.2%. Is this because of higher input cost still affecting our margins? How much improvement can we expect in H2 as well?
Atul Aggarwal: Well, it is a good question. Yes, you are 100% right. With revenue growth, the EBITDA has not grown at the similar levels. Like I said in my call, and as in previous engagements as well, input price increases have been dramatic this year. This has been an exceptional year in manufacturing. We have seen where the input costs have gone up by some commodities as much as 300%, some by 30%, 40%, 50%. The inflationary impact has been substantial. We are bumping up our revenue, that is one way. Secondly, we are negotiating with our customers for price increases, not only on account of steel, which is a normal practice running for years, but this year the exceptional item is inflation in cost increases. We are negotiating with our customers. Some have come through, some are under negotiation.
Atul Aggarwal: Some of them will come with retrospective effect, but this is a long negotiation process. It does not happen overnight because these are long-standing relationships. We do expect we will get substantial compensation going forward with retrospective effect. Having said that, there will be pressure on maintaining our EBITDA margin this year because of exceptional inflation and steel price increases.
[Analyst] (MB Securities): Understood, sir. So by H2, there would be a price pass-on?
Atul Aggarwal: Yes.
[Analyst] (MB Securities): Is this understanding correct? Okay.
Atul Aggarwal: Yeah, that's a mutual negotiation we do, which takes some time.
[Analyst] (MB Securities): Okay, understood. And sir, another question I had was regarding commercial vehicles. So they have been our key growth driver this year. So the growth is coming mainly from higher volumes with existing customers, or it is new customers who are also contributing meaningfully?
Atul Aggarwal: No, these are all incumbents. There have been no really new customers or new operators in that segment. It is existing customers like Tata, Leyland, Volvo, Mahindra, Daimler Benz. It could be Mahindra's, Swaraj Mazda, which earlier. It is across the board. With startups, it is the existing operators have ramped up dramatically.
[Analyst] (MB Securities): Okay. It means majorly existing customers are only driving this growth.
Atul Aggarwal: Correct.
[Analyst] (MB Securities): Understood. Yeah. Thank you. That is all from my side.
Operator: Thank you. A reminder to all the participants that you may press star and 1 to ask a question. The next question comes from the line of Madhur Rathi from Counter Cyclical Investments. Please go ahead.
Madhur Rathi: Sir, thank you for the opportunity. Sir, I wanted to understand regarding the margin of our fastener business. Sir, can we expect to move to the 14% to 15% range maybe over the next one or two quarters? Q1 you mentioned that we had a benefit of low-cost inventory, so how should we look at the margins of this business going forward?
Atul Aggarwal: Madhur, on the fastener business, we have been hovering between 15% and 16% EBITDA. Like I said a little while ago, we hope to maintain that, but this year is an exceptional year. There has been a tremendous pressure, not only on account of steel price increases, also because of inflationary impact on every input we have into our manufacturing processes, power, diesel, carbide, tool steel, people cost, they have gone up dramatically because of minimum wages increases. It has been an exceptional year with most parameters going up. So there may be pressure on EBITDA margin this year. Like I said, we are trying to negotiate with our customers for increases. We hope to get substantial compensation, I would say, against that. For me to say whether we close the year at the same margin as last year is difficult right now.
Atul Aggarwal: As the time is progressing, I will have a better estimate on that. But we are under pressure on EBITDA margins. Having said that, pressure does not mean it will be dramatic. It will be a marginal pressure in terms of numbers.
Madhur Rathi: Sir, would it be fair to assume that by Q4, we could move to the levels, not on annual basis, but from a quarterly basis, we could move to the 15% levels by Q4 of this year?
Atul Aggarwal: We are hoping that. That is correct.
Madhur Rathi: Got it. Sir, I wanted to understand how is the competitive intensity, because it seems that one of our competitors was acquired some time back by an Italian company. Is the competitive intensity much better, or the pricing is much better with OEMs, or how is it, if you can help us understand?
Atul Aggarwal: Despite that acquisition of that competitor by an Italian company, we do not feel any pressure coming to us on account of that. There is no pricing pressure. There is no volume pressure. In fact, our volume levels are up almost 28% on a half yearly basis. I think we are in a good wicket. Because of our quality customer servicing, volume availability, capacity availability, we are in a good wicket. Obviously, backed up by four decades of relationship. We do not feel any constraint in terms of growth or pricing or margin pressures because of that.
Madhur Rathi: Sir, my question was more on, has the acquisition been beneficial to the whole industry? Has there been any pricing discipline post the acquisition by some large MNC kind of a company? From that metric.
Atul Aggarwal: It is an exceptional year. As you know, the volumes are up dramatically. I think it is too early to talk about that, but maybe you want to ask that question to the Italian company and try to get their sense as to what they see. From our perspective, we feel we are in a good place.
Madhur Rathi: Got it. Sir, what are the process of exporting our fasteners as well as moving into either structural fasteners that are used in either PEB industry. Is there a possibility for Sterling to move towards that as well?
Atul Aggarwal: No, we are not looking at structural fasteners. Our near-term plan is to stick with automotive and adjacencies of automotive. We have no plan to go into structural or construction businesses at all. We are trying to do some business with railways, and we will grow that business incrementally, and once we understand that business very well, we will probably take a more strategic view on that after that.
Madhur Rathi: Got it. Sir, just one final question on the STML business. As you have commercialized the contactors and relays. How is our gross margin? Have you been able to reach the desired gross margin level for these product and how should we look at the scale-up of this business going forward, if you can help us understand?
Atul Aggarwal: Yeah, I think the gross margins will be in line with what we project next year. They are already in line as of Q2. But once this business ramps up, which is last quarter of this year, then we will get more clarity on gross margins as well as EBITDA margins.
Madhur Rathi: Got it. Sir, that was from my end. Thank you so much, and all the best.
Operator: Thank you. The next question is from the line of Ansh Khimawat from Capital One. Please go ahead.
Ansh Khimavt: Hello. Good morning, sir. Am I audible?
Atul Aggarwal: Yes.
Ansh Khimavt: Congratulations on a great set of numbers, sir. I just had a few questions regarding the CapEx. So we had initially planned INR 80 crores odd, and we ramped it up to INR 135 crores. So could you just lay out as to where we are seeing an opportunity and where this CapEx is going to be incurred?
Atul Aggarwal: Let me break up that CapEx for you. Our overall CapEx at a consolidated level will be about ₹150 crores. ₹20 crores is going to happen at SEM, and about ₹10 odd crores at STML. On our standalone fastener business, the initial CapEx plan was ₹80 crores, which has been ramped up to maybe close to more like ₹130 crores this year. Sorry. ₹120 crores this year. As the business has been progressing, time has been progressing, and we see the traction. We are building our CapEx with eye to the future of 12 to 24 months because there is a lag for that CapEx to happen and convert to possible revenues, depending on the kind of equipment, anywhere from six to 18 months. We are progressively building a CapEx plan, keeping in mind what we hope to do in FY 2028 and FY 2029.
Atul Aggarwal: That is why the numbers have gone up substantially. We are planning our next 24 months proactively, based on the traction we have with our customers, based on revenue growth, based on our communications and our commitments with certain customers, and lastly, keeping in mind the time lag we have to execute those commitments.
Ansh Khimavt: Okay, sir. That is encouraging. What kind of capacity will you be adding for the fasteners business then? The additional ₹40 crores which we are adding, what kind of capacity would we be adding? And what organization are we applying to?
Atul Aggarwal: Ansh, it is a very complex question. I think it needs a long conversation because capacity itself is built across different areas. It is pure hard capacity on the shop floor, which will translate to numbers. CapEx also means putting up infrastructure. It could be in terms of buildings, in terms of power backups, et cetera. Not each dollar value or rupee value converting into a revenue immediately. It is a combination of CapEx which we do, which translates to certain capacity increase. For example, I think with about ₹120 odd crore CapEx, I think we probably increase our capacity by roughly, in value terms, will probably give us another ₹150 crores of revenue.
Ansh Khimavt: That was so interesting. Our other expenses have increased by INR 10 odd crores in the current quarter. We were at around INR 67, INR 68 crores in the last year, same quarter. Now we have come to around INR 87 crores. This was INR 77 last quarter. Is there any update as to why that is happening? Is that mainly your pacing?
Atul Aggarwal: Give me a second.
Ansh Khimavt: Hello.
Atul Aggarwal: Yes, our other expenses have gone up. Other expenses include consumables, toolings, tools, et cetera. I will just give you a number. Tungsten carbide prices have gone up by over 300% in the last 12 months. A, backed on inflationary pressures. B, there has been a 28% volume growth as well. If you look at absolute numbers, they will probably be deceiving. If you look at other expenses which have gone up on a standalone basis, they have gone up from 77 to 87, like you rightly said. But percentage-wise, that is stable.
Ansh Khimavt: Okay. The variable end of the expenses is increasing, which is in line with the sales. Is that the correct assumption?
Atul Aggarwal: Yeah. I would not look at absolute numbers. I would look at percentages. Percentages are stable despite the fact there have been inflationary price increases in input cost.
Ansh Khimavt: Okay, sir. That is encouraging. Also, sir, our debt has gone up considerably in this quarter. Is that mainly because of the CapEx we are incurring, or is there any other?
Atul Aggarwal: Yes, I think the debt has gone up by two, three reasons. One, we have done an INR 40 crore investment in our subsidiaries this year, SEM and STML, which was announced in the last quarter's results. Second, because of our CapEx plan going up to about INR 150 crores, we are getting it funding through our higher debt component. I think these are the two big reasons. Lastly,
Ansh Khimavt: Thank you.
Atul Aggarwal: Since the balance sheet side is increasing, our revenue is up say 30 odd percent. The absolute value of working capital needs have gone up. On top of that, we have taken strategic view to add a higher level of inventory for virgin, for raw material, which we buy from steel mills. Because the market is so buoyant, steel mills are totally booked out. We are carrying a higher level of inventory for our raw materials, so a combination of all these factors.
Ansh Khimavt: Okay, sir. On the business end of it, how is the AEM, the advanced motor ramp-up coming up, sir? Are we yet in contact with the customers, and have you received any update from their end?
Atul Aggarwal: Jerry, do you want to take that?
Jaideep Wadhwa: Yes. I think we had updated that we were looking at doing two POCs for the AEM product for two different product categories of vehicles. One POC is delayed but expected to be completed by the end of November. The second POC has been put on hold by the customer because of the inflationary pressure that they were facing. They put a lot of the advanced engineering projects on hold for the time being. We are hoping to see the first POC coming through maybe by the end of the next month, which is November.
Ansh Khimavt: Okay, sir. By the end of November. As far as my understanding is, sir, then we will be in the advanced stages to build a motor for them then. Right now we are in touch, and we are just trying to understand as to what their requirement is, correct?
Jaideep Wadhwa: I think that is probably a little bit more advanced than what the actual status is. A POC is basically to prove that, yes, the concept works. Thereafter, the customer has to figure out how to incorporate it in their designs, et cetera. There is still a lot of time and effort that is required to take it from a POC to actual production.
Ansh Khimavt: Okay, sir. Understood. Thank you, sir. I will get back to you.
Jaideep Wadhwa: There is a lot of engagement, but to translate a brand-new concept or a new technology into revenue has a fairly long gestation.
Ansh Khimavt: Okay, sir. Understood. Sir, just if I could, have we taken any new clients in the Fasteners business? We had Tata earlier, have we signed any new customers?
Atul Aggarwal: Ansh, we are already working with pretty much all the customers. There are no major customers to be acquired in that Fasteners space. All we need to do is we need to increase new product development with them. We need to increase our share of business spend with them. But in terms of new customer acquisition, we pretty much have all the customers in our deck. If you see the customer deck, you will find all the customers are onboarded with us. All the customers with many material value of buying. You have got others like Volkswagen or Cetra Group, which are totally import-based. In that sense, all the major OEMs are already on our deck.
Ansh Khimavt: Okay, sir. I think the assumption that this volume growth can be carried forward for the remaining part of the year and maybe in the next year as well is something which can be made on a relative basis right now.
Atul Aggarwal: What is the last part of the statement you made?
Ansh Khimavt: Which can be, we can go ahead with that assumption. Is that correct?
Atul Aggarwal: Yes. I think that is what we are saying. This number, what I am trying to project is based on our confidence we have with our customers and where we are today.
Ansh Khimavt: So we will be able to surpass the revenue, what we did last year, maybe on the standalone business by the end of this year is
Atul Aggarwal: Yes, definitely.
Ansh Khimavt: Maybe a 15% increase also on that is a fair assumption?
Atul Aggarwal: Definitely.
Ansh Khimavt: Okay. Thank you. Thank you. That will be from my side, sir.
Atul Aggarwal: Thanks.
Ansh Khimavt: All the best.
Operator: Thank you. A reminder to all the participants that you may press star and 1 to ask a question. The next question comes from the line of Yogesh Patel from Pravi Investment. Please go ahead.
[Analyst]: Good morning, everyone, and thank you very much. Sir, my question is, you rightly said 28% volume growth and there would be a cost increase. It is very difficult to figure out piece-wise, but in terms of, let us say, volume tonnage-wise, if I see. So the amount of value addition might be reduced due to inflation, and do you see any kind of improvement realization because of product mix or any kind of price pass on? Or do you see the
Atul Aggarwal: Yogesh, we lost you in the middle. Do you want to start the question again? We lost you in the middle.
[Analyst]: Sorry. Sir, you said 28% volume growth, right? It is very difficult to spread out on per piece basis. But I am saying in terms of, let us take a tonnage, if I say like weight-wise, and value addition, maybe per kg or per ton basis. So the incremental growth or maybe revenues generated in Q2 is a combination of new product mix, and lack of prices passed through customer. I mean I am saying the impact of inflation plus product mix. So roughly, can you slightly give maybe not very exact breakup? Meaning how much impact of inflation is there in fastener business, roughly?
Atul Aggarwal: So let me just say our 28% is a pure volume growth.
Atul Aggarwal: which we have in the H1, and I think our value growth is also very similar. Mathematically, it is already saying that there is not a large part of inflation factored into this revenue right now. Which is, like I said, it is under negotiation. It is an ongoing process. The inflation price increase from the customers are very nominal right now. A lot of them are under negotiation and which will probably translate into our P&L in this Q3 and Q4.
[Analyst]: Okay. It means we will get a price recovery in Q3 and Q4, roughly?
Atul Aggarwal: Correct.
[Analyst]: Sorry, I did not get you.
Atul Aggarwal: Some of those price increases will have a retrospective effect as well.
[Analyst]: Okay, got it. Sir, sorry, I am asking, is there any better realization because of the improvement in product mix or high margin product? What could be that percentage involved in roughly?
Atul Aggarwal: No, I think those are marginal numbers right now.
[Analyst]: Okay.
Atul Aggarwal: Yeah. It is not something to make a dramatic impact quarter on quarter with us in our business.
[Analyst]: Okay.
Atul Aggarwal: It is a total basket we look at over the year.
[Analyst]: Okay. If you are going above industry average, roughly we are gaining market share from other players, right?
Atul Aggarwal: Yes, we are.
[Analyst]: Okay.
Atul Aggarwal: Yes, we are.
[Analyst]: Considering the CapEx in fastener business and EV business, what is the potential revenue? Maybe I am not saying you give your target, but aspiration kind of in 2028 and 2029, roughly from EV and fastener business. Maybe a hypothetical number.
Atul Aggarwal: Our first target is to reach INR 1,000 crore revenue in our fastener business ASAP.
Atul Aggarwal: We are quite positive if the current momentum continues and the kind of investments we are doing in our business, we probably will have visibility on that in the very near future. Talking about SEM and STML businesses, SEM is on a rebuilding of the business. We have gone through a big shock in FY 2026.
Atul Aggarwal: We are rebuilding our business as of FY 2026 and FY 2027. We are quite hopeful that business this year will turn around substantially by refocusing on the kind of products we are doing and the customers we are doing, and that will help us lay the foundation for the years going forward. Similar for STML. I think the validation and the testing periods are as long as 12 to 18 months. A lot of that work has already been done.
Atul Aggarwal: We will see some revenue ramp-up coming dramatically next year based on top of this year's numbers.
[Analyst]: Okay. But roughly, what would be the numbers? Just to understand the business.
Atul Aggarwal: I do not want to put a number out there. Maybe we can have this conversation when we do our FY 2027 investor call.
[Analyst]: Okay, sorry. I completely agree. But just want to know what is the potential revenue possible in this capacity, basically?
Atul Aggarwal: Like I said, I do not want to do that right now. There is a lot of groundwork happening. Certain information is confidential right now based on certain contracts we have to customers on the EV businesses. I would, like I said, maybe get into that conversation in FY 2027 investor call.
[Analyst]: Okay. Just last question.
Operator: Mr. Yogesh, sorry for interrupting. Please rejoin the queue for more questions.
[Analyst]: Sure.
Operator: The next question is from the line of Ayush Abani from SAII Advisors. Please go ahead.
[Analyst] (SAII Advisors): Hello, am I audible?
Atul Aggarwal: Yes.
[Analyst] (SAII Advisors): Yeah. Sir, I wanted to ask that the onboard charger and multifunction unit production lines have been commissioned as planned, right?
Atul Aggarwal: That is right.
[Analyst] (SAII Advisors): When do you expect these products to start contributing meaningfully to revenue? How important could they become for SEM's growth?
Atul Aggarwal: If you see, a lot of our SOPs, our customers' SOPs are starting in Q3, Q4. So Q3, Q4, you will see a substantial bump up in revenue compared to Q1, Q2. I think the businesses have been acquired, customers have been acquired and developed and tested. They are converting into revenue in Q3, Q4, and FY 2028 will be a much bigger year on top of that. We have refocused a lot into these new product lines, and the unit prices of these product lines are much higher than we were doing for the two-wheeler segment business. These businesses are primarily focused on commercial vehicles, like commercial vehicles, public transport, which has a more sustainable growth. So you will see a lot of that revenue ramp up coming in Q3, Q4 and FY 2028.
[Analyst] (SAII Advisors): Okay. Understood. Sir, I also wanted to ask, can you clarify the CapEx amount, whether it is INR 135 crores or INR 150 crores?
Atul Aggarwal: INR 150 crores for FY 2027 at a consolidated level.
[Analyst] (SAII Advisors): Okay. Thank you so much, sir.
Operator: Thank you. The next question comes from the line of Dev, who is an individual investor. Please go ahead.
[Shareholder] (Private Investor): Yeah. Hi. Sir, in the presentation, under the E-mobility segment, you mentioned that we have 42 active programs and 23 business contracts. Just wanted to understand how many of these contracts have come in H1 of this year where we have signed contracts, Jerry?
Jaideep Wadhwa: We have got five new contracts that are coming into production by the end of this year.
[Shareholder] (Private Investor): Okay. So this 23 number includes the five, but the production will happen this year. It is not yet started, right?
Jaideep Wadhwa: Not yet. When I say, we may have supplied quantities in the tens, but not.
[Shareholder] (Private Investor): Okay
Jaideep Wadhwa: not the full production quantity.
[Shareholder] (Private Investor): Okay. Are we also working with some of the bigger commercial vehicle OEMs like Tata, Ashok Leyland, Eicher, on the ECM business?
Jaideep Wadhwa: Yes.
[Shareholder] (Private Investor): Okay. Have we signed any contracts with them till now?
Jaideep Wadhwa: Yes
[Shareholder] (Private Investor): It is under engagement. Okay. Yes.
Jaideep Wadhwa: Yes.
[Shareholder] (Private Investor): Okay. Yeah. Thank you.
Operator: Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of question and answer session. I now hand the conference over to management for closing comments.
Atul Aggarwal: Thank you everybody for joining us today and giving us time, helping us communicate to you our last six months and where we see the business going forward. We hope to engage with you again in the future calls. If anybody has a request for additional information, please reach out to SGA, our investment advisors. They will organize the communication with us and hopefully, we will try and answer all your queries. Thank you very much.
Operator: Thank you. On behalf of Sterling Tools Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
