Sterling Tools Limited

Sterling Tools reported a consolidated revenue of INR 195 crores for Q1 FY26, marking a significant 31% year-on-year decline. This downturn was primarily attributed to product in-sourcing by a key customer. The broader Indian automobile industry also faced challenges, with an overall decline of 5.1% in Q1 FY26, including a 1.4% drop in passenger vehicle sales and a 6.2% fall in 2-wheeler sales. Despite these headwinds, the company's standalone fasteners business demonstrated stability and continued to grow at a faster pace than the industry.

The company is aggressively pursuing growth in the electric vehicle (EV) ecosystem through its subsidiaries, Sterling GTAKE E-Mobility (SGEM) and Sterling Tech-Mobility Limited (STML). SGEM is actively engaged in 28 customer programs across various vehicle segments and is diversifying its product portfolio to include integrated motors, MCUs, magnet-free motors, onboard chargers, and DC/DC converters. Notably, SGEM secured its first nomination for DC/DC converters, with revenues from these new product lines anticipated to commence by the end of the current fiscal year or during FY27.

STML is making significant progress on its new facility in Bangalore, with commissioning expected by September end 2025. Small volume trials are slated for October, leading to full-scale production by the first week of November this year. This subsidiary will focus on manufacturing high-voltage DC contactors and other EV-agnostic products. Management projects STML to achieve a revenue potential of INR 150-200 crores within the next five years, contributing significantly to the company's EV growth strategy.

Sterling Tools plans a substantial investment of INR 150-200 crores in its non-fastener businesses (SGEM/SEM and STML) over the next three years. For FY26, specific capex allocations include INR 15-20 crores for the fastener business, INR 50 crores for STML, and INR 20-25 crores for SGEM. These investments are aimed at achieving a combined revenue potential of INR 500-1,000 crores from the non-fastener segments, though this is contingent on market penetration and evolving government policies.

The company emphasizes import substitution and localization of EV components, leveraging its expertise in power electronics. It is actively developing REM-free motors in alliance with UK-based Advanced Electric Machines to address risks associated with rare earth magnet supply, with production expected by FY27. Management believes its first-mover advantage, strong customer access, and robust in-house capabilities provide a sustainable competitive edge in the rapidly evolving EV market.