Sterling Tools Limited — Q2 FY26 earnings call

Call held 12 Nov 2025

Management summary

Sterling Tools reported a Q2 FY26 total income of INR172.2 crores for its standalone fastener business, with the MCU division growing 22% Q-on-Q. While consolidated revenue saw degrowth due to a customer loss in SEML, the company maintains a net debt-free status and expects 5-7% growth in its standalone business for FY26. Significant capex of INR50 crores is planned for FY27 across existing businesses, with new high-voltage EV product lines like HVDC contactors showing strong future revenue potential.

Highlights

  • Standalone fastener business total income increased to INR172.2 crores in Q2 FY26.

  • MCU division reported 22% Q-on-Q growth, driven by diversification into 3-wheeler, LCV, and HCV segments.

  • H2 FY26 domestic sales for the industry are expected to see double-digit growth, lifting FY26 domestic sales by 5% to 7%.

  • Sterling Tech-Mobility (STML) HVDC contactors business has a revenue potential of INR200 crores within the next 5 years.

  • Company maintains a net debt-free status with consistent cash flow generation.

Concerns

  • PBT before exceptional items for the standalone fastener business remained flat on a year-on-year basis.

  • Consolidated level experienced degrowth over last year due to the loss of a key anchor customer in Sterling E-Mobility Solutions Limited (SEML).

  • EV business growth may be muted in the short term, with only INR2-3 crores revenue expected for SEM in FY26.

Key financials

  1. Total Income (Standalone Fastener) ₹172.2 Cr

What they filed

Q1 FY27: revenue up 23.6%, net profit up 45.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue167 153 163 161 170 +2%180 +18%205 +26%199 +24%
EBITDA24 19 23 22 23 −4%27 +42%29 +26%29 +32%
Net profit12 8 11 11 20 +67%10 +25%24 +118%16 +45%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • MCU Division
    0.22 decimal_fraction Q-on-Q Growth

Capital allocation

high confidence
  • Capex ₹50 Cr
    • SEM business ₹10 Cr
    • STML DC contactor business ₹10 Cr
    • Standalone fastener business ₹25 Cr
    So for the capex for the new businesses, let’s say, the SEM business- Sterling E-Mobility and then STML, for the first SEM business, we’re looking at about INR10 crores to INR15 crores capex coming next year into that. And for our STML DC contactor business, I think there will be a marginal capex coming in, maybe the tune of INR10-odd crores next financial year. Vis-a-vis our standalone fastener business, our capex next year is projected to be anywhere in the range of about INR25-odd crores. So altogether put together, we are looking at about a INR50 crores capex for the existing businesses we have.
  • Debt Debt disclosed
    We continue to maintain a net debt-free status with consistent cash flow generation
  • Liquidity Liquidity disclosed Company maintains consistent cash flow generation and generates a lot of cash.
    We continue to maintain a net debt-free status with consistent cash flow generation, enabling us to fund group growth initiatives internally. Our mature cash-generative core business provides a strong foundation for strategic diversification into high-growth areas. We continue to generate a lot of cash.

Guidance & targets

Sales Growth

  • Standalone Business FY26 Growth Sales Growth · FY26 · High confidence 5% to 7%
    I think at the beginning of the year, we said we'll probably grow at 5% to 7% for the full year and we are on track to do that in our standalone business on a full year basis.

    — Atul Aggarwal

Revenue Potential

  • HVDC Contactors Revenue Potential Revenue Potential · within the next 5 years · High confidence INR200 crores
    This business has a revenue potential of INR200 crores within the next 5 years.

    — Atul Aggarwal

Revenue Target

  • SEM Revenue Revenue Target · FY30 · High confidence INR450 crores
    we are targeting to reach around INR450 crores by FY '30.

    — Jaideep Wadhwa

  • SEM Revenue Revenue Target · FY26 · High confidence INR2 crores or INR3 crores
    We only expect to do INR2 crores or INR3 crores this year.

    — Jaideep Wadhwa

Capex

  • SEM Capex Capex · FY27 · High confidence INR10 crores to INR15 crores
    for the first SEM business, we're looking at about INR10 crores to INR15 crores capex coming next year into that.

    — Atul Aggarwal

  • STML DC Contactor Capex Capex · FY27 · High confidence INR10-odd crores
    for our STML DC contactor business, I think there will be a marginal capex coming in, maybe the tune of INR10-odd crores next financial year.

    — Atul Aggarwal

  • Standalone Fastener Business Capex Capex · FY27 · High confidence INR25-odd crores
    Vis-a-vis our standalone fastener business, our capex next year is projected to be anywhere in the range of about INR25-odd crores.

    — Atul Aggarwal

  • Total Capex for Existing Businesses Capex · FY27 · High confidence INR50 crores
    So altogether put together, we are looking at about a INR50 crores capex for the existing businesses we have.

    — Atul Aggarwal

  • SEM Total Capex Capex · FY25-FY27 · High confidence INR60 crores
    So 3-year capex of INR60 crores.

    — Jaideep Wadhwa

Consolidated Revenue

  • Consolidated Revenue vs FY25 Consolidated Revenue · FY27 · Medium confidence very close to our numbers what we had in FY '25
    hopefully, in FY '27, we'll be very close to our numbers what we had in FY '25 on a consolidated level with the new business of STML kicking in and the growth we have in our fastener business plus the growth coming next year in the SEM business.

    — Atul Aggarwal

What to watch in Q3 FY26

HVDC contactors commercial production

Next quarter (Q3 FY26)
Current Starting in December '25
Target Commercial operations

Why it matters

Marks the commencement of a new, high-potential business segment for Sterling Tech-Mobility.

Our STML subsidiary will start commercial production of HVDC contactors and relays in December '25 at its state-of-the-art fully automated manufacturing facility in Bengaluru.

Risks & concerns

  • Loss of key anchor customer in SEML

    high

    The loss of a key anchor customer in Sterling E-Mobility Solutions Limited (SEML) has led to consolidated degrowth over the last year.

    Management acknowledged

  • Impact of GST rationalization on EV value proposition

    medium

    GST rationalization made internal combustion engine scooters more economical, reducing the value proposition for electric scooters, requiring OEMs to rework their strategies.

    Management acknowledged

  • Geopolitical risk and need for in-house technology

    low

    The company aims to develop its own technology to protect against geopolitical risks and reduce dependence on partners.

    Management proactively developing own tech to mitigate

Q&A highlights

8 direct
MCU division growth despite top customer volume drop Direct
So that -- those customers today contribute more than 25% of our total revenue. And our 2-wheeler business is about 60% of our total revenue now. And the number will -- and we expect that going forward, the share of business from other segments, that's 3-wheeler, LCV, HCV will continue to grow.

Reveals the diversification strategy for the MCU business beyond 2-wheelers and the growing contribution from 3-wheeler, LCV, and HCV segments.

Asked by Deepan Sankara

Landworld Technology partnership for onboard chargers and DC/DC converters Direct
So Landworld is a company based out of Shenzhen. They make onboard chargers, DC/DC converters and PDUs. This is these are products that go into typically high-voltage applications... the applications for such products are in light commercial vehicles, heavy commercial vehicles and passenger vehicles. Basically and typically, the product ranges that are 300 volts and above.

Explains the new partnership and the strategic focus on high-voltage products for commercial and passenger vehicles, indicating a move into higher-value segments.

Asked by Deepan Sankara

Market size and Indian manufacturing for HVDC contactors and relays Direct
So with regards to HVDC contactors and pre-charge relays, the market currently would be in the tune of INR300 crores to INR400 crores in India, is growing every year and we expect this market to go up to upwards of INR1,000 crores by the end of this decade... they don't, Schneider makes switchgears for industrial applications. They don't really make HVDC contactors and relays... So no one is manufacturing in India then? Anish Agarwal: No.

Quantifies the significant market opportunity for a new product line and highlights the company's first-mover advantage in domestic manufacturing for HVDC contactors/relays.

Asked by Shashank Agarwal

Impact of SMT investment on expenses and cost reduction Direct
But the downside -- but when we make it in-house, we are able to reduce we are able to capture more of the value and are able to reduce our cost. So it's a trade-off. So as when we start looking at SMT technologies and so on, then what we are looking at is reducing our cost base.

Explains the strategic rationale behind vertical integration and in-house manufacturing, aiming for cost reduction and increased value capture.

Asked by Shashank Agarwal

Capex plan for new EV and HVDC operations and standalone business Direct
for the first SEM business, we're looking at about INR10 crores to INR15 crores capex coming next year... for our STML DC contactor business... maybe the tune of INR10-odd crores next financial year... standalone fastener business, our capex next year is projected to be anywhere in the range of about INR25-odd crores. So altogether put together, we are looking at about a INR50 crores capex for the existing businesses we have.

Provides specific capex guidance for different segments for the next fiscal year (FY27), indicating investment priorities and scale.

Asked by Payal Shah

Overall growth outlook for FY26-27 and timeline to recover FY25 revenue levels Direct
I think at the beginning of the year, we said we'll probably grow at 5% to 7% for the full year and we are on track to do that in our standalone business on a full year basis... hopefully, in FY '27, we'll be very close to our numbers what we had in FY '25 on a consolidated level with the new business of STML kicking in and the growth we have in our fastener business plus the growth coming next year in the SEM business.

Gives a clear timeline for consolidated revenue recovery to FY25 levels by FY27 and reiterates the standalone business growth target for the current fiscal year.

Asked by Payal Shah

Tech partnerships and time to revenue Direct
But still to for a product from the time that we first connect with the customer, the earliest we can hope for any revenues is at least a year. Because that's how long it takes to do the trials, to do the integration, validation, homologation, et cetera. I mean, chances are it's more than that. But the best we can hope for is a year.

Provides realistic expectations on the gestation period for new product revenues from tech partnerships in the auto industry, typically at least a year.

Asked by Rahil

Duration of tech partnerships and strategy for independence Direct
Typically we sign 7 to 10-year agreements... That's right. I mean, we have the option of renewing, but the idea is to be able to develop our own tech because we have to also protect against geopolitical risk.

Clarifies the long-term nature of partnerships and the company's strategic goal of developing in-house technology for self-reliance and geopolitical risk mitigation.

Asked by Rahil

2 min read 7 chapters

Detailed narrative

Industry Highlights & Outlook

The Indian automobile industry saw steady improvement in Q2 FY26, supported by GST 2.0 rollout and early festive demand. While passenger vehicle sales were marginally lower year-on-year, September witnessed a strong rebound. H1 domestic 2-wheeler sales grew 1%, and exports were up 24% post GST rationalization. The industry expects double-digit growth in H2, projecting FY26 domestic sales to grow by 5% to 7%.

Standalone Fastener Business Performance

Sterling Tools' standalone fastener business reported a total income of INR172.2 crores in Q2 FY26. EBITDA margin and PBT before exceptional items remained flat on a year-on-year basis. The company expects its standalone business to grow at 5% to 7% for the full year FY26, maintaining its positive trajectory.

Sterling E-Mobility Solutions (SEM) Evolution

Sterling Gtake Mobility Limited has been rebranded as Sterling E-Mobility Solutions Limited (SEM), reflecting its evolution as a comprehensive provider of advanced EV powertrain and power electronic solutions. This is strengthened by partnerships with Advanced Electric Machines and Landworld Technology Company Limited. SEM aims to reach INR450 crores by FY30, with INR2-3 crores expected in FY26.

Sterling Tech-Mobility (STML) - HVDC Contactors

The STML subsidiary will commence commercial production of HVDC contactors and relays in December '25 at its Bengaluru facility. This business has a revenue potential of INR200 crores within the next 5 years. The Indian market for HVDC contactors and pre-charge relays is currently INR300-400 crores, projected to grow to INR1,000 crores by the end of the decade, with no current Indian manufacturers.

Strategic Partnerships & Technology Localization

The company has formalized four technology partnerships, including Jiangsu Gtake, Advanced Electric Machines, and Landworld, to accelerate its entry into high-growth EV areas. These partnerships enable rapid market entry and cut the learning curve, while the company simultaneously invests in its own IP to achieve independence. Vertical integration, including SMT technologies, is being pursued to reduce costs and capture more value.

Capital Expenditure Plans

For FY27, Sterling Tools plans a total capex of approximately INR50 crores for its existing businesses. This includes INR10-15 crores for SEM, INR10 crores for the STML DC contactor business, and INR25 crores for the standalone fastener business. The total 3-year capex for SEM (FY25-FY27) is projected at INR60 crores, with INR45 crores already invested in FY25-FY26.

Overall Business Outlook

Despite a consolidated degrowth in FY26 due to the loss of a key anchor customer in SEML, the company is confident in its recovery. Management expects consolidated revenue in FY27 to be very close to FY25 levels, driven by new STML and SEM businesses, alongside growth in the fastener segment. The company maintains a net debt-free status and consistent cash flow generation, supporting its strategic diversification.

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