Sterling Tools Limited (NSE: STERTOOLS) Q4 2025 Earnings Call dated May. 14, 2025
Corporate Participants:
Unidentified Speaker
Arun Agarwal — Deputy General Manager Finance & Accounts
Pankaj Gupta — Group Chief Financial Officer
Jaideep Wadhwa — Director
Atul Aggarwal — Managing Director
Jaideep Wadhwa — Non-Executive Non-Independent Director
Analysts:
Unidentified Participant
Himanshu Upadhyay — Analyst
Apoorva — Analyst
Rohan Mehta — Analyst
Manan Vandoor — Analyst
Gopalakrishnan — Analyst
Radha — Analyst
Presentation:
operator
Sam it. Sam. It. Sam it. Sam. It. Ladies and gentlemen, the conference will begin shortly. Please stay connected. Thank you. It. Sam Ram. Sam. It. Ladies and gentlemen, good day and welcome to Sterling Tools Limited Q4 and F525 earnings conference call. 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 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 Touchstone phone.
Please note that this competency is being recorded. I now hand the conference over to Mr. Pankaj Gupta Group CFO Sterling Tools Ltd. Thank you. And over to you, Mr. Gupta.
Pankaj Gupta — Group Chief Financial Officer
Thank you. Good morning everyone. On behalf of STL Group, I extend a very warm welcome to all of you for our Quarter 4 FY25 earning call. I’m joined today by Mr. Atul Abhyawal, our Managing Director. Mr. Jaidee Wadhwa, Director Sunny Shagarwal, Director and SGA, our Investor Relations Advisors. Our results and the investor presentation have been uploaded in the stock exchange and also available in our website. Hope you have a chance to review it. I request Mr. Agrawal to present his opening remarks. Please.
Arun Agarwal — Deputy General Manager Finance & Accounts
Thank you. Pankaj. Good morning everybody and thank you for joining our call today. I’m going to just digress a bit and talk about the business differently. Just some highlights. We achieved 1,000 crore revenue for the first time in the history of sterling tools in FY25. And we look forward to meeting greater milestones in the years to come. Our consolidated revenue increased by 10.6% to 1038 crore in FY25 driven by strong growth in our subsidiary SGEM and a stable performance in our standalone business which recorded a 6.2% year on year growth and a 10.5% year on year PAT growth.
Adjusted EBITDA on a consolidated basis rose by 13.8% to 132.4 crores. With margins expanding to 12.8%. Sterling Tools is well positioned to outperform the broader industry backed by a diversified product mix, deep OEM relationships and focus on operational efficiencies and innovation. Just some highlights for FY25. I’ve talked about the revenue numbers. We spent about 59 crores in CapEx in FY25. Investments were primarily on in the HM facility, upgradation and capacity enhancements and additionally investment for our new product segments. Net debt position the company remains surplus. We have a 12 crore surplus cash. In other words it’s pretty much net debt free.
Margins primarily improved on account of higher sales volume for both fasteners and EV components and we had a better product mix optimization. Some of the positive factors we had this year ICRA upgraded long term rating from AA minus stable to AA minus positive. We had major expansion and upgrade of labs at SGEM with HP Dynamos, installed major infrastructure on freight and capacity expansion at SGEM factory and we have developed it as an EV campus. SAP got implemented as HGEM as well and is live some of the things which impacted on a one time basis in FY25 we have substantial one time expenses for future product expansion.
As you’ve seen we have announced three different products in the last 12 months namely magnetics with the Korean company for Hyundai Kia Relay business with the Chinese company Kunshan Goli coming up in Bangalore and you saw the announcement for Magnet 3 Rare Earth 3 Motors going forward. So we have done that. Business development required some external relationships and partnerships to execute and crystallize. So we had to carry substantial one time charges in FY25 to see that happen. Operationally in our standalone business you see our margins at 14.7 this year over 14.9 last year. But just I want to highlight the operating EBITDA on a like to like comparison is better than 14.9% of FY24 is probably 15% plus.
In FY25 revenue split is approximately 63% fasteners and 37% EV components. In electric vehicle EV segment we’re going to do a lot of customer and product diversification where Jaydeep and Aneesh will talk more about that Focus still remains in our EV business on three wheelers, light commercial vehicles, two wheelers heavy commercial segments and we will try and introduce some products for the passenger vehicle segment itself. New products like onboard chargers, DC DC converters, magnet free motors will be introduced in early FY26 in the power transmission segment. 100% subsidiary of Sterling Tech Mobility Limited was crystallized to address this market segment.
Hopefully that business should be in operation sometime 3rd quarter FY26 the facility is being set up with an investment of 50 crores and in technical collaboration with China Kunshan Goli New Energy Co. Ltd. Revenue target is about 200 crores by 2030. For this one particular product segment. We. Are looking at balanced growth across Fasteners, power electronics, power transmission and magnetics. And we also want to look at high customer stickiness due to long product validation time. I just want to mention one thing here. When I look at the journey of sterling tools from a faster maker and bulk of our future investment coming in non faster businesses, new age businesses where a lot of the components are for the EV industry power transmission segment as well going forward. All of these components have traditionally been imported till now, bulk of them are imported even today. So we are trying to identify product lines where there’s import substitution make in India initiative and more importantly where we have the first mover advantage.
So a lot of the revenues will kick in over time. Investments will start firing in already but you will see the results incrementally in the years going forward. We are here for the long haul. We are looking at building portfolio and revenue growth which is sustainable and has a strong presence with our customers. Creating high customer stickiness. Along with that a lot of these products, it could be the magnetics or it could be even the DC DC converters or latching relays etc. They all require long testing and validation times with our customers. So the revenue increase may seem slow in the beginning but once the testing validation is done, the volume growth ramps up quickly and more importantly it creates a lot of customer stickiness and also a version at the customer’s end to add a competition product.
So somehow the first move advantage is critical in these new product lines. We are strengthening our tech center team in Bangalore to address products across different product segments including our self developed MCU and other power electronic products. Long term priorities are to have 50% revenue coming in from non fastener businesses. In our fastener business we are focusing to increase our revenue in two product areas, two segment areas of passenger vehicles where we’ve got SOP starting with Hyundai this year. And also we want to increase our intensity the way we are covering our commercial vehicle segment business.
Like I said earlier, we want to be an early entrant, provide the first mover advantage and hopefully create stickiness and more customer commitment for our product lines. Thank you very much. And I’m going to hand you over to Pankat to talk swap numbers in more detail. Thank you.
Pankaj Gupta — Group Chief Financial Officer
Thank you sir. I’ll share the financial highlights for quarter 4 FY25. Starting with the standalone financial highlights for the quarter 4, total income stood at 165 crores in quarter 4. EBITDA for the quarter was 24.9 crores with EBITDA margin of 15.1% in quarter, profit after tax was 11.3 crores in this quarter. For the full year, standalone Total income grew by 6% reaching to 652 crores against 614 crores last year. It increased by 5% reaching to 94.8 crores as compared to 90.5 crores in FY24. And EBITDA margin stood at 14.5%. Profit after tax witnessed a growth of 10.5% reaching to 42.9 crores in FY25 compared to 38.8 crores in FY24.
Coming to the consolidated financials for quarter four, total income slightly degrew back to 205 crores in the quarter four as compared to 270 crore last year. Mainly because of the lower revenue from our subsidiary company SGEN. And our adjusted EBITDA margin which is excluding ESOPS improved to 12.9% blended as compared to 12.5% last year. The consolidated performance for the full year our income grew by 11% reaching to 1038 crores which is what Mr. Said. We crossed 1000 crore first time as compared to 938 crore last year. Adjusted EBITDA again excluding ESOP increased by 13.8% reaching to 132 crores in FY25 compared to 116 crores in FY24.
And our registered EBITDA margins stood at 12.8% as compared to 12.4% last year. Profit after tax witnessed a growth of 5%. We achieved 58.3 crores in FY25 as compared to 55.4 crores in FY24. Thank you everyone. We can now start with question and answer session please.
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 the Touchstone telephone. If you wish to remove yourself from the question queue, you may press Star and do. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we wait for a moment while the question queue assembles. The first question comes on the line of Himanshu Upadhyay with Bukit of pms. Please go ahead.
Questions and Answers:
Himanshu Upadhyay
Yeah. Hi, good morning. I had a question on Sterling the standalone business because. And the question is till last quarter we were growing at 8 to 9%.
Okay. And we were expecting similar growth for the year. But suddenly we find this quarter the business decreased by 1%. So can you elaborate what happened on the in Q4 for standalone business and why they.
Arun Agarwal
So. Good question. Let me Just say a few factors. One, the auto industry if you know is slowing down, relatively slowing down. You know passenger vehicle industry grew marginally last year in FY25. Commercial vehicles were negative. Only substantial growth in FY25 came in the two wheeler business. So typically two wheeler intensity of sales is first half of the year or first nine months of the year starting April onwards till maybe November, December and last quarter normally muted for two wheelers. Last quarter is normally strong for commercial vehicles and for passenger vehicles. And the last quarter at the OEM level was not very good from a production perspective.
I think that there’s a lot of public data. I’m sure we can pull out something to tell you what happened last quarter. That’s one. Secondly we have taken, like I said, last quarter is also a quarter where we take a lot of one time provisions rationalize things. Secondly thing was which impacted the revenue numbers was the fact that there has been a steel price reduction. Where indications are that the steel mills have done some understanding. The OEMs and OEMs have communicated to us as to what reductions they are looking at. Numbers discussions have already started.
So we have taken provisions for steel price reductions and those provisions are in multi crores which we have adjusted against the top line revenue number. I think these are the two big factors impacting revenue growth in the last quarter.
Himanshu Upadhyay
Okay, and one more thing, I’m looking at slide 14 and 12 and if you try to understand the expenses. It. Is reduced from 27 crore to 14 crore. You got cut off in the middle if you want to start that question again. Okay, so I am talking about expensive side for SGEM and this is slide 14 and 12 I am trying to compare. Okay, so the cost average then cost of goods sold has reduced from 27 to 14 crores. What is the potential for further reduction in the cost? And what is the run rate of product monthly run rate of production currently at hcef. Now as OLA is no longer manufacturing or is not the customer, what type of costs will be incurring?
Pankaj Gupta
I think a big reason for the drop in the cost that I mean you are asking about the cost of goods sold, right? Not the cost of goods sold, the other expenses. I am saying other expenses. Yeah. For Q4 which is 88 minus 74. Okay, 14 slide 12 and slide 14. So you have total expense of 89 which has reduced to 74.5 on standalone. Yeah, yeah. So yeah. So I think the. A couple of things which will come in there that you asked a question about ola. So Ola has decided to. To make the motor control units and motors the integrated unit in house for the Gen 3 platform. However, for the Gen 2 platform, we will continue to supply to them. Gen 2 production in the last few months has been quite low at OLA due to. Due to operational issues at least the communication that they have given to us is that they will see a ramp up in Gen 2 volumes going forward though it will be a small portion of their overall sales.
In terms of the overall. In terms of the overall run rate that we are looking at depending on month to month, we are looking at about, you know, anywhere between 15 and we’re hoping to do anywhere between 15 and 20,000 units a month depending on the month. Some months could be slight, could be lower. We are also. But there is a difference in that as we make units for commercial vehicles, et cetera. Those. The production. The production volumes on those are much lower. And in terms of the expenses, you know our other expenses, I think there’s about six.
Yeah, we have an average of about six to seven crores per month. One of the factors that drives other expenses is that it includes a royalty and you know when if sales go down then obviously the royalty also goes down correspondingly.
Himanshu Upadhyay
Okay, but the monthly expense for the plant is around 6,000.
Pankaj Gupta
Yeah, 7 crores is there.
Pankaj Gupta
But. Look at our warranty as. Sorry, look at our royalty expenses as the. You know those are based on revenue numbers. So as revenues go down, those go down dramatically or as they. As revenues move, these move dramatically.
Himanshu Upadhyay
Okay, I. I get that point but sorry to be labor this point more because Q4 if we take a console the total expense was 89 crore.
Pankaj Gupta
Okay, we couldn’t hear you. No, I am saying the slide 12 is. The total expense on console is 89 crores. And for the standalone which is slide 14. Okay. Which is 74.5 crores. Cost is around 1415 crores for the quarter last minute cost would be around 4 crores. Let me do this if I can. Let me. Let me get back to you on one on one on this. I. I’m not sure I’ve understood the exact question. But what we’ll do is that I will. We’ll send you a message and clarify your details, clarify your query. I’d like to just walk through each one of the constituents of other expenses and be able to answer that. Karan, you can help us set up a call independently with jd. Want to say.
operator
Okay, thank you. I’ll join back in with you. Thank you. A reminder to all the participants, please press Star on one to ask a question. Next question comes to the line of Apoorva with Whitestone financial advisor. Please go ahead.
Apoorva
Yeah, hi sir. Thanks for the opportunity. So my first question is regarding the recent partnership which we have done with the advanced electric machines. Right. So if you can throw some light, like what, like what is the revenue potential we are targeting in the next few years and like if you can share with royalty how much you would be sharing with them.
Pankaj Gupta
So I, you know, I don’t think we will be sharing royalty information. That’s, that’s something that I would say is company confidential in terms of, in terms of motor potential overall, you know, if you different, you know, we have to look at different estimates. But broadly speaking we believe that even as of FY25 the total market for motors is about 2000 crores. Okay. And this is, and the growth rate in the coming years is supposed to be, is likely to be exponential going forward. Now I do not, you know, typically a major take tier one would want to be able to target 10 to 15% market share in a segment.
I don’t but as this is not a mainstream technology, we believe that initially this will be, you know, that the market share potential would be lower. We would see lower penetration. This obviously could change dramatically depending on what happens with rare earth magnets out of China. But as these are, as this is a very pioneering technology, we expect that this will slowly gain acceptance and get deployed in mainstream automobile industry over a period of time. So the market share expectations would be in the single digits. Sir. So these motors are like cheaper or expensive than the magnetic motors. Okay. So the most important difference of. So let me answer that question directly and then I’ll give you this thing. So the bomb cost should be the same or lower in a large electric motor. Magnets constitute up to 30% of the cost of the motor. That is at the prices that prevailed before these trade tensions took hold. Hold. What’s going to happen on. As you probably have heard, there have been very few shipments of magnets in the last few months after China put on restrictions on the export of magnets. So there may be increases in the cost of permanent magnets which would obviously increase that percentage. The motors, the technology that we have been evaluating and working on on for several years along with AEM does not use any magnets whatsoever. But obviously there are other parts of the construction which are little expensive. So net, net we expect the BoM cost to be very similar to that of a permanent magnet motor.
But there is no dependence on. But we are able to remove the dependence on permanent magnets and what’s going to and the vagaries of supply chain that permanent magnets have because of the 90% stranglehold that China has on that supply chain.
Apoorva
Okay, when are we planning to start the manufacturing like in next how many years?
Pankaj Gupta
So we, we will start customer customer trials and validations nearly immediately. We were waiting to sign off this agreement and we expect to start negotiating with customers on trials very soon. I don’t know exactly when we would be able to be in production but I would expect sometime next year. Next question.
Apoorva
Okay, and how much time does this take? Customer validation.
Pankaj Gupta
Customer validation. As Atul mentioned even in his opening remarks said anything to do with easy three to six months is a very. Three is also low. I would say six months easily for just the validation. And there’s you know obviously stuff that happens before on technical alignment and stuff that happens subsequently even after the trials on sign offs and so on and so forth. So you know, from the time that you start working with the customer and start from the time you start putting products on trial to the time you go into production could easily be a year.
operator
Okay, thank you. Thank you sir. Thank you to all the participants that you may press 1 to ask a question. Next question comes from the line of Rohan Mehta with Nexus Capital. Please go ahead.
Rohan Mehta
Good morning sir. Thanks for the opportunity. Am I audible?
Pankaj Gupta
Yes Rohan, yes.
Rohan Mehta
So sir, firstly with Sterling GTech now targeting two wheelers, three wheelers and commercial vehicles customers beyond Ola, how do does your current customer pipeline look like and how are you looking at contribution from the three wheeler and CV segment in FY26?
Pankaj Gupta
So you know, so you know we have, and you know we’ve talked about three wheeler and LCV quite extensively even in the past. I think the difference that I would say in the current in the last few months has been the inroads we have made into the heavy commercial vehicle or the HCV segment and sorry, could you repeat that the second part of your question again?
Rohan Mehta
Sure. So I just wanted to know how the customer pipeline is looking like and how we are looking at the contribution from throw wheelers and CVS in F526.
Pankaj Gupta
Okay. So in terms of the customer pipeline we have more than 30 customers that we are working with at current. This is across all categories and there are, and then I said 30 customers. These are customers with whom we have either got been awarded the contracts or where we have an advanced stage of testing and there are other, many other customers maybe an equivalent Number of customer programs where we have some kind of initial dialogues in terms of what would be the split. I’m going to say, and I may be off by a little bit but I’m going to say it’s going to be about 40% from three wheelers and commercial vehicles.
You know, two wheelers will, you know, at the end of the day if you look at, if you look at the total production of EVs in India, three wheelers will continue to dominate that. Sorry, two wheelers will continue to dominate that overall penetration and therefore, and we are strong in that segment and we continue to want to sell in that segment to customers both in the, especially in the high speed, but even sometimes in the low speed segments.
Rohan Mehta
Right, right. That helps. Just a clarification. Where you meet the 40% you said is three wheeler and EVs put together, right?
Pankaj Gupta
Yes. I mean a non, non two wheeler is what I.
Rohan Mehta
Sure, sure.
Pankaj Gupta
And that’s very different from last year where it was 90 over. Just over 90% on two wheeler and 10% on the balance. So you will see a significant change in the portfolio.
Rohan Mehta
Sure, that’s helpful sir. And secondly, could you just provide some color on upcoming power electronics products and the expected contribution from HVDC contractor delays and so how much incremental revenue can we foresee from these initiatives and next two years FY 26 and 27.
Pankaj Gupta
So what I will do is I’m going to just talk about the power electronics and then request Anish to give you an update on the relays. Actually DC and magnetics. So power electronics we are looking at essentially chargers which could be both on board and off board and DC DC converters and this would be across an entire, across all segments. Okay. And one of the things that I think maybe Anish has explained earlier and I’ll, you know, he may elaborate on that earlier also that in D.C. d.C. As well as in, on chargers, magnetics is a significant part of the bomb.
So for us this is not a random, these are not random partnerships or ventures. This is a clear strategy that we have to enter into the power electronics space and to backward integrate into the components that go into power electronics. Anish, if you could expand on that please.
Arun Agarwal
On, on high voltage DC contactors and relays. We have budgeted for 10 crore this fiscal and over the next two years we hope we get to 30, 35 crore for next fiscal. So it’s going to be a slow ramp up. It depends on how the EV industry grows. But it’s going to be 10 crores. For this fiscal and next year it will be 30 to 35 crores on Magnetix. We’re still under negotiations with our Korean partner. Once we conclude the negotiation and finalize our budgets for next fiscal, because that project will only kick off in January 2026 at the earliest, we’ll have more information to share then.
Rohan Mehta
Sure, sir. That’s very helpful. That’s it for my side, sir. Wish you all the best.
Arun Agarwal
Yeah. So sorry.
operator
Thank you. Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Manan Vandoor with Walford pms. Please go by.
Manan Vandoor
Yes, thank you so much for the opportunity. Am I audible?
Pankaj Gupta
Yes, you are.
Manan Vandoor
Yes. The first question is which is the customer that we don’t sell our MCO to?
Pankaj Gupta
Sorry, could you repeat that please? Which customers we don’t sell our m. Yes.
Manan Vandoor
Last quarter I had asked which are the customers we sell to? So you said that we sell to everyone except one. So I would like to know which is that one customer you don’t sell the MCU to. On the LCV space. Okay. On the lcv. That was on the question. When I can. The question was on the LCV space. And if you want to know the answer, that’s Tata Motors. Okay, so Tata Motors. We don’t. And in generally I would say like all, like considering 2 wheelers, 3 wheelers, LCV, etc. Then how many customers we don’t sell to?
Pankaj Gupta
That would be a huge list. Look, I mean we are seeing obviously a massive attrition in the EV space. But you know, at a, at a certain point, I think there were 200 companies that made two wheelers alone. There were probably more than 50 companies, maybe more than that, that made three wheelers. There are a couple of hundred companies that make E rickshaws that all have the ambition of moving into three wheelers. I don’t know, maybe 10 companies that do LCVs, three or four companies that do HCVs. You know, the PV landscape, that’s. I mean easily you’re talking about 3, 400 companies.
I mean, and I keep telling you that we’ve got engagements, contracts with about 30 customers. And by the way, this list, I mean the list that I’m telling you is a list after much attrition. I mean there was a mushrooming that happened and obviously as the industry grows, you know, there will be consolidation and you will have fewer players survive. But you know, we are probably in touch with, we are probably in touch with 20% of the market, maybe 25% of the market. And we are doing active business with say 10% something. I mean these are broad numbers but directionally they will be correct.
Manan Vandoor
Understood.
Pankaj Gupta
And I’ll try to again clarify that question. And my answer on the last call was specifically about lcbs.
Manan Vandoor
All right, all right. Okay, understood. Thank you so much. And so now coming to a bit of numbers kind of a question. So could you please tell us how many MCUs did you sell in quarter four as compared to last year?
Pankaj Gupta
Quarter four we did probably, we were down by, I mean year over year we’re probably down by about 60%.
Manan Vandoor
Could you say it in unit terms, sir?
Pankaj Gupta
We did approximately about 100,000 and went down to about 40,000.
Manan Vandoor
40,000 was this quarter as compared to last year it was around 1 lakh.
Pankaj Gupta
Yeah.
Manan Vandoor
Okay. Okay. And so then my next question would be could you the full year numbers, could you give also like last year full year numbers and this year full year numbers?
Pankaj Gupta
Right. So look, when you talk of last year I, it would be, I, I won’t, I’ll have to get back to you for FY24 but okay, 25, we were close to about 5 lakh units.
Manan Vandoor
Okay, close to 5 lakhs.
Pankaj Gupta
So you have to understand that there are differences in the, I mean in, we are doing different productions. You know when I’ll give, I’ll give you one data point that when in, in the production that we do for some of our lower cost MCUs we have a taktime of say we can produce pretty much an MCU a minute and the supply chain is set up. All the supply of components that is there supports that level of activity. So the mechanical components, the electronic child parts, the PCB assembly, all of that is geared to that kind of a volume.
When you look at say a light commercial vehicle MCU I’ll say we can make 25 a day. If you look at a heavy commercial vehicle MCU we can make 10 a day. So the product mix and even within two wheelers there is a big difference between price. I think we had explained that to you in earlier calls also that the lowest MCUs will be about 3 to 4000 rupees. The most expensive will be about 12,000 rupees in the two in the two wheeler and three wheeler segment. So depending on the product mix there’s a lot of difference that takes place.
Manan Vandoor
Right. Just two more questions sir, then I’ll be done. So the third question is that so out of, out of the numbers that you just told me as on quarter four we did 40000 in FY25 and last year we did 1 lakh and in FY25 we did almost 5 lakh units. So out of this could you tell us how much we supplied to ola?
Pankaj Gupta
So I think we mentioned earlier also that OLA is, I mean listen, I think we’ve explained this in the past also that ola is typically 60 to 70% of our total volumes.
Manan Vandoor
Okay. Okay. So out of all of this it would be almost 60 to 70%. Okay. And the last question would be that when you are saying that we are increasing our non two wheelers from almost 7% to 40% in FY26 does that mean that the non two wheeler MCUs must be having higher margin and higher selling price? Right? That. Is that a general understanding? Correct?
Pankaj Gupta
Yes. I don’t know. I want, I mean the margin again, different customers, different programs, different specifications. Margins may vary but generally speaking higher per unit cost is definitely true.
Manan Vandoor
So when, when you’re saying 40%. So it would be three wheelers and then LCV HCVs. Right? So, so if you could, if you could just give a ballpark number as, as to how much a three wheeler MCU would cost and how much an LCV or an LCD MCU would cost. Would you please do that?
Pankaj Gupta
It varies. The LC3 Wheeler will range typically upward of 10,000 rupees. And LCV at the bottom end would be, would be anywhere between 40 and 60,000 rupees.
Manan Vandoor
Okay. Bottom end would be 40 to 60 and higher end would be.
Pankaj Gupta
No, sorry, I should have. The bottom end would be 40, the high end would be 60. And so the HCV side. Again really varies by specification. But we have some units that go into some buses that are 4 lakh rupees each. And these are multi function units. I think we had spoken about this in the past that these are not only traction inverters, these also include auxiliary drives and DC DC’s 4 lakhs maybe a little bit more.
Manan Vandoor
Right. So just, just summing up. No more questions, more just summing it up. So when we say that almost from 7 to 40% we are going and we can see that normal two wheeler MCUs will cost around 4,000 to 12,000 ranging. But when we go to three wheelers and upwards we can see that the range is much higher. So if it, it shows a general understanding that the next year with having 40% in LCV and HCV and three wheelers we might, we might have much higher revenues than we had in FY25 no. Right.
Pankaj Gupta
That’s not, that’s not true.
operator
That’s not true. But that’s not true considering unit wise.
Pankaj Gupta
I mean, look, let me. I mean let’s you, you know, you ask your. There’s a number of questions. We are talking in percentages and absolutes and you can’t keep mixing them up. And I am. I would do not expect our revenues in FY26 to be anywhere close to the numbers that we had in FY25. Okay. So I would not give. I would not. So I putting two and two together and coming up with 22, there would not be. Not be. Okay. Would not be appropriate.
Manan Vandoor
Okay, when you say that our numbers will not be as terms of FY25, what do you mean by that?
Pankaj Gupta
I mean they’ll be lower.
Manan Vandoor
Okay, understood.
Pankaj Gupta
I think, I mean if I may say, you know, we’re going round and round. I cannot give you. We do not, we have not given and we do not give predictions for, you know, guidance for revenue numbers. That’s something we’ve not done. I will however say that we expect a down year in FY26. We expect our revenue numbers to be down. You know, if our biggest customer has taken, has in house or insourced a significant portion of their volume, then obviously we will see a drop. Our strategy to diversify the customers and the products is working, but it doesn’t have immediate results.
And there will be a down year in FY20, FY26. And in fact even at FY27 we may not be back to FY25 numbers.
Manan Vandoor
Okay, that was really helpful. Thank you so much. All the best.
operator
Thank you. Next question comes from the line of Gopalakrishnan with an individual nurse. Please go ahead. Mr. Krishna, please go ahead with the question. We’ll take the next. The next question comes from the line of Apoorva from Whitestone Financial Advisors. Please go ahead.
Gopalakrishnan
Yeah, hi sir. So I had one. One last question that the Sling Tools has done MOU with Yongin Electronics. Right. And there we have mentioned that we have done the partnership which covers the entire portfolio of magnetic components. So can you please specify like what exactly we will be manufacturing in these magnetic components?
Pankaj Gupta
We’re putting specifically four different lines for. Four different club components within subset of magnetic. So the first one is high frequency transformers. The second one is EMI filters. The third one is common mode chokes. And the fourth one is inductors. So we’ll be putting four different lines which cover all the whole segment of magnetics used in chargers, DC DCs and any kind of power electronics that goes inside EVs or charging stations. So these components would be used in the charging station as well and in the. Yes. The voltages and the power ratings vary depending upon the platform. Okay. Can be on board, off board or could be a DC fast charger. But in each case you have to basically play with currents and voltages and that’s what. That’s what the magnetics enable us to do.
operator
Okay. Yes. Thank you sir. Thank you. Next question comes to the line of Ramesh P. And individual investor. Please go ahead. Hello sir.
Pankaj Gupta
Thank you for opportunity. Am I audible?
Arun Agarwal
Yes, please.
Pankaj Gupta
Sir, in past con call you say we are participating new model for IC there. So any corporate development we have any assignment from IC player.
Arun Agarwal
So I can. Are we talking about any particular products line? Are we talking about power electronics, fasteners or power. I am particularly discussing for mcu. Mcu. Okay. Mcu. Sorry. I. Motor controllers are special specifically for electric and hybrid vehicles.
Pankaj Gupta
They’re not for IC engines. I know, but I see there also in business of EV2 Wheeler. So I am asking about EV3 Wheeler particularly. So you know, maybe your voice is cracking a bit. A little bit. But I. What are you useful? Did you ask the question about EV3 wheelers? I’m sorry, I’m not sure I’ve understood your question. Sir. Sir, I am particularly asking for EV2 Wheeler. Yes. Yeah, I understood that. So you’re asking what ev2wheeler. Yes, please go ahead. Yeah, in past you say that we are participating in new model for it. I mean. Sorry. Okay, I understand what I. You’re Sorry, my. I’ve understood your question. So what you are talking about is the incumbent players, the players that are currently selling the ICE models. We are continuing to engage with them and we are providing samples and so on.
But no, we are not in production with anyone.
operator
Thank you, Mr. P. Ramesh, please switch on the queue for more questions. Next question comes from the line of Radha with BNK securities. Please go ahead. Hello sir.
Radha
Thank you for the opportunity. Sir, the presentation states the strategic way forward for the company. And you mentioned to the previous participants that all these partnerships are calculated steps taken by the company. So with regards to this I wanted to understand the potential of the company for the existing business plus new initiatives from your vision from a five year perspective considering all these initiatives that you have taken.
Arun Agarwal
So you know, like I said in my communication in the beginning, I think we expect a breakup of 50% revenue coming from our legacy business and 50% coming from new businesses by 2030 so and I can’t give you forward guidance in hard numbers but all I want to emphasize again is the new products we have added in the past. In the last three, four years, for example motor control units, we’ve added magnetics and DC to DC contactors, relays and going forward we’ve added magnet free motors. And you’ll see some more products being added in this power electronics and power electrical vertical which is what we want to focus on of our growth.
A lot of the revenue will start kicking in larger volumes FY27, 28, 29, 30 onwards. So bulk of the growth will come in on a large basis in these new businesses. And I’ve said this in the last one year in all the investor calls our legacy fastener business is very mature. It’s already of a certain scale. We will grow, we will grow faster than the industry. Our focus would be to keep our margins intact, look at more sophisticated products within our fastener business, increase our intensity with a commercial vehicle within the commercial vehicle segment and also maybe grow in the passenger vehicle itself which we’re doing.
Maruti traditionally has been our strongest customer in the PV business. We’ve added, we’ve had, we’ve seen tremendous development work done in the Mahindra automotive division in the past years now crystallizing into revenue. And Mahindra will be another growth customer for us in the passenger vehicle segment. And finally our SOPs with Hyundai Kia start this financial year. So just to give you a broad idea, 5050 split by 2030 but bulk of the growth coming in from new businesses.
Radha
Is it a fair understanding if I take in terms of the new businesses, can this new business be as big as your existing business in the next five years? And what would be your vision or target with respect to the RFEs that you want to achieve in five years?
Arun Agarwal
Good question rather that said in my opening statement, 50 50. But yes, these new businesses at some stage will be larger than our legacy business. That’s the whole idea of what we are trying to do. We are trying to build a future proof organization which is giving growth to us for the next 10 to 20 years and getting ready for the way the industry is changing and more importantly what our strengths have been and our customers with the product lines. And also understanding that for us to grow in the traditional businesses where the tier one or the supply chain is already set up for last 30 years, it will be difficult for us to add businesses in the ICE product category where the existing players are very strong.
And I don’t think we add much value to our customers if we have started doing traditional businesses. That’s why we’re looking at businesses which are currently imported. We’re looking at import substitution, we’re looking at the Make India initiative as part of that and also giving us a focus mover advantage. So hopefully in the next five years or so we have a strong position in the automotive space in the new businesses. And sir, your target ROC is in the next five years. I think for the new businesses I think we would be comfortable looking at anywhere 25% plus ROC on the new businesses.
Radha
Thank you. All the best to you.
Arun Agarwal
Thank you. Thank you.
operator
Next question comes from the line of VIPUL and Indujil merchant. Please go ahead.
Unidentified Participant
Yes. Yeah. So congrats team on actually building some strategic alliances. My question was actually pertaining to, let us say what is the industry trend with OEMs in terms of integration? For example Ola, you see in this case they are building now they are building the products in house. What is the industry trend and what is our competitive advantage against these larger players or let’s say our customers integrating and building in house.
Arun Agarwal
You know, so it’s a. Vipul, it’s a good question. I’m also, you know, it’s a question where, where the dynamics are changing every quarter. In the businesses we are addressing in the new product lines, they’re all electric vehicles or hybrids. The market situations are changing very quickly in India. They’re hugely impacted by government subsidy programs or incentive programs. There was a lot of momentum a year ago or longer than that. There was a lot of subsidy on two wheeler, three wheelers. The government withdrew that. That’s why the E2 wheeler segment has not grown very far.
So there are multiple issues which impact and finally from a technology and supply chain perspective, the supply chain for EVs and hybrids is not there in India. It’s being built as we speak. Like we are building a lot of stuff and so is a lot of other companies building supply chains for that. To answer your question about what are the OEMs doing, Ola has in house or in sourced the motor control unit. It is not a function. It’s just if you look at other players, Bajaj or TVS Motors or Hero, this product line is still outsourced to partners outside.
Ola was an extreme situation and I think Ola as a company also has a very different DNA compared to the incumbent two wheeler three wheeler makers. I also believe that the volumes currently in the industry are very small. I think we are looking at a run rate of about 5, 2 million units in the E2 Wheeler segment, the penetration in passenger E vehicles is only 2%. Commercial vehicles is not even that. Even the bus segment which is being electrified in public transport in urban centers, the penetration is also very, I think what 30 odd percent in that I’m not too sure.
No, no, no. 4, 5%. So I think the dynamics are changing regularly. But I also, like I said, I believe as and when the volumes build, one should not think 12 months, 24 months. I’m thinking five years. Because when you look at our business, I’m looking at it. My lens is looking at next five to 10 years where I want to be or where we want the business to be. There’ll be a lot of opportunities. They may have lost the OLA business, but our belief is as and when the volumes pick up, all these OEMs will need not single sourcing of products even if it’s in sourced.
They will need at least two or three sources of vendors going forward to run their production lines. When the volumes reach 8, 10 million units or 5 million units in E2 Wheeler space, currently the penetration is only 100,000 units in passenger vehicles, which is nothing. If that reaches a penetration of 20%, you’re looking at a million 2 million units for passenger vehicles, the industry will grow dramatically. I think the dynamics, the technologies, the supply chain will stabilize and all the OEMs will need dual sourcing minimum to support the line and the market and customers. So like I said, it’s a very dynamic situation and we want to stay on top of it and at the same time address the changes which happen on a daily basis.
I hope I’ve answered your question, Vipul.
Radha
Yes, yes, and thanks for the response.
Pankaj Gupta
And yeah, looking forward being invested in Darling. And I’ll just add to what Atul spoke about. There is integration at the component level. You know, we talk about motors and controllers. As Atul addressed, you know what is happening there, there is integration of onboard chargers, DC, DC PDUs. There’s integration of traction drives and auxiliary drives and so on. So there is a lot of integration that is happening now. Therefore, our strategy and you know, we spoke about it definitely in the last couple of investor calls, is that we are building a power electronics competence so we are not restricting ourselves to one, one element like a motor control unit.
We are looking at, we are looking at, we are looking at the entire spectrum of power electronics so that as customers move in different directions with different levels of integration, we are able to support them. Will we get Nakul address this question? In terms of investments and the sizes in the market sizes in India, in China you have, in the passenger vehicle space you have nine in one, 10 in one gearbox, which includes a gearbox, a motor control unit, a charger, a bmf, everything comes into one box. Will we get there in India? We don’t know.
We think it’s unlikely because the volumes are just not there. I mean BYD makes more electric cars in China today than the entire production, total production of passenger vehicles in the country. Right. So for BYD to consolidate everything into this one integrated unit, it’s very viable and the investments can be paid off. Can we do that in India? I don’t know. Will there be no integration? I don’t believe so. Okay, so the answer for India, the India specific solution is there’s going to be some level of integration but we don’t know how much. And our strategy very clearly as Atul articulated is to be a, that we will play across the entire segment of power electronics and powertrain so that as customers in India choose different levels of integration, we are able to support them.
So our foray into motors has been something that we’ve been working on and it’s very important for us because we believe that there will be integration. We’ve talked about obc, dc, DC auxiliary drives. So these are all parts of the puzzle for us and we are building that as a competence. We’re not building that as a product competence but as a, as a technology competence. Thank you.
operator
Thank you ladies and gentlemen. As there are no further questions, we have reached the end of question and answer session. I would now like to hand the conference over to Mr. Atul Agarwal for closing comments.
Arun Agarwal
So thank you everybody. Just as a, you know, I just want to add, I think we talked about that we have lost one of our key customers in HM named OLAP because they’ve in sourced the product. I just want to talk about the journey again. I think last four years at SGEM have been very exciting. I think we’ve had a substantial ramp up in volumes and revenue and more importantly we were able to build a footprint for ourselves as sterling tools in the EV space. I think we got recognized that we are one of the key players in the business.
It has opened doors for us. That particular journey has opened doors for us at a lot of OEM customers in India. And also importantly we’ve been able to identify what are the customer needs, their challenges, their pain points. And we’ve been able to act on that. We’ve been able to identify new product lines within China and Korea especially keeping in mind that the Indian customer is very price sensitive. The volumes are not going to ramp up as fast. At the same time Indian customer, Indian OEM wants all the choices and to do what we need to do.
So we’re building a product portfolio for the long term. Revenue ramp up may be slow in the beginning but we are very confident it will grow very substantially in the years to come. So long and short we may have a temporary pain at SGM in the short term but I think that spurred us to do a lot more creative and aggressive stuff and adding new product lines and customers at the same time. So we are very focused, we are very positive about business going forward and we believe we are on the right track. Thank you.
operator
Thank you on behalf of Sterling Tools Ltd. That concludes this conference. Thank you for joining us. You may now disconnect your lines.
Pankaj Gupta
Thank you.
Arun Agarwal
Thank you.