Sundram Fasteners Limited (NSE: SUNDRMFAST) Q1 2026 Earnings Call dated Aug. 01, 2025
Corporate Participants:
Unidentified Speaker
R Dilip Kumar — Chief Financial Officer
Bharathan — Executive Vice President – Marketing
R. Ganesh — Senior General Manager, Finance
Analysts:
Unidentified Participant
Mukesh Saraf — Analyst
Rushabh Shah — Analyst
Sahil Rohit Sanghvi — Analyst
Pankaj Tibrewal — Analyst
Nihaar Shah — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome TO Sundaram Fasteners Q1SR26 Earnings Conference Call hosted by Evander Spark Institution Equities Private Limited. As a reminder, all participants lines will be in listen only mode and there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Mukesh Karafa from Evander Spark Institution. Thank you. And over to you sir.
Mukesh Saraf — Analyst
Thank you Pari. Good morning everyone. Mukesh here from Avenders Park. Appreciate everybody logging in to this first quarter 526 earnings call of fastness from the management team I’m pleased to host Mr. Dibit Kumar, Chief Financial Officer. Mr. S. Bharatin, Executive Vice President Marketing. I’m Mr. R. Ganesh, Vice President Finance and Projects. I’ll now hand over the call to Mr. Dilip Kumar for his opening remarks post which we’ll begin the Q and A over to you sir.
R Dilip Kumar — Chief Financial Officer
Thanks Mukesh and good morning and welcome to the Sukhar Partners Q1 earnings call. So we started out well in the domestic segment and we had growth slightly higher than the industry across all segments. Commercial vehicles, engines, passenger vehicles, tractors, all segments. We have performed well as expected because of the uncertainty in the overseas markets exports. We have to see how it evolves next coming quarters. We have finished the quarter at 1,367 crores compared to corresponding revenues of 1021 crores. One of the things which has helped is the performance of the European customers and our invoicing in Europe and as well as GDP which have appreciated sharply that we just told you benefited from foreign exchange movement.
Also the favorable chromatin prices which have remained benign. And thanks to the procurement mix we’ve been able to bring the margins. We have been able to reduce the materials cost and up the gross margins. And again the due to favorable product mix we had a lower charge on account of stores and tools as well as subcontract expenditure. And internationally the slight outward costs have also come down compared to Q1 of last year. And one surprise element is the forage. You see our power procurement again has been favorable. The renewable energy mix has increased and it is also cost competitive for us.
And our after accounting for fixed expenses increase on account of sample solutions we have reported with the 230 crores at 17.5% compared to 17% for Q1 of last year and 15.6% of Q4. The borrowings are also showing a declining trend. And not only the borrowings, the working capital components as well. The receivables are well under control, so are inventories. And we expect the capital expenditure to be around 300 crores this year. And we have recorded reported PBT of 186 crores which is the highest for us, and also profit after tax of 138crores, which is again the highest quarter.
And like I said, all the balance sheet parameters are looking up, including the asset terms. Both gross asset terms and net asset terms have moved up. And the outlook we are reasonably positive for Q2. And on the questions which may come relating to the tariff, I think most of the customers have been supportive and we’ve been able to negotiate reimbursements from all our customers. So we’re not seeing any challenge on that front. And with these opening remarks, we are open to now questions. Thank you.
operator
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press start and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star. And two participants are requested to use their handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rushab Shah from Balrog pms. Please go ahead.
Rushabh Shah — Analyst
Thank you for the opportunity. My first question is how big is aftermarket an opportunity for us? And what proportion of our business comes from aftermarket? Morning.
R Dilip Kumar — Chief Financial Officer
The aftermarket business for Sundaram overall is around 12 to 13%. And that business we have been steadily growing, serving the auto segment as well as the industrial segment. We see good headroom for growth in that segment which we have been pursuing for the last three to five years.
Rushabh Shah — Analyst
In the automotive or the industrial segment, which is a bigger opportunity for us in the aftermarket, like a 12 to 13%.
R Dilip Kumar — Chief Financial Officer
You said industrial segment across various segments. When I mean industrial segment, we serve say for example the steel industry, the cement industry. So it covers a host of industries where machine tool manufacturers. So there we see a large headroom for further growth.
Rushabh Shah — Analyst
So any steps are we taking to make this 12, 13% aftermarket business a bigger segment, bigger portion of revenue for us in the going ahead for the next four to five years.
R Dilip Kumar — Chief Financial Officer
It’s a constant endeavor. But these percentages of proportion may remain somewhere between 10 to 15%. As you know, the automotive carbon business is relationship based and we have our commitments to the OE segment in the domestic market and our export customers. So we will be able to participate in the market. But my sense is that our proportion of the retail in the overall scheme of things may remain between these levels.
Rushabh Shah — Analyst
Okay, so my next question is on the export market. How is that working out for us? Sir, can you give some view? I think currently. Hello.
R Dilip Kumar — Chief Financial Officer
Yes. Yes, currently the export market is a bit. I think things are not clear. If you take North America, there is a lot of confusion regarding the initial norms that are to kick in. EPA 27. Norms that are kicking in 27. And also this tariff related issues have created a demand slump in North America with some of the major customers while some are holding on. And on the Europe side I think we are doing slightly better. It’s not as confusing as. And Europe has also improved over the past couple of years compared to what it was two years back.
I think the situation in Europe is panning out much better. So overall I would say slightly down or on par with what we were last year and hoping to improve by the Q4 of this year, that is or post October, the third quarter of this year, we see improvement and the various subsegments in North America are also indicating that the improvements might come towards the end of the year.
Rushabh Shah — Analyst
Okay, my last question is what are the key risks do you see in a business like Sundaram Fasteners?
R Dilip Kumar — Chief Financial Officer
The risks at this point in time we have made investments in our getting additional capacity and we want full utilization of the acceptance to improve. And so we expect the export market schedules to improve for some of our parts, especially hybrid vehicles from customers in Q2, our Q2 and for our parts, electric vehicles to improve from Q4. And so the markets, even overseas markets, the demand pattern is not clear. It’s evolving. So that export market I think as our primary from this perspective, as the issue.
Rushabh Shah — Analyst
All right, sir, thank you. I went back in with you.
operator
Thank you. The next question is from the line of Kahil Rohit Sanvi from Monarch Network Capital. Please go ahead.
Sahil Rohit Sanghvi — Analyst
Yeah, good morning sir and good to see the beat on the domestic side of the business and thank you for the opportunity. First question, sir, if you can explain what’s been working for us that we’ve delivered this outperformance on the domestic market.
R Dilip Kumar — Chief Financial Officer
See on the domestic market first our coverage is much higher. Whether it is the heavy commercial, medium, commercial light commercial vehicles, passenger cars or tractors. I think our coverage is quite big. We are participating with almost the entire industry and we almost with all our customers. We are the major stakeholders in terms of share of business, we are a major stakeholder. And when it comes to specific segments, say for example in the medium and high commercial, the shift to the higher tonnage vehicles and multi axel vehicles has helped us in the sense that our participation has become much higher and the pack value of our parts have improved.
Similarly in the tractor segment also the shift towards the higher HP higher husband tractors has helped us in the sense that we have been the first to develop parts of this industry in this segment and it has also helped us by way of share increase and more penetration in both segments. Same is the case in the SUV improvement which is now 66% of the passenger car segment. Then also our participation in the. So overall we are progressing with the industry and we are slightly outperforming the industry because of our increased participation and share.
Sahil Rohit Sanghvi — Analyst
And this is this, you said only for fasteners or across components, across the.
R Dilip Kumar — Chief Financial Officer
Company, for all our products.
Sahil Rohit Sanghvi — Analyst
Okay, okay, okay. Secondly, sir, any, any kind of update or clarity on how do we see the production schedules wrapping, picking up for the EV order that we’ve got from the American customer.
R Dilip Kumar — Chief Financial Officer
On the EV orders, I think there has been further shift in terms of Stellantis, one of our major customers. We see the EV and the EV vehicles getting shifted to work by one more quarter and earlier it was supposed to be from July, but then it’s going to the end of the year. And while on the GM front, I think since they introduced the vehicles much earlier a couple of years back, it’s steady though it’s not as per the indicative schedules. The GM EV program is going on and we are on track with that.
Sahil Rohit Sanghvi — Analyst
So for the GM side, are we aiming for some 150, 200 crores of revenue this year or could it be lower?
Bharathan — Executive Vice President – Marketing
It will be upwards of 250 crores for general Motors as an individual customer.
Sahil Rohit Sanghvi — Analyst
So specifically for the EV orders, the new orders that we got, I’m asking about that, not the whole business that we do with gm.
R Dilip Kumar — Chief Financial Officer
I think the EV order with GM depends on the pull with respect to the specific customer there we are meeting the required volume in full. So that is how I would put it because the contract or order creation of capacity is for X level, but they have settled down and based on the EVA pull, we are servicing the customer’s requirements.
Sahil Rohit Sanghvi — Analyst
So fed to Fed to assume that it will take two to three years to reach the optimum annual run rate for the EV order.
Bharathan — Executive Vice President – Marketing
One to one and half years. That is how I would put it because last year we had some technical Glitches, supply chain issues. And I think GM has addressed all of them. So I think it is on its course. And by next year, same time, they should be at the full halt.
R Dilip Kumar — Chief Financial Officer
Again, our capacities are well established and. Depending on what the customer wants and. Depending on the market consumer preferences in the U.S. if the demand is for ICE vehicles, we are happy to supply and if the demand is for a plug in hybrid, we are there. If it is easy, we are there. So we have no choice in terms of controlling that. But depending on the consumer preference, we are well positioned.
Sahil Rohit Sanghvi — Analyst
Got it. Got it. And just two more questions. One, we alluded in the opening remarks that the product mix was better. Can you throw some more light on that? I mean which components or how do you define that improved product mix?
Bharathan — Executive Vice President – Marketing
Again, as I said in my response to earlier question, okay, higher tonnage, the.
Sahil Rohit Sanghvi — Analyst
Require tonnage, higher tonnage and the SUV.
R Dilip Kumar — Chief Financial Officer
And the high tractors, these give us a. These are the reason disadvantage compared to the normal mix. Got it. Winter fastener compared to the last year’s same quarter. I think with the added capacity which has come on stream, that has also helped in generating additional revenue from that segment.
Sahil Rohit Sanghvi — Analyst
Got it. Got it. And lastly, sir, what will be the proportion of the power that we are generating from renewables right now versus say a year back?
Bharathan — Executive Vice President – Marketing
Renewable energy is about 51, 50. And we are aiming for the year at 55% plus.
Sahil Rohit Sanghvi — Analyst
55% plus.
Bharathan — Executive Vice President – Marketing
Yes.
Sahil Rohit Sanghvi — Analyst
And what is this number last year?
Bharathan — Executive Vice President – Marketing
Sir, last year we closed at around 51%. Today we are hovering at 52. I think with the additional inflow of renewable energy which generally kicks in from July. So we should see better numbers.
R Dilip Kumar — Chief Financial Officer
That some of our plants, four of them are located outside Tamil Nadu where the renewable energy policy is not well established. So therefore 98% of the procurement in Tamil Nadu is from the board where the power cost is very high. So maybe roughly around 75%. Our revenues or production is from Tamil Nadu. Therefore you have to see this 55 or 60% in the context of 72%.
Sahil Rohit Sanghvi — Analyst
Sure. Got it sir, got it. Thank you. Thank you so much.
operator
Thank you. Before we take the next question, we would like to remind participants, you may press Star and one to ask a question. The next question is from the line of Pankaj from Ikai Asset Manager. Please go ahead.
Pankaj Tibrewal — Analyst
Yes, thank you for giving me the opportunity. My question is on the growth. Can you just help us understand from where we are the next couple of years how growth coming back? What are the drivers both on auto as well as autos? The Order is taking time to ramp up. We have capacity.
operator
Sorry to interrupt. Mr. Pankaj, can you please bring your device closer to you and speak louder.
Pankaj Tibrewal — Analyst
It’s very closer. Yeah. Can you hear me now? Yeah. No. So from a growth side, sir, can you help us understand from both the US ramp up on the auto side and on the non industrial side how should we look at growth coming back? And if you can help us quantify on the non auto side how the growth spanning out from both defense, aerospace, railways and the other industrial side. So that will be helpful because growth has been a little subdued as we speak over the last few years. Yeah.
Bharathan — Executive Vice President – Marketing
We’ll start with the domestic front. If we look at the auto, I think we are currently outperforming the auto segment and also that has been our own even earlier we’ve been doing this and we are participating in all the new platforms and we are there. As far as the non auto side of the domestic is concerned, I think Indian energy we started quite some years back and last year and this year we have made we’ve seen good portion in wind energy segment and the growth is a filmed and we are participating in all the new platforms.
As far as the EV segment is concerned though it is a bit early today in India we are there some of the many of the product lines we are there. Similarly on the highways also we made four days. It’s still early days but still on railways and as far as defense, we are looking at good opportunities coming our way and we have a roadmap for that which will definitely help achieve our mix. In terms of the auto, non auto mix that we are targeting and coming to the retail segment as explained by Mr. Ganesh also earlier, the industrial segment we have huge headroom and.
Pankaj Tibrewal — Analyst
Hello. I think we have lost them. Hello. Yeah, I think we have lost them.
operator
Just a second, I’m connecting. Ladies and gentlemen, the line for the management is on hold. Please wait while we reconnect them.
operator
Sam. It. Ladies and gentlemen, thank you for being on hold. The line for management is now reconnected. Thank you. And over to you sir.
Bharathan — Executive Vice President – Marketing
Thank you. I think I had explained the domestic OE actions that are in place for the growth. I will now continue with the actions on the retail side wherein we are constantly looking at range improvement and also diversification plus a continuous dealer onboarding by all our teams on the ground. And as I said in the industrial segment we have good headroom and we are looking at all opportunities to leverage on that. And on the export side, while the scene looks a bit muted now we are ready with all the new platforms, with all our OEMs, with the current OEMs that we are participating with.
And so going forward we should be seeing good opportunities. Other than that we are also looking at increasing our customer base in the regions of not only North America, but diversifying it with other geographies and in Europe and other places. So I think overall we are trying to diversify in terms of geography, in terms of products and in terms of ranges. This is what we are looking at from a growth perspective. On the. On the mineralogy portion, while you had asked for the growth drivers while the initial phase of expansion was over, which has helped us to move from 200 odd crores per annum to now 350 plus I think we are in for the third phase of expansion where already we have committed the 75 crore plus with respect to the expansion.
R. Ganesh — Senior General Manager, Finance
So I think that will help the wind energy segment to grow. And with respect to railways and defense, while we have been supplying, I think it’s still more in the startup phase and probably in the next two to three years it should help in adding sizable amount of revenue. In terms of the aerospace, while we were doing two to three million dollars, I think with the drive and presence in aerospace segment and where we have also got accreditation from NatCap that has helped us in terms of moving it to say six to seven million dollars.
So we are working in that direction and we should see that growing to 100 crore plus in the next two to three years. These are the growth drivers we are working on.
Pankaj Tibrewal — Analyst
Thank you. Thank you and quite helpful. And just quickly this quarter was just 2 1/2% top line growth for the whole year. What’s your sense? Should we move into double digits or the what’s the outlook of the remainder of the year?
R Dilip Kumar — Chief Financial Officer
You know we have reported 4% in Q1 and the largely arising out of domestic market that should exports also revive and conditions improve and definitely 8 to 9% the direction for the whole year.
For the whole year.
Pankaj Tibrewal — Analyst
Yes. Thank you and all the best. Thank you.
operator
Thank you. A reminder to participants, if you wish to ask a question you may press Star and one on your Touchstone phone. The next question is from the line of Mukesh Sharaf from Aventus Park. Please go ahead.
Mukesh Saraf — Analyst
Yes, I’ll just ask a couple of questions until we have people in the queue. First up, sir, you had mentioned about tariffs and the fact that most of the customers have been accommodative, but could you give some more sense like are there any customers where we have to bear some portion of the tariff. Could you just give more color on that, sir?
R Dilip Kumar — Chief Financial Officer
At this point in time there are no cases where we’ve been asked and customers have been supportive. And while understandably they are not giving a clear commitment in terms of saying that they are 100% position also keeps changing depending on the situation emerging there month on month.
But right in Q1 so far we have been good with all our customers and.
R Dilip Kumar — Chief Financial Officer
Understood, understood. And also you had mentioned about Europe. I think historically Europe is not a large portion of our overall exports. Any sense. What is it now? I mean how much of our overall exports is now? Non us
Bharathan — Executive Vice President – Marketing
with respect to Europe, Mukesh, it would be about 15% of our overall exporter and UK would be another 5%. So between the larger Europe combining with UK we should be looking at more 20%.
Mukesh Saraf — Analyst
Okay. And are we like, you know, kind of in terms of looking at further new business here, specifically from Europe, uk these kind of geographies as a longer term goal, are we seeing any traction there?
Bharathan — Executive Vice President – Marketing
There is also the UK fda.
So know any clarity or any visibility there that this business could grow significantly for us. Yeah, UK FTA is concerned. I think it’s too early to talk on that, but definitely we see opportunities there. I don’t discount that. But on Europe side, yes, we are looking at new customers and expansion in our Europe geography.
Mukesh Saraf — Analyst
Okay, but it’s not like a. I mean this year you. Is it like a near term benefit they can see or is it more longer term?
Bharathan — Executive Vice President – Marketing
I would say it is a medium term because products, the time to start a production from the development from the word go is a bit as you know.
So I think it would be, I would call it a medium term and a sustainability.
Mukesh Saraf — Analyst
Understood. And on the domestic business, I think in one of the answers we had mentioned about product mix being better and the fact that we are also now with more SUVs vis a vis historically being with more hatchbacks. So is this a trend we can expect to continue? And the reason I’m asking is in the last couple of years we have underperformed the domestic market. This quarter we have started outperforming it. So should we say that some of your efforts are already yielding results and from here on we can continue to outperform the domestic market with more SUVs and maybe more business with some of the customers which are seeing growing market share?
Bharathan — Executive Vice President – Marketing
Yes, that is our chance too.
Mukesh Saraf — Analyst
Yeah. Okay. So that. So we can expect this to continue.
Bharathan — Executive Vice President – Marketing
We can expect this to continue where the industry shifts towards the higher end in all these segments, sub segments. So we hope to benefits of that.
Mukesh Saraf — Analyst
Understood. And in continuation with domestic business itself, we are also seeing a lot of domestic OEMs launching EVs, Mahindra, Tata, Hyundai, all of them. So because we already have some of these products on the shafts and on the differentials, etc. Are we seeing any traction in terms of supplying these driveline products for domestic passenger vehicle EVs as well as.
Bharathan — Executive Vice President – Marketing
Yes, I think in quite a few of our product ranges we are looking at opportunities in ED where the product nature is also not very much different from that needed for the IC engines. And in some product ranges where it has to be distinctly different. Also we are working, but that is a bit of a slower process.
Mukesh Saraf — Analyst
Got it, got it. Understood. So I’ll get back in the queue. I think we have one more person in the queue.
operator
Thank you. The next question is from the line of Sahil Rohit Singh, we from Monarch Network Capital. Please go ahead.
Sahil Rohit Sanghvi — Analyst
Yeah, thank you for the opportunity. Again, my question was largely on the margins, so why. I appreciate the reasons that you’ve highlighted in the opening remark for better margins also this year, but I wanted to understand what will be those factors that will help us reach that 17, 18% mark that we used to have, say a couple of years back. Are we still, do we still believe that we can reach that mark in say a year or two? And what will be the factors contributing to that?
R. Ganesh — Senior General Manager, Finance
Once the traction improves in the export segment and where the realization is historically higher, the margin will definitely grow.
The second factor for margin expansion is the stability of further reduction in raw material price. And as we have said several times, the raw metal prices, especially steel rods and bars, which were around 45,000 to 50,000 to us back had moved up to 85 to 90,000 and now they have stabilized around 70,000. So until they roll back, this further expansion is unlikely. The third driver is of course the operational efficiency. This is our constant endeavor and yield improvements and changing the procurement mix depending on the segment mix. Also as more in the aftermarket, the cost of raw material tends to be lower and also again depending on the product mix, the indirect material and the subcontracting operations, they also undergo a change depends on product.
So there are many considerations. So operationally we have room for project expansion and the revival of the exports. The one significant piece is of course the raw material cost, which I explained. So these are the three drivers. And getting back to 19 or 19.5 may be a challenge, but definitely there is room for another 1% of.
Sahil Rohit Sanghvi — Analyst
Right sir, and thank you for that. That’s good. Secondly, sir, on the other income we have a big number this quarter so if you can help me understand, is it what, what, what is the composition over there and is it something which is a little one off or I mean one off in the sense not recurring?
Bharathan — Executive Vice President – Marketing
Yeah, partly.
Yet there have been settlement towards insurance claim and also the IR realization from euro receivables and GP receivable may not be there subsequent quarters. But then having said that, the euro INR sadly weak and our revenues are accruing at the current level. So there may be a bit of production but not as high as what we report.
Sahil Rohit Sanghvi — Analyst
Got it sir. And I believe the program that you had on Capex is something that will maybe end this year or partly next year. So FY28, do we see any major CapEx or would it be largely maintenance?
Bharathan — Executive Vice President – Marketing
No, we will have growth.
It’s a combination of both. Typically we have seen from experience about 25% of our capital expenditure. So that will continue and selectively for customer requirements get sent up as the own.
Sahil Rohit Sanghvi — Analyst
Sure sir, thank you so much sir.
operator
Thank you. The next question is from the line of Nihar Shah from India Asset Manager. Please go ahead.
Nihaar Shah — Analyst
Hi sir, thanks for the opportunity. You know, just continuing on the previous question, the margins front, you know we’ve kind of gone back to closer to the 60% gross margin that we used to do, you know, a couple of years back. But there seems to be a drag in terms of our operating structure. Right, I know. While you mentioned that we’re kind of focusing on operational efficiency and yield improvement. Could you just call out the factor which is leading to this deterioration of cost structure between gross margin and ebitda?
Bharathan — Executive Vice President – Marketing
Between gross margin and EBITDA we have three or four major elements.
The stores and tools, our indirect materials. Subcontract. And we have repairs and maintenance. We have power cost and freight cost. If like I explained, the repairs and maintenance have been bit lower this quarter because sometimes these are need based. And apart from routine maintenance, some of the overhaul or inspections may not happen every quarter unless there is a deed which was there in Q4 and it is not there now. And like I explained, the international freight costs compared to June 24 have dropped by more than $1,000 if you are exporting from Chennai to Michigan. And also the favorable supply of renewable energy in the power exchange this year, hydropower supply has increased, therefore the costs have fallen in the exchange.
So all of this have helped. And apart from this, the product mix has played a role in lower consumption of indirect materials and our subcontracting corporation. So all this have helped to expand the margin of the contribution level and our fixed costs have remained fairly stable and whatever expansion at the contribution level which we have seen have completely passed through to the ebitda.
Nihaar Shah — Analyst
Okay, because if I just compare it to your performance last year or even the same time last year, the same quarter, while we’ve seen improvement in gross margins this quarter, that doesn’t seem to be flowing through to the ebitda.
So just. And you know, we’ve had the benefit of them at a free trail
Bharathan — Executive Vice President – Marketing
bit louder or come near the speaker, they’re not able to hear you.
Nihaar Shah — Analyst
Hello? Yeah, so you know, while we’ve seen you know, benefits on freight and like you mentioned on what as well, the benefits of improvement in gross margins aren’t seeming to flow through to ebitda. So just was wondering if there is anything that is a drag in case, you know, in the cost structure here.
R Dilip Kumar — Chief Financial Officer
Well, I think like I explained, the contribution as far as which you are not able to see probably for the financial has improved by 2% and that is the improvement we are seeing it in ebitda compared to Q4.
I’m comparing it with Q4, not with corresponding.
Nihaar Shah — Analyst
Okay, thank you.
operator
Thank you. As there are no further questions, I now hand over the conference over to management for closing comments.
R Dilip Kumar — Chief Financial Officer
No further comments.
operator
Thank you. On behalf of Avendus Park Institutional Equities Private Limited concludes this conference. Thank you for joining us. And now you may disconnect your lines. Thank you.