Conference Call Overview
• Date: May 13, 2024
• Key Participants:
• Atul Aggarwal (Managing Director)
• Pankaj Gupta (Group CFO)
• Focus: Financial and operational performance
Financial Performance
• Revenue: INR 613 crores for FY '24
• Growth:
• 12.5% increase in domestic automobile sales
• 5.2% year-over-year income growth in Q4 FY '24
• Profit after tax: INR 12 crores (126% increase from previous year)
Subsidiary Performance
• Sterling Gtake E-Mobility:
• 86% revenue increase
• Accounts for 35% of consolidated revenue
Strategic Developments
• MOU with Yongin Electronics:
• Establish EV components facility in India
• Expected revenue generation: INR 200 crores annually over five years
Key Discussions
• Investment and Margins:
• Initial investment for new MOU: INR 20-25 crores
• Ongoing feasibility studies for new magnetic product category
• EBITDA Margins:
• Current margins lower than targeted 8-10%
• Adjustments due to ESOP costs; expected improvement next year
Production and Business Focus
• MCU Production:
• Over 2,000 units produced daily
• Fastener Business:
• Modest growth anticipated; projected revenue of INR 750-800 crores
• Focus on passenger vehicles and two-wheelers for growth
Market Insights
• Segment Performance:
• Passenger vehicles: 7% revenue increase
• Two-wheelers: 21% revenue increase
• Declines in commercial vehicles and farm equipment
• Customer Concentration:
• Top client accounts for 70% of MCU revenue
• Need for diversification acknowledged
Future Outlook
• Joint Venture with Korean Partner:
• Target revenue of INR 200 crores by FY '30
• Operations expected to start in late 2025 or early 2026
• Capex Plans for FY '25:
• Approximately INR 60 crores focused on existing businesses
Conclusion
• Management optimistic about future growth and profitability improvements
• Acknowledgment of challenges and strategic plans to address them

Sterling Tools Limited Q3 FY24 Earnings Conference Call Summary
Financial Performance
• Standalone Revenue Decline: Q3 revenue decreased by 6% due to challenges in commercial vehicle and farm equipment sectors.
• Strong Segments: Growth in two-wheeler and passenger vehicle segments.
• EV Business Growth: EV business under SGEM contributed 33% to overall revenues, up from 21% in FY23.
• Total Income: Rs. 142.7 crores for Q3; Rs. 446.7 crores for nine months.
• EBITDA Margin: 14.9%.
Strategic Developments
• Localization Success: Successful localization for light commercial vehicles and first export order for SGEM.
• Focus on EVs: Emphasis on EV sector over industrial products due to greater opportunities.
Management Insights
• EV Two-Wheeler Discussions: Ongoing talks with major players for new product launches.
• Revenue Guidance: No specific forecasts for MCU business; growth expected in line with industry.
• Margin Improvement: Strategies in place aiming for low double-digit margins in the medium term.
Segment Contributions
• OEM and Retail Sales: Breakdown of standalone business contributions discussed.
• Fastener Business Growth: Challenges noted, but optimism for Q4 performance.
Operational Challenges
• Bangalore Facility: Significant capital expenditure (Rs. 200 crores) and ongoing optimization.
• Cost Structure Impact: Increased operational costs and fluctuating steel prices affecting margins.
Market Positioning
• Passenger Vehicle Segment: Strong growth with Maruti Suzuki despite slower overall market growth.
• Competition from Ola: Plans to enhance product offerings to retain customers.
Future Outlook
• EV Industry Projections: Anticipated 30% penetration of EVs in two-wheeler market; overall growth rate of around 40% over the next five years.
• Subsidy Regime: Confidence in continued growth despite potential subsidy removal.
Closing Remarks
• Future Interactions: Indication of upcoming annual accounts call and continued engagement with stakeholders.

Sterling Tools Limited Q2 and H1 FY '24 Earnings Conference Call Summary
Company Performance
• Date of Call: November 1, 2023
• Revenue Growth:
• Standalone business: 4% increase
• Consolidated level: 23% increase
• Industry Trends:
• Automotive industry growth: 1%
• Passenger vehicles: 15% increase
• Electric vehicle sector: 37% growth
• Subsidiary revenue growth in EV: 111%
Strategic Initiatives
• Employee Incentives: Introduction of Employee Stock Option Plan (ESOP)
• Capacity Utilization: Focus on a three-pronged strategy to boost capacity
• Capital Expenditure: Planned CAPEX of 28 crores by March 31, 2024
Market Challenges
• Fastener Business Margins: Currently at 13.5%-14%, with expectations for improvement
• Non-Fastener Business Growth: Projected growth may fall short due to electric two-wheeler sales slowdown
Future Outlook
• Growth Segments: Optimism in three-wheeler and light commercial vehicle (LCV) markets
• New Product Launches: Anticipated to drive growth in the EV space
Q&A Highlights
• Sales Expectations: Festive demand may boost sales; production typically ramps up in September and October
• Market Share Strategy: Diversification of customer base and new product launches to enhance offerings
• Inventory Management: Average inventory carrying period of about 120 days, affecting margins
• MCU Business: Finalizing technical agreement with Gtake, ensuring stable gross margins
Competitive Landscape
• MCU Business Dynamics: Varied strategies among OEMs; few can produce significant volumes
• Dependence on Major Customers: 100% business from Ola, but not solely reliant on them
Financial Projections
• Return on Capital Employed (ROCE): Estimated between 15% to 20% on a consolidated level
• Future Revenue Guidance: Current run rate expected to be maintained; standalone EBITDA margin projected to approach 15%
Closing Remarks
• Gratitude: Atul Aggarwal thanked participants and encouraged follow-up questions
• Festive Wishes: Best wishes for the upcoming Diwali festival

Financial Performance
• Q4 FY23 Highlights:
• Standalone income increased by 14% to INR 159 crores.
• EBITDA rose to INR 21 crores.
• Full Fiscal Year Performance:
• Total income grew by 27% to INR 604 crores.
• Consolidated income reached an all-time high of INR 775 crores, marking a 51% increase.
Industry Outlook
• Significant growth in the Indian auto market, particularly in passenger and commercial vehicles.
• Entry into the electric vehicle (EV) component sector with substantial revenue growth and multiple contracts secured.
EV Business Insights
• Jaideep Wadhwa discussed:
• Market share uncertainties for competitors like Ola.
• Potential extension of the FAME subsidy.
• Growth potential of at least 2x for the EV business.
• Stable gross margins expected due to accounting changes.
Fasteners Business Overview
• Pankaj Gupta addressed:
• Drop in margins due to one-time factors.
• Healthy overall margin structure with expectations for improvement in FY24 (targeting 16% margins).
• Revenue mix for fasteners in FY23:
• 20% from two-wheelers, 24-25% from passenger vehicles, 11% from farm equipment, and 14-15% from the aftermarket.
• Achieved 28% revenue growth compared to the previous year.
Challenges and Adjustments
• Lowered EBITDA margin guidance for FY24 to 16% due to increased steel prices and inflationary pressures.
• Flat revenue in the EV segment attributed to inventory fluctuations.
• Concerns about rising raw material costs clarified as inventory revaluation impacts.
Future Growth Strategies
• Projected growth of 17-20% for the fasteners business in FY24.
• Plans to invest INR 25-30 crores in incremental capex to enhance capacity.
• Focus on increasing market share in the EV sector, particularly in the motor control unit segment.
Conclusion
• The call concluded with gratitude expressed to participants and a commitment to provide further updates on the company's EV product portfolio.

Sterling Tools Limited Q3 FY23 Earnings Conference Call Summary
Key Executives
• CFO: Pankaj Gupta
• Whole Time Director: Atul Aggarwal
Financial Performance
• Standalone Revenue:
• Q3: Increased by 30% to INR 151 crores
• Nine months: Increased by 33% to INR 445 crores
• EBITDA:
• Q3 Margin: 15.4%
• Nine months: Up 32% year-over-year
Electric Vehicle Segment
• Motor Control Unit (MCU) Revenue:
• Nine months: INR 119 crores (up from INR 38 crores previous year)
• Margin Expectations:
• Current: 6%, projected to rise to 8%-12% as it matures
• Potential gross margins could reach 20% with improved supply chain
Business Insights
• Growth Strategy:
• Focus on engineering capabilities to increase growth from mid-single digits to low-double digits
• Market Potential:
• Estimated market size for electrification in two-wheelers: INR 12,000 crores
• Current market share: 50% in high-speed scooters, 30% in overall electric scooter market
Production and Capacity Expansion
• MCU Production:
• 14 customers in production, ramp-up slower due to new battery regulations
• Anticipating production for various vehicle types
• New Facility:
• Construction for 500,000-unit capacity to begin in February, full ramp-up by mid-2023
Capital Investment and Profitability
• MCU Business Investment:
• Total: INR 28 crores, break-even at INR 120 crores
• Focus on growth and customer acquisition over immediate profitability
• Capex Plans:
• Current fiscal year: INR 12 crores, next year: INR 20 crores
Competitive Landscape
• Major Competitors:
• Mahle, Hella, Bosch
• OEM Challenges:
• Complexities in product industrialization and software customization hinder OEMs from in-house production
Warranty and Cost Management
• Warranty Provisions:
• Calculated as a percentage of sales, conservative estimates due to limited data
• Cost Absorption:
• Higher costs from suppliers being absorbed, with future price adjustments anticipated
Future Outlook
• Growth Projections:
• EV segment growth rate: 25%-30% over the next few years
• Market Size Adjustments:
• Two-wheeler market size corrected to INR 7,000 crores by 2030
• Focus on Green Technology:
• Commitment to core auto components business, exploring hydrogen and electric vehicle opportunities
Conclusion
• Positive outlook with a clear vision for future developments and continued investment in growth and technology.