Thank you, Ikra. Good morning, everyone.

Ram here from Avendus Spark. Appreciate everybody logging in into this 4Q earnings call of Sundram Fasteners.

From the management team, we are pleased to host Mr. Dilip Kumar, CFO; Mr.

Bharathan, Executive Vice President, Marketing; and Mr. Ganesh, Vice President, Finance and Projects.

I now hand the call over to Mr. Dilip Kumar, CFO, for his opening remarks, post which we'll begin the Q&A.

Over to you, Dilip ji.

Thank you, Ram. Good morning, and welcome to our discussion on the annual results of Sundram Fasteners for the year ended 31st March 2026.

From the year-end perspective, we've recorded 7% plus growth, moving from ₹5,231 crores to ₹5,612 crores. The raw material prices have been fairly stable for us, though we experienced inflation in nickel, aluminum especially after the West Asia conflict started.

The conversion costs, I will get into bit of details, but have been fairly stable. The depreciation has been in line with our capitalization, and profit before exceptional items has grown from ₹660 crores to ₹749 [crores?]

, which is a 12% growth. We have benefited from a bit of operating leverage.

The two overseas subsidiaries, the UK and China, especially China has done very well despite difficult market conditions there. The construction segment has recovered.

The valuation exercise was positive for us, and in the earlier years in line with accounting standards, we had made an impairment provision, which we have reversed now completely, which is an exceptional item. As most of the companies did in Q3, we had made a provision under the new labor code for gratuity liability for the past service, which was about ₹11 crores.

Net of that, after making these adjustments, profit before tax increased from ₹680 to ₹767 [crores?] .

The effective tax rate has been in line with the earlier years, and slightly lower deferred tax provision because of the gratuity liability. After the adjustments for the actuarial valuation and MTM provisions for some of the investments, as the stock market had a fall, and some of the investments which we had made, the market capitalization became lower.

The profit after tax was ₹550 crores, which is the highest in the history of the company. After adjustments for MTM, we reported ₹576 crores compared to ₹517 crores.

Now coming specifically to the quarter and as well as the annual performance, the OE segment has been very strong for us. Retail especially compared to the corresponding quarter has recorded close to 20% increase.

The exports moderated despite the rupee depreciation in dollar terms. It moderated.

In Q4, I'm happy to report that we entered into the positive territory, and we had growth compared to the corresponding quarter, both in dollar terms as well as in rupee terms because rupee weakened by 4%. In terms of growth trajectory as far as exports is concerned, I think we are back to FY '25 and in line with our budgets.

Last year was more one-off because of the tariff, which again is easing up a bit, with customers having reimbursed major portion of the tariff. Also, as the reciprocal duty is down to 10%.

I must tell you that under the Trade Expansion Act for critical materials such as aluminum and steel, the duty continues to be high. We also benefited from rupee weakness this quarter.

We have taken the benefit of exchange gains in the quarter. The company reported ₹1,529 crores, including other income, which again crossed ₹1,500 crores for the first time.

The contribution, which is the difference between the revenues and the variable expenses, have expanded by about 150 basis points, mainly because raw material prices have been stable and some of the one-time expenditure which we had had in Q4 of last financial year were not there this year. Subcontract expenses have always been a function of product mix, which has come out favorably this quarter.

The power and fuel thanks to company's investments and judicious procurement from power exchange, where the clearing prices were lower, and the investments in RE cover has helped us to rein in the cost. I believe we have managed the tariff well.

I said we've got a fair share of reimbursement from the customers. The fixed costs have remained stable.

The EBITDA for the quarter was ₹260 crores at 17% compared to 15.6% in the corresponding quarter. Before the exception items, we crossed PBT of ₹200 crores for the first time.

After the exceptions, it's ₹231 crores PBT. After tax, ₹180 crores for the entire year.

Our subsidiaries have also performed reasonably well, both the TVS Upasana that again had a strong year in terms of profitability. Like I mentioned, China has done well for us, which helped in the valuation of investments and reverse of impairment.

The UK subsidiary, the markets have moderated a bit in the price-sensitive, interest-sensitive commercial vehicles market in the UK. We expect interest rates to be cut this year and things to improve in the UK also.

Overall, I think my marketing colleague will explain. I think the outlook looks very strong.

We have started April well. I will pause here.

We're happy to take the questions. Thank you.

Good morning to the team. I have two questions.

My first question to Mr. Bharathan is, I just want to understand how are you going to position Sundram Fasteners to capture evolving demand in automotive components and global manufacturing while mitigating risks from electrification, supply chain disruptions, and competitive pressures?

What strategic levers will differentiate the company from its peers in the coming quarters? That's my first question.

I'll ask my second question after this. Thank you very much.

Good morning. See, as you are aware, already Sundram Fasteners, in all its various verticals, six main verticals that we have, are certainly leaders and the preferred choice as far as the IC segment is concerned.

During the past 5-6 years, we've also bagged quite a lot of orders on the EV segment more in the export where there seemed to be some traction in the past. Now that has receded a bit, there's a pushback.

In the export segment, the EVs are getting a bit postponed, and the demand is also downsized. That notwithstanding, because of our leadership in the IC segment, I think we are back to the near-normal condition as far as export segment is concerned.

As far as our exports is concerned again, our exposure is also towards the heavy engines of the high horsepower ranges wherein those continue to be IC, and there's not going to be any immediate threat on electrification in those segments like power generation or marine or other segments. As far as the domestic market is concerned, as we are leaders in the domestic segment, and domestic segment is a progressive growth on the EV, not much of a this thing.

Now with that notwithstanding, we have also bagged quite a few orders on the EV segment as well with major OEMs in India. That said, I think the threat from electrification is not going to impact us, and we are well-placed to handle that.

As far as the strategic levers are concerned, I think we are a Deming company, number one. Number two, our focus towards quality and the brand equity is keeping us in good stead.

We are certainly the first choice for all the customers in many of the product developments. That's why our order books are full today, and also we are receiving quite a few new orders and our development teams are busy doing that.

Thank you. My second question to Mr.

Dilip Kumar is with revenue growth supported by exports and domestic OEM demand, how is capital allocation being prioritized between capacity expansion, technology investments, and shareholder returns? What structural cost efficiencies are being implemented to protect margins amid rising raw material and energy costs?

Thank you.

See, on the shareholder return, as a policy, we'll be distributing 30% of the profit after tax consistently. That is the shareholder from return perspective.

From cost efficiency, raw material prices have been stable. If there are increases either ways or if there is a reduction, we have a contractual obligation to pass it through to the customers.

We either charge them or give them a credit note. In the aftermarket, we have the ability take into account competitive pressures to calibrate the market prices.

In the export segment, we are not under an obligation to make a pass-through. If market prices are benign, we benefit from the lower raw material prices, and we don't pass it through.

As far as capital allocation is concerned, Sundram has been investing not less than ₹300 crores year-on-year. Typically, 25% to 30% is for replacement.

The balance 70% would be driven by customer requirements across all our plants. Taking into account the current operational efficiency, we allocate capital for revenue growth purposes.

Thank you, and best wishes.

Thank you, sir.

Am I audible?

You are audible.

Sir, my question is on the non-auto side. You mentioned that you are entering into the railways and defense.

In what product category are we entering into the railways and defense? What is the roadmap that you have for the non-auto side of the business?

Also, how is it different from the business which we are doing in terms of cash flow, profitability, and working capital basis?

On the non-auto side, while we are strategically using wind energy fasteners and aerospace fasteners, apart from that, we have also looked at fasteners for railway applications, which we have been channeling through our retail partners. With the advent of high-speed train and the quality requirement set out by the Railway Board and authorities, I think they are happy to work with a company like Sundram Fasteners.

There, we see a large headroom for growth by direct participation. This calls for us getting qualified through the standard requirement mentioned by the railway team in terms of the standard whatever they have set out.

In terms of order visibility, while we are participating in multiple tenders, and I think the current hit rate, I would say it's about 20%. We are confident of taking up the hit rate.

The visibility, where we are doing roughly about ₹2 to ₹3 crores per month, and I think we see a visibility of it taking up to ₹100 crores. That is on the railway side.

Difference, I would say, with all the participation through start-up programs, I think it is still in the nascent stage while we are working on multiple platforms. The aerospace fasteners is really taking off.

We have also invested to grow along with the customer like where we supply for either General Electric or the domestic players like Hindustan Aeronautics as well as Skyroot. Those are some of the key customers with whom we are working.

Wind energy fasteners where we have had expansion, and now we are in the next phase of expansion for the project to take it up from say ₹30-₹35 crore level to ₹50 crore per month level. These are the levers which we are working on the non-auto.

Apart from that, our aftermarket participation for industrial application, it is quite wide and large. These are the headrooms on the non-auto side which we are working.

Just to add to what my colleague said, see, overall, our non-auto exposure is around 35%. In our product mix, non-auto is 35%, including tractors.

To add to your specific question on this defense, currently, we are in the areas of pumps and machined castings, but we find a lot of scope for our other verticals as well. We are working with the defense agencies to proceed there as well.

Okay. Just a follow-up on this one.

How would this be different in terms of cash flow and let's say profitability versus the auto business which we are doing? Also, since it is 30% of our revenue, and we are planning it to take towards 50% of our revenue.

Aerospace would be the major contributor or everyone would be an equal contributor going ahead?

No, it will be an equal participation from all the segments. With respect to the profitability, I think it's slightly 100 to 200 basis points above our automotive because we are working on participation in exports as well as domestics.

The lead time with respect to supplies and the working capital cycle is slightly shorter when we serve the domestic market. Thereby, the cash flow and profitability are at much better pace in the non-auto segments.

Okay. Since we were talking about, sir, exports, we had 30% of our revenue coming from exports.

You had mentioned in your call that we have plans to take it to 50%. Any update on that, and what steps have been taken towards that journey?

While that is an aspiration, and in terms of the tariff-related impact while the exports did have a drop, but the new customer, new program addition, I think we are seeing visibility for it to come back to its original level of 30%, 35%. From thereon, with our participation in other geographies and product range, we should see better numbers.

Okay. My next question is that you have customers with whom you have relationship of let's say 10 to 15 years, and you mentioned that you are adding new customers.

My question is in which segment are you adding this customer, and how many have we added in the last 4 to 5 years? If possible, could you name them?

In terms of new customers, while we are onboarding some on the non-auto, especially on the consumer durable like Daikin and we are working with few others. I would say even on the existing customer, we drive more on cross-selling, where we have been supplying through supply chain partners.

We work with our OEMs, and then try to get into their direct supply chain. I think those are the success stories, which has helped in terms of growing the exports.

See, as far as the areas what you are asking is concerned, in our fasteners, machined castings, gears as well as sintered parts, we are engaging with new customers in different geographies, not only North America, where currently we have quite a good base, but we are also looking at European customers. We have seen some business come to fruition, and we are expecting some to come in the near future as well.

Okay. My last question is how often do our parts get replaced in a vehicle?

Because I wanted to understand the whole aftermarket segment, as it is a higher-margin and higher profitability ratio for aftermarket segment. How often do these parts get replaced in a vehicle?

See, it depends on the functionality of the part. Whereas if you take, for example, the pumps that we supply to the market, water pumps and oil pumps, oil pump is almost a fit-and-forget part, whereas the water pumps get replaced maybe once in 2, 2.5 years in a truck and once in 4 years in a car and once in 2 years in a tractor.

Depending on the usage and the ruggedness of the atmosphere, it affects the replacement. That's how pumps get replaced.

Similarly, fasteners also have a periodicity of somewhere around 2 to 3 years depending on the function, if it is an engine fastener or a chassis fastener. Depending on that, there are various cycles on which they get replaced.

Okay. Thank you so much, sir.

I'll get back in the queue.

Thank you.

Thank you for the opportunity, sir. Congratulations for good set of numbers.

Sir, I would like to know about the segment mix and segment-wise growth which we have achieved in FY '26. Also, what kind of growth we aspire in coming 2 years?

What would be the growth drivers for the same? If there is any order book for the same?

Thank you. See,

I think I will address the revenue mix. I think we are leaders in fasteners.

Fasteners continue to be in the range of 40% to 42% of our overall revenue, followed by pumps and assemblies, cast and machined assemblies, which is in the range of 25% to 27%, and followed by cold extruded and sinter metal components of around 15%, and hot forged and machined components constitute 12%, and balance from other business segments like radiator caps and others. This is on the segment-wise mix of revenue, which we have witnessed in '25-'26.

With respect to growth, while for the current year our CFO mentioned that we are at 7%, I think our aim is to have a double-digit growth in the coming 2 years. That is what we are working on.

What would be segment-wise or industry-wise order book which we have? If you can mention about non-auto, EV, PV, CV,

etc. While we have growth coming in from both automotive driven by the various segments in which we participate and the drive on non-auto, I think the fair share of the mix would be in the same range, with absolute amount growing in each of the segments.

If you look at somewhere around 13% to 20% growth between these segments, 13% in the OE, 15% in the retail, and 20% in the export, amounting to about 15% growth overall. That's how we look at these segments.

Sir, thank you, sir. If you could break up industry-wise growth for FY '26, like what kind of growth we had in passenger vehicle, what kind of growth we had in commercial, non-auto, aero, wind, infra, industrial fastener, etc.?

I think each of the segments, we surpassed the industry. You want to add some numbers?

Yeah. Can

you please share your email ID? We'll give you the information.

Sure, sir. I would.

Thanks. Another would be on the Hello?

Please go ahead.

Yeah. Another would be on the same industry-wise growth drivers which we have, like what kind of new products which we are having in passenger segment, what kind of new segments we are having in commercial segment, and outlook on wind infra.

You mentioned in two calls back that we have an order book. How it is ramping up?

Let me answer you, sir. See, last year, I think we had about a 7% growth in the 25 the industry growth was 7% in the '25-'26 for the commercial vehicle segment and 5% to 7% somewhere around 6% on the passenger vehicle segment, and 22% was the tractor growth.

This was the broad growth of the industry. As Ganesh Mr.

Ganesh said, we've surpassed the industry growth in all the segments last year. This year, while due to various geopolitical constraints, the market analysts and others have pegged the growth of the commercial vehicle segment and the passenger vehicle segment at 4% to 6%, and the tractor segment has flagged to 2%.

We are looking at a growth of at least 3 to 4 percentage points more than the industry segments. We'll be outperforming the industry by minimum 2% to 3% in all the segments.

Percentage points, not percent, percentage points. That's how we look at the industry.

We are looking at a 8% growth in the commercial vehicle segment and 10% in the passenger vehicle segment and probably 6% to 7% in the tractor segment. That's how we look at the industry this year going forward.

What would be the growth driver?

See, basic demand is one growth driver. Then the new customers that we acquire is the second.

The third is for the past 3-4 years in the passenger car segment, there has been a lull on the small car side, where our participation was traditionally higher. After the last year's GST correction and the income tax relief that was given last year, the small car segment has also come back with a bang.

In all these, we are benefiting. Of course, we are also having increased share.

For example, with this geopolitical problems coming to the fore, many small players are not able to sustain and supply to our customers. Wherein we see some scope for share increases also.

There have been instances of share increase already, but we are progressing on that as well.

Thank you, sir. It was very helpful.

On the last side, if you could mention how has our raw material basket has changed with respect to Q3 Q3 of FY '26? Was there any impact in our numbers in quarter 4?

What kind of impact we see in next two quarters due to raw material inflation?

I think in the opening remark itself, it was covered, stating that in terms of raw material, we have been more or less stable, and we have not seen any significant inflation. That is the outlook we have for the coming quarter as well.

Wherever there are increases, say either in aluminum, nickel, or copper, it is indexed, and we have a pass-through mechanism.

Thank you, sir. I'll join back in the queue.

Thank you.

Thanks. Hope I am audible.

I am audible, right?

Yeah. Am I

Hi, good morning, and congratulations for a really good set of improved numbers this quarter. Am I audible, sir?

Yes. Yes.

My first question is if you can give some understanding of how the export markets are looking, major reasons for your better performance in the export market. I understand you have mentioned in the press release that Class 8 trucks saw good demand.

How sustained momentum is this? What do you see for the next 2-3 quarters depending on the kind of production schedules you've received?

If you can also break it down according to the CV and passenger vehicle orders, that'd be helpful. Yeah.

See, the export market last year last year was a bit of a big problem for us because of the initially, it started with the tariff issues and then the geopolitical crisis. As far as the North American market is concerned, where the Class 8 trucks, the bellwether of the economy, were not doing well, there was a lot of anxiety and lack of clarity on the EPA '27 norms also that are to kick in in January '27.

On account of all this, the decisions were getting the decision to buy a fleet was getting postponed, and the demand was really low. With clarity emerging on the Class 8 trucks, first, the date is finalized.

It is going to be enforced from 1st of January '27. Though there are some issues that the industry is negotiating with the Environmental Protection Agency on the warranty aspects, it is to kick in.

With also a lot of turbulence getting settled on the tariff side, the the situation is now slowly limping back to normal. With this EPA declaration, we also see some mild pre-buy having started.

The Class 8 segment is looking up now, while the demand is considerably higher. In fact, if you take the first quarter, that is Jan, Feb, March, first quarter of the North American industry, Jan, Feb, March, the Class 8 truck preliminary orders were almost double that of the year-ago period.

While the retail segment has still not picked up because there's always bound to be a lag between the two. This year, the Class 8 trucks are expected to perform at least 10% to 15% better than the last year.

That is one thing, and which is helping us increase our demand. As far as our other major customers are concerned, for example, a major customer like Cummins has indicated a good growth in all the segments.

The we participate in the high horsepower segment, the mid-range segment, as well as the heavy-duty segments. In all these segments, in the high horsepower, because of the data center requirements continuing to be good, they're projecting about a 25% growth.

The heavy-duty segment also, we are looking at upwards of 15% growth. On the mid-range segment, where the initial guidance was flat, now they are looking at at least a 2% to 3% growth quarter-over-quarter.

That's how the basically the truck segment and the power segment power generation segment is looking at. Coming back to the other customers like General Motors and Stellantis, yes, the EV platforms have had a definite setback.

They have downsized their EV projections by 50%. While Stellantis has also postponed the programs, General Motors is continuing with the program at a downsized level.

The IC segment is springing back to normalcy, and with all their pipeline inventories are also getting exhausted, we are seeing near-normal rebound of the demand with General Motors and Stellantis as well. Overall, we hope this year exports to be much better than the last year, and that's why we are looking at a growth of about 15% to 20% this year.

Right. That's very elaborate.

Thank you so much. My second question would be as a follow-up to this one, that how do we see our EV orders, which were roughly about ₹4,000 crores, now ramping up?

Do we see it starting in FY '27? How do you see the ramp-up happening, EV orders from US?

No, no, with respect to the US EV orders, while there has been a slight uptick, it has not reached its potential whatever we have envisaged. With respect to specific on either Stellantis or General Motors, with respect to the ICE and PHEV, we are seeing an uptick.

I think the full ramp-up would happen by '27. Definitely we are seeing better numbers compared to what it was in '25-'26.

That is one of the reason for us to have a confident or positive number with respect to export growth in '26-'27.

Sure, sir. Sure.

Secondly, sir, if we had to look quarter-on-quarter, there is a dip in the gross margins, which is also kind of transpiring in the EBITDA margins. Apart from the nickel and aluminum cost inflation that you've reported, anything else has affected our gross margins?

Nothing specific, because if you're looking at gross margin of let us say Q3 or Q2, like I said, after the West Asia conflict broke out, there has been an inflation in the RM and direct materials to some extent. It has got slightly compressed.

I think if you see the overall year, and it has been quite okay.

Right. Right.

Lastly, on the railways, I just wanted to confirm the numbers that were given by the one of the speakers. I think you said that there is roughly a ₹2 to ₹3 crore kind of monthly run rate that we are working with in revenues.

This has a potential to ramp up to roughly ₹100 crores monthly. Is that correct?

No, no. That is ₹100 crores per annum.

From a ₹2 to ₹3 crore level, the run rate would be at say ₹8 to ₹10 crores. That is what we are envisaging.

This can happen this year itself? No,

on an annualized basis, we are looking at this number. I think by Q3, Q4, we should be able to look at this.

Okay. Okay.

This was helpful. Thank you.

Sir, hope I'm audible.

Sir.

Yes, sir. Yeah.

Hi. Sir, I'm just trying to reconcile, if you look at longer period growth, if I look at from March '23 to March '26, I think we have grown around 11% or 12%.

The currency has depreciated by around 14%, while steel prices have actually gone up by around 18%, 19%. Automotive industry as well as industrial growth has actually gone up on a point-to-point basis, right?

Now I just want to understand how to explain this divergence between our growth, which I think would be around 11% or 12% in the period '23 to '26, and also can you provide some color on the internal benchmark you use to measure success? How the last 3 years performance had looked?

When the management looks at it, how the last 3 years performance has actually met or exceeded management expectation, given the context that we have grown at x percent, while currency has depreciated and the metal prices have increased, and also the industry and the GDP has actually increased, right? I just want to understand how the management thinks about it.

The management looks at it as the minimum growth that we should target is let us say at least a nominal GDP and plus 2%, that is one way of looking at it, or 2x of GDP. Roughly around 12% to 13% is how the business plans are formulated, capital allocations are made, and all discussions revolve around that kind of scenario.

The actual market there may be challenges, and somebody may scale back EV program, or the tariffs having disrupted last year. These things can have an impact on the growth in general.

Coming specifically to the RM or material prices, like I said, they have been fairly stable for us. We've been able to get a better price advantage, or we have maximized N0 procurement and also got reasonable volume discounts based on our procurement and special discounts.

We've been able to keep the prices lower, though there's a threat of some inflation creeping in in the RM prices. As far as exports are concerned, like I said in my opening remarks, for the quarter, it has entered into the positive territory, both in dollar terms.

If I annualize that, it looks quite strong and going back to FY '25 levels. Overall, for the entire year, notwithstanding the rupee depreciation, we've had about 8% degrowth.

That I would think is more of one-off for the reasons which we all know. Taking a lot of confidence from Q4 and the way we have started the month of April this year looks to be quite strong.

Got it. I was just looking at slightly longer because last year has seen with tariffs, etcetera.

That's why I used '23 as a baseline, and then looked at 3 years. Where our growth has been divergent from even the metal inflation and even the currency depreciation, as though we are a beneficiary of both in terms of top line as well as in, I think that's where I am picking off as to, from the eyes of management, has the last 3 years been better per your budgets or it was underwhelming to your budgets or your own business plans when you actually did it in '23 and looked at the next 3 years?

I think from your point of view, what are the benchmarks and how you think you have actually performed? That's my question.

No, I answered that question by telling you that we target as far as growth is concerned either it is nominal GDP or 2x of GDP. This is why I said 12% to 13% is the overall growth we would like to have.

Taking especially this year, that growth has come in OE as well as in retail. It has not happened in export.

If you take a 3-year time frame and where we had made a lot of investments and we were banking on certain customers and products, it has not taken off in a manner which we would have desired. I think these are cycles.

Like I said, last year, though it started on a pessimistic note the month of April itself with reciprocal duty and ended with the conflict, but after the GST 2 rationalization and markets have boomed. We are seeing that momentum continuing in the current year also.

Got it. Okay.

Thank you so much. It is very, very

helpful, sir.

Thanks

as well. Thank you.

Nothing specific. I think most of it was covered in the opening remarks, and the questions were deep, and many of them were insightful.

We maintain that the outlook looks quite strong from a domestic market perspective, and there is also a strong traction in the export market as well. Thank you.

Thank you.

Thank you.