Ladies and gentlemen, good day and welcome to Sundram Fasteners Q4 FY 2025 earnings conference call, hosted by Avendus Spark. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mukesh Saraf. Thank you, and over to you, sir.
Thank you, Avirat. Good morning, everyone. Mukesh here from Avendus Spark. Appreciate everybody logging in. From the management team, I'm pleased to host Mr. Dilip Kumar, Chief Financial Officer, Mr. S. Bharathan, Executive Vice President of Marketing, Mr. R. Ganesh, Vice President of Financial Projects. I'll now hand over the call to Mr. Dilip for his opening remarks, after which we'll begin with the Q&A. Over to you, sir.
Yeah, thank you, Mukesh. Good morning to all. Welcome to our discussion on our annual results for the financial year ended 31st March 2025. First, the good news, we have crossed the milestone of INR 5,000 crores this year in the company. We closed the year at INR 5,231 crores. The other major item I would pick, which I have noticed in the results also, is the inventory build-up which we have made in anticipation of the U.S. demand from our key customers. Notwithstanding the tariff, things are not bad, and we have built quite a bit of inventory in anticipation of that demand, which has also pushed up some of our costs, conversion costs, and as you also know, at any point in time, we have a large number of new products under development, and we've also had significant capital expenditure this year.
A lot of spares too incurred by our expenditure. We have closed the year with a profit before tax of INR 668 crores. After accounting for the exceptional income of INR 12.5 crores, which arose out of testing the performance of the overseas subsidiaries for impairment, for which we had made a provision in the earlier years, we have reversed some of those provisions, and we finished the year at INR 680 crores. After the effective tax rates, they have slightly come down because of deferred tax adjustments. The profit after tax at INR 517 crores, which is 8% growth in the EPS, is the highest in the history of the company. Now, coming to the quarterly performance, again, we have registered INR 1,362 crores, which is highest for us for the quarter.
Like I explained, there has been a significant inventory build-up, which has increased some of the conversion costs. As inventories get liquidated, we expect this to get corrected, and both the contribution margin and the PBT margin to resume its normal trend. The fixed cost good news for us has been stable across the quarters. The borrowings have gone up because of the working capital build-up, which we have made in the inventory and receivables, and also the higher capital expenditure. We finished the quarter with, after accounting for the exceptional income, INR 131 crores, which again is the highest in the history of the company. I think, again, all our subsidiaries have done reasonably well. Like I said, the overseas subsidiaries' impairment testing was done, and therefore the valuation came very positive, and we took a credit for the exceptional income.
Both our domestic subsidiaries have done reasonably well. With this, I bring my opening remarks to an end. We are happy to take questions from the analysts.
Hello. Hello.
Yes, we are happy to take the questions now.
Okay. Sir, I would request you to speak up a bit louder. You're not very audible.
Yeah, as loud as possible, as close as possible to the phone. So I will do my best. I finished my opening remarks, and.
Okay. We'll start with the Q&A, sir. Yes, sir.
Yeah.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rishabh Shah from Bugle Rock PMS. Please go ahead.
Hi. Thanks for the opportunity, and congratulations on a great set of numbers, sir. In the previous call, you mentioned that just by offering a lower price, a customer would not switch the business. So in a business like Sundram Fasteners, when does a customer never ever switch his business? So what are the switching costs for a business like Sundram Fasteners?
Yeah, switching costs is not an easy proposition for the customer because it requires product validation, and it typically takes more than a year, and also a considerable amount of money. So the customers are always wary of switching from one supplier to another supplier for a few cents here and there. They would rather work with the existing supplier if it is some commercial reason. So it is not easy, especially for a product like ours, where there is a lot of design and engineering. And validation is there for customers to simply switch. It may happen in the aftermarket, but not in the OE business.
So just to follow up on that one, in the aftermarket segment, how good is our performance?
Sir, can you repeat your question, please?
In the aftermarket segment, how good are we in the industry?
How good are we in the industry?
See, I think we have done well last year, as expected, and March was a very good month. So as expected, April was a bit down. But on the aftermarket, by and large, we've been expanding our network distribution, as well as on the direct industrials, we are having a good growth.
Okay. So my second question is, in the previous call, you mentioned that you have entered into spaces like aerospace and defense, mainly to operate in terms of quality and global competitiveness. So how is that space working out for us, sir?
So I think with respect to aerospace, we are present through fasteners, and we supply materials to customers like either General Electric or HAL. And this predominantly forms part of usage of exotic materials. So in that space, we are able to penetrate and gain share and grow the business. So from the current level of approximately $3 million, we will be looking at close to $6 million in the coming year. And we have plans to grow that to $8 million to $12 million. With respect to defense, I would say that we are still in the startup phase with respect to development of parts and validation at customer end.
Sir, my last question is, what are the top three or four priorities you would have for the next three to four years?
I think with respect to the top priorities, I think growing with our existing key customers, gaining share of business, and working with them on their new platforms, either the conventional or the EV or whatever new models that are planned by the customers, we will work with them. Apart from that, we are focusing on the non-auto segment, especially in the areas of wind energy, railways, and aerospace, so these are the broad sectors or areas in which we will be working in the next three to four years.
Thank you, sir. Thank you so much.
Thank you. The next question is from the line of Abhishek Jain from AlfAccurate . Please go ahead.
Thanks for the opportunity. Sir, how was the revenue mix in export versus domestic in this quarter? Hello?
With respect to the revenue split, it's about 70% coming from domestic and 30% from exports. So that has been the quarterly mix for the current year.
Okay. And in export, if you can throw some light, what kind of tariff charges are imposed on your product, and how do you see the challenges over there at the current situation? You can throw some light on it.
As far as tariffs are concerned, I think it's still a working process. Most of our customers, especially the major customers, have not yet performed their responses as the tariffs on their specific parts are not very clear as yet, and they are working out their responses. In fact, most of them have not even approached us with any proposal. But that said, we are definitely expecting customers to come to us on tariffs going forward. As of now, only some customers we don't have much of an exposure have approached us for any tariff-related issues, and the major customers are still assessing the situation.
I think just to supplement to my colleague , I think the OEMs are bracing themselves for their profits to take a hit because I think they are looking to bear the significant portion of the tariffs, and I think we've also been hearing, seeing in the media that the prices, retail prices, consumer prices are going up. I think they have always been supportive of the supply chain, and that's the positive statements which have emanated from the global OEMs so far.
Okay. And my next question on this non-auto segment, as you are quite focused on the expanding business in wind and aerospace, if you can throw the light, what is the current revenue contribution from the non-auto segment, and what's your medium to long-term guidance for the revenue from the non-auto segment?
See, I think with respect to non-auto, at the moment, we would be close to one-third of the revenue comes from the non-auto segment. My long-term reason is to take it up to 50%, but the immediate focus is on growing the wind energy business, wherein our earlier calls, we had mentioned about close to an investment of INR 85 crores-INR 90 crores. That project is up and running, and we have been able to meet the customer requirements. Based on the performance, customers have come back, and we are on the negotiation table for furthering the revenues and taking the next phase of action. With respect to the next phase of action, we are also planning for further investments to grow the business.
From a current level of INR 300 - odd crores, our aspiration is to take it to INR 600 crores in the wind energy space.
Okay. And sir, my last question on the product-wise standalone numbers like in Fasteners, components and mills, and which segment you are more positive in terms of the growth in the next two years?
I think with respect to growth, we will be working on all the engines of the Sundram Fasteners' product range, be it Fasteners, be it Pumps & Assemblies. So we will be growing in each of the segments along with the customer growth in terms of organic as well as growing the share of business. So it is not that we would be growing only one particular segment. That has not been our strategy. So we would work with the customer in all the product segments. And if you look at Fasteners, where we are present, 35%-40% of the total revenue are followed by Caps and machined a ssemblies at 30%. So we will continue to work with the customer.
Thank you, sir. That's all from my side.
Thank you. The next question is from the line of Sahil Sanghvi from Monarch Networth Capital. Please go ahead.
Yeah. Good morning, sir. Am I audible?
Yeah, yeah, yeah.
Yeah. So my first question is, with respect to whatever developments have happened on the tariff front and overall demand in the U.S., I just wanted an understanding on, are we still targeting the INR 250 crores of revenue from the EV business in FY 2026, and will that meaningfully scale up to its full potential INR 450 crores in the next year? How should we see this scale up?
I think at this point in time, it's anybody's guess. But however, even prior to these tariff concerns on the EV side, we were just hoping that things would happen. There was some pushback, and things have started moving now. But with this tariff issue coming up, there seems to be some delay and some slowdown in the EV side as well. But then from next quarter, at least, we are hoping that things would improve, but still the last word is not said on that.
So you expect the commercial sales to start from 2Q FY 2026? Is that understanding correct?
Can you repeat that question, please?
You expect commercial sales to start from 2Q FY 2026. Is this understanding correct?
So, see, I think with respect to commercial sales, it has already started. So the product development approval and commercial sales have started. I think the question from your end was whether it would be at the—
Targeted level.
Targeted level. There we are seeing a little bit of slowdown in view of the Trump and tariff effect, but it should pick up as indicated by customers starting from Q2 and Q3 of current year.
Another point, sir, is that for capacity planning and capital expenditure purposes, we have a program life of five years. But based on past experience, we know that some of the products have much longer life, more than 10 years, in some of the cases where we've been supplying products. So we don't have to worry about the predefined time frame of four years or five years. We will have a fairly long cycle. There may be temporary turbulence in the market. Once these trade tensions subside, the long-term indications and projection trend will continue.
Sir, any kind of budgeted target for exports in this year, FY 2026?
I think the current year budget, we will be looking at close to, say, $200 million. So that's the number which we are looking at.
Got it, sir. Got it. I'll come back in the queue, sir, if there's anything. Thank you, sir. Thank you.
Thank you. The next question is from the line of Rajeev Bhansali from Omkara Capital. Please go ahead.
Hello. Good morning, sir. Sir, my question is regarding the CapEx done this year, which is around somewhere INR 396 crores, and can you throw some light on the next year's CapEx plan?
Yeah, yeah. Based on the current indications and the internal plans which we have made, we should be incurring another INR 300 crores of capital expenditure, minimum.
And what about the current CapEx done this year? Did we improve the current capacities, or it was regarding the new non-auto segments of aerospace and other wind energy that you mentioned?
This will be broad-based, sir. This will be for our traditional partner business, aerospace, and also for the wind energy partners. This will be spent across all our businesses.
Okay, sir, and coming back to the inventory build-up you mentioned, so are you seeing some traction from the current lines, or is it regarding the domestic market, or is it regarding the exports you are seeing?
We have built a bit of inventory while keeping the overseas market in mind.
Okay, sir. Thank you.
Okay.
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Hello.
Yeah, so we have nothing further to add, and we thank all the analysts for having joined the call, and we look forward to interacting with them in the rest of the conferences and in the coming quarterly calls.
Thank you.
Thank you.
Thank you.
On behalf of Avendus Spark, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.