Sterling Tools reported a 32% YoY revenue surge for Q2 FY27, fueled by commercial vehicle segment demand. However, EBITDA margins faced headwinds due to sharp commodity inflation. Investors should track the company’s ongoing price negotiations with OEMs and the revenue ramp-up in its E-Mobility subsidiaries, which management expects to scale further in the coming quarters.
Sterling Tools Q2 Revenue Up 32% as Input Costs Pinch
Revenue grew 32% YoY in Q2 FY27, while PAT stood at Rs 13.6 crore.
Reader Takeaway: Strong top-line growth from the fastener business balances against persistent margin pressure from commodity inflation.
What just happened
Sterling Tools delivered a robust performance in its standalone business, recording a 32% revenue increase. While revenue growth remains strong, the bottom line is affected by comparison with the prior-year period, which included an exceptional gain of Rs 9.5 crore. EBITDA for the quarter stood at Rs 27.7 crore, reflecting the current strain from rising input costs.
Why this matters
The company is betting heavily on its E-Mobility (SEM) division and high-voltage DC contactors. While the EV segment is still in a growth phase, recording Rs 23 crore in quarterly revenue, management maintains a target to achieve breakeven once revenue surpasses the Rs 150 crore mark. Investors are watching for how effectively the company can pass on high input costs, specifically tungsten carbide, to their OEM partners.
Capex and Debt
Sterling Tools has scaled its consolidated capex to Rs 150 crore for FY27. This investment is spread across its core fastener business (Rs 120 crore) and its newer EV initiatives. Increased funding needs for this expansion and subsidiary investments have led to a rise in debt levels during the quarter.
Risks to watch
Margin volatility remains a primary concern. Beyond material costs, the company is managing inflationary pressures in power and labor. Furthermore, there is an execution risk associated with the long gestation period of EV projects as they move from proofs-of-concept to full commercial revenue.
What to track next
Watch for the progress of price negotiations with major OEMs like Tata and Mahindra. Management expects some relief in H2 through price adjustments. Additionally, the scale-up of the STML high-voltage DC contactor business will be a critical monitor for long-term growth.