Leading auto parts maker Sundram Fasteners Ltd. said it has resumed its capex cycle and has planned a 3-year capex of ₹1,000 crore in view of a favourable growth outlook in both auto and non-auto segments.

The proposed capex will be spent on ramping up capacity to supply parts in the wind energy and electric vehicle (EV) segments as the order book continues to swell.

“The last three years — FY20–FY22 — were muted for expansion as we took a pause in capex. But we resumed it in FY23 and spent about ₹300 crore during the last fiscal, and we are on course to spend the remaining ₹700 crore over the next two years,” R Dilip Kumar, Chief Financial Officer, Sundram Fasteners, said during the Q4FY23 earnings’ call.

Orders surge

The company’s EV business has been witnessing a surge in orders for parts meant for electric cars from both domestic and global OEMs. Recently, the company bagged an order of $250 million (about 2,050 crore) from a leading global OEM to supply parts over six years. This project is expected to deliver peak revenue of $52 million (about ₹426 crore) in FY26.

Its EV order book now stands at $375 million, and the company is expected to incur a capex of ₹300 crore (as part of the proposed ₹1,000 crore capex programme) to serve the EV business.

Non-auto business

Sundram Fasteners also seeks to lay a stronger focus on the non-auto business, comprising the wind energy business, after-market segment, tractor business, and industrial segments, which constituted about 1/3rd of its standalone revenue. As part of its strategy to de-risk its overall business from cyclicity, it aims to grow the share of the non-auto business to about 50 per cent of its total revenue over the medium to long term.

“The wind energy space offers huge opportunities for growth. This business contributed about ₹200 crore to its top line in FY23. The management sees an opportunity to grow the revenue of this business to about ₹500 crore in the next few years,” Kumar told businessline.

The size of the aftermarket business in FY23 was ₹600 crore, and 50 per cent of the aftermarket business was constituted by the industrial segment.

Meanwhile, the company is also planning to undertake initiatives to reduce variable costs. As energy costs pose a big challenge to the company, it is trying to mitigate the cost rise by procuring power from captive power producers and sourcing more green energy.

Sundram Fasteners is planning to invest in the group captive policy of the Tamil Nadu government to buy wind, solar, or blended power from private producers to keep our costs lower. “We are likely to invest about ₹25 crore in this area,” said Kumar.

“Also, with more wind and solar energy, our power mix will also change in favour of green energy, which will also help address ESG objectives,” he added.