Leading auto parts producer Sundram Fasteners Ltd. is seeing a notable increase in its order book for electric vehicles (EVs). With other contracts in the works, the business presently has EV orders totaling about Rs 40.00 billion.

Notwithstanding certain obstacles, India's shift to electric vehicle (EV) technology is quickening because of government grants, improved awareness, and more regular product releases in a range of categories. As a result, Sundram Fasteners has experienced a significant increase in EV component orders.

The firm is based in Chennai and provides hot-forged machine parts, battery coolant covers, fasteners, and other kinds of shafts to OEMs in the electric vehicle industry. It's also working on an electric water pump.

According to R. Dilip Kumar, Chief Financial Officer of Sundram Fasteners, it was stated during a recent earnings call that the current order book of Rs 40 billion is expected to be fulfilled over the next 5-6 years. He mentioned that the order book is anticipated to expand further as Sundram Fasteners engages in negotiations with multiple customers for new EV orders.

To manage current and future orders in the EV sector, Sundram Fasteners is increasing its capacity at its factories located in Mahindra City and Sri City near Chennai. For the current fiscal year, the company has planned a capital expenditure of Rs 3.50-4.00 billion, primarily focused on the fastener division to meet export demands and support the EV business. In the fiscal year 2023, a capital expenditure of Rs 3.43 billion was incurred, which was entirely financed through internal accruals without additional borrowing.

The management of the company believes in a gradual transition to EVs, starting with internal combustion engines (ICE), plug-in hybrids, and eventually fully electric vehicles. With the anticipated growth in the EV order book, Sundram Fasteners expects the contribution of the EV segment to total revenue to rise from approximately 6% currently to 10-15% in the coming years.

To sustain its growth and prepare for the anticipated decrease in content per vehicle due to the shift from ICE to EV, Sundram Fasteners is also diversifying into non-automotive sectors, such as renewable energy. The company is focusing on wind energy and supplying fasteners for industrial and off-highway applications. It is projected that the wind power segment could potentially double its revenue from the current Rs 2.50 billion to over Rs 5.00 billion within the next 2-3 years. Consequently, Sundram Fasteners expects the share of non-automotive revenue to increase from 30% to 50% over the next five years.

Regarding the expansion into new product lines, Kumar mentioned, "SFL is happy to announce its foray into a new product line, copper heatsink, serving marquee customers. This has greater potential for all EVs, aerospace and defence, IT and telecommunications, and healthcare."

As per a report from brokerage house Sharekhan, three key structural growth drivers for Sundram Fasteners in the long term were identified: the commencement of executing the EV order book worth Rs 40 billion, the scaling up of the wind energy project, which has already begun, and the expectation of an increase in the EV order book as the management engages with multiple customers domestically and internationally.