Learnings From Our Investment Journey and The Road Ahead: Sansera Engineering

Investing often feels like a game of identifying who is “changing the engine while the plane is still flying.” Our journey with Sansera Engineering has been exactly that—a masterclass in spotting a precision engineering giant hiding in the plain sight of a “traditional auto ancillary” label.

When we first initiated coverage (IC) in late 2022, the street was fixated on cyclic two-wheeler volumes and heavy reliance on ICE engines. We chose to look at the Flywheel of Competencies.

1. The “Street” Missed the Moat: An Engineering Powerhouse, Not a “traditional auto ancillary”

At the time of our IC, the market valued Sansera as a vendor of connecting rods and rocker arms. What they failed to factor in was Sansera’s integrated machine-building and Precision Engineering capabilities.

• In-house CNC Machines: Sansera doesn’t buy machines; it builds them. To date, they have built over 975 CNC machines in-house.
• The Cost & Agility Edge: These machines are 20–30% cheaper than imports and are highly modular. This allows them to switch production lines from automotive to aerospace with minimal downtime—a level of agility most peers lack.
• Design Partners: They aren’t “built-to-print” vendors. They co-design components with OEMs right from the Statement of Requirements (SOR) stage, creating immense customer stickiness.

2. The EV “Tailwind” vs. the Market’s Perception of “Headwind”

The loudest bear case at the time was the “EV threat” to ICE components. Our deep dive revealed that Sansera was actually future-proofing its business:

• Higher Kit Value: We recognized early that Sansera’s kit value for an Electric 2-wheeler is 10–20% higher than for an ICE scooter.
• Sole Supplier Status: They secured sole supplier status for major players like Ola Electric for their first 5 million units.
• Material Science Pivot: Their foray into Aluminium Forging was a strategic move to capitalize on the “light-weighting” trend essential for EVs.

3. The Data That Proves the Pivot: Order Book Evolution

The most compelling evidence of Sansera’s transformation isn’t just in the narrative—it’s in the hard numbers. The market missed the distinction between “Auto Order Book” (cyclical) and “ADS Backlog” (long-term visibility).

The “Then vs. Now” Snapshot

Critical Insight:
At the time of our IC, Aerospace was a minuscule 3% of revenue (~Rs. 60 Cr). Today, the unexecuted backlog for ADS alone is Rs. 3,953 Cr—executable over 5 years. This gives them revenue visibility that is totally uncorrelated to the auto cycle.

4. The “ADS” Explosion: From Niche to Core

While the Street worried about monthly auto sales numbers, we focused on the Aerospace, Defence, and Semiconductor (ADS) segment. This was the asymmetric upside the market ignored because of its small initial base.

• Entry Barriers: ADS requires a decade of building trust. Sansera spent that decade qualifying for Boeing and Airbus supply chains.
• Semiconductor Breakthrough: They have now broken into the semiconductor manufacturing supply chain, a market with even higher precision requirements and sticky margins.
• Guidance: Management is now guiding for ADS revenue to touch Rs. 500–550 Cr by FY27, backed by the massive Rs. 3,953 Cr backlog.

The Financial Journey (Rs. Crores)
We saw the transformation in the numbers long before the valuation rerated

Note: As of H1FY26, the company is net-debt free, giving them a fortress balance sheet to fund the next leg of ADS expansion.

Current Snapshot (Jan 2026):
The stock has rerated from ~Rs. 700 at IC to ~Rs. 1,800 today, reflecting the market finally acknowledging its “Engineering DNA” rather than its “Auto DNA”.

Final Thought: The Art of Seeing

Our investment journey with Sansera Engineering reinforces that the biggest arbitrages aren’t in valuation, but in time horizon. Core learnings:

• Arbitrage the Time Horizon: Market inefficiencies are often in time, not price.
• Capability Trumps Category: A precision engineering platform—not just an auto component label.
• Trust is a “J-Curve”: Aerospace credibility precedes revenue.
• Terminal Value is King: Future supply-chain entrenchment drives conviction.

From a humble workshop in Bengaluru to a critical node in the global high-tech supply chain, Sansera Engineering shows that resilience and competence eventually translate into returns. From simple rods to critical aircraft gimbals—Sansera has truly “spread its wings”.

The Road Ahead: Foundation Built, Credibility Established and Now the Flywheel Starts Spinning…

If the last few years were about planting seeds in high-tech soil, the next phase is about harvest. Sansera is at an inflection point where its portfolio of competencies compounds non-linearly.

1. The ADS Explosion: From Validation to Scale

The Aerospace, Defence, and Semiconductor (ADS) segment is no longer an experiment; it is the company’s new growth engine

• From ~Rs. 125 Cr sales in FY25 → Rs. 300–320 Cr in FY26 → Rs. 500–550 Cr in FY27.
• Medium-term aspiration: Rs. 800–1,000 Cr in 3–5 years.
• Backed by confirmed order books; ADS backlog ≈ 25% of total new business.
• Recent Rs. 160 Cr per annum Tier-1 Airbus order for the Airborne Intensive Care Transport Module signals value-chain upgrade.

2. The Semiconductor Frontier

Sansera has successfully leaped from microns to nanometers.

• Won a $12 Million order (LOI scaling to $30 Million annually) from a global semiconductor fab equipment manufacturer.
• Requires extreme precision (Class 1000 clean rooms) and delivers sticky, high-margin revenue.
• Creates a massive competitive moat versus traditional auto peers.

3. Global “Plus One” Beneficiary

While Europe faces headwinds from high energy costs and skilled labor shortages, Sansera is perfectly
positioned to capture the “China+1” and “Europe+1” shift.

• Positioned for China+1 and Europe+1 outsourcing shifts.
• Estimated international revenue CAGR: >20%.
• 20–30% CNC cost advantage strengthens competitiveness.

Our Vision: The Best Is Yet to Come…

We do not view Sansera as an auto-component company. We view it as a specialized precision engineering platform that happens to serve the auto industry today but will serve the world’s most critical high-tech industries tomorrow.

1. Financial Transformation (The Return on Capital Story)
The company has invested heavily (~Rs. 1,580 Crores in Capex over 5 years) to build capabilities in Aluminum forging and ADS. These investments are currently depressing return ratios.

• The Vision: As these capacities fill up (operating leverage) and the mix shifts to high-margin ADS products (steady-state margins of 25–30%), we expect Pre-tax ROCE to expand to 20%+ over the next 5 years.

2. Resilience Over Speed
In a world of geopolitical friction and supply chain weaponization, global giants need partners they can trust with their most critical components. Sansera has never lost a customer in its history. That culture of resilience—prioritizing engineering depth over quick wins—is what builds the Terminal Value we are betting on.

Final Verdict
We are witnessing a structural metamorphosis. Sansera is evolving from a vendor of engine parts into a strategic partner for the machines that move the world—be it EVs on the road, aircraft in the sky, or the chips powering our future.

The best is yet to come…