Pune-based Sterlite Technologies, a fully integrated optic fibre producer, has been making the most of the current focus on broadband. The Department of Telecommunications has set a target of achieving 20 million broadband connections by 2010. Accordingly, telecom players such as Bharat Sanchar Nigam Limited (BSNL), Bharti Airtel and Tata Teleservices have stepped up their network rollout, spurring extensive growth in the sector as well as demand for optic fibre.
Worldwide too, the demand for optic fibre has surged. According to the Cooperatives Research Unit, UK, the global demand for optic fibre in 2007 was 127.4 million km, up by about 25 per cent compared with the 2006 figure. This was the highest annual demand ever for the optic fibre industry. The highest demand came from China at approximately 36 million km, closely followed by the US and Japan. These three countries accounted for about 69 per cent of the global demand in 2007.
US-based KMI Research estimates a compounded annual growth rate of 9 per cent in the worldwide demand for optic fibre cables from 2006 to 2012, driven by fibre-to-the-premises deployments.
In order to meet this demand, Sterlite has realigned its product portfolio and sales efforts to focus on a judicious mix of products, sustained growth markets, and potential markets.
Background
Incorporated in 1988, Sterlite manufactures optic fibre, optic fibre cables, and copper cables for long haul, metro access, and premises networks. It caters to industries such as telecom, power, oil and gas, defence, railways and aviation. Sterlite’s clients include BSNL, Mahanagar Telephone Nigam Limited, Reliance Communications, Tata Communications, and Bharti Airtel.
Lately, the company has diversified its product portfolio and has begun manufacturing and supplying power transmission conductors. It has also started manufacturing ADSL2+ modems at its manufacturing facility in Aurangabad. In 2007, Sterlite had a market share of about 46 per cent in the Indian optic fibre space, close to 37 per cent in the optic fibre cable market, about 30 per cent in copper telecom cables, and about 23 per cent in power transmission conductors.
Recent initiatives
The past one year has been busy for the company. It won several key contracts, introduced new products and expanded its client base.
In January 2008, Sterlite won a contract from Rajasthan Rajya Vidyut Prasaran Nigam for the manufacture and supply of over 5,600 km of aluminium conductor steel reinforced Moose power transmission conductors to be installed in a 530 km route-length of 400 kV single circuit, and a 180 km route-length of double circuit transmission lines in Rajasthan. The contract is valued at approximately Rs 1.4 billion.
In November 2007, Sterlite received a contract from BSNL for the manufacture and supply of 20 to 2,000 pairs of copper telecom cables, which are to be used to enhance BSNL’s pan-Indian network to provide basic telephony and broadband services. Valued at Rs 1.43 billion, the contract gave Sterlite over 23 per cent share of the copper telecom cable market in India in 2007-08.
BSNL also opted for Sterlite’s high fibre count ribbon fibre optic cables for its nationwide optical fibre access network through a Rs 380 million contract awarded in August 2007.
The company introduced several new products in the Indian market in 2007-08 ?? its Micro Duct fibre optic cable, which is a range of low-diameter optic fibre cables designed for blowing in micro ducts for FTTx networks; a portfolio of AL-59 alloy power transmission conductors; a range of single mode optic fibres; and the Bend Lite range of optic fibres.
Key financials
Listed on the National Stock Exchange and the Kolkata and Mumbai stock exchanges, Sterlite has posted strong financial results for the financial year 2008. The company’s net revenues touched Rs 16.86 billion in 2007-08 ?? a 41 per cent increase over the previous fiscal year’s revenue of Rs 11.98 billion.
Sterlite registered a net profit of Rs 1.01 billion for the period under consideration, a 98 per cent increase over profits of Rs 510 million registered in 2007. The earning per share (diluted) was Rs 15.46 as compared to Rs 7.83 in 2007.
The sale of telecom products and solutions increased by 54 per cent over 2007 to Rs 6.35 billion, with an improved EBITDA margin of 14 per cent as compared to 13 per cent in 2007.
Future outlook
Keeping in mind the global demand indications, the company plans to double its manufacturing capacity from the current 6 million km per annum. Accordingly, a capital expenditure of Rs 1.4 billion has been earmarked for this capacity expansion and a brownfield expansion project is under way at the company’s existing facility at Aurangabad where commercial production is expected to start by June 2009.
Sterlite also plans to continue to focus on projects related to clearing up bottlenecks in currently installed capacities and improving operational efficiency and productivity. At the same time, the company plans to continue reviewing its capacity vis-a-vis the global demand for fibre over the next two quarters.
