Sterlite Technologies is riding the data boom with a strong third quarter led by revenue growth. The margins too put up a robust front, coming in at a 12-quarter high.
In an interview with CNBC-TV18, Anand Agarwal, CEO of Sterlite Tech discussed the company's Q3 performance.
Agarwal said that the margin has been improving due to higher capacity utilisations especially on optical fibre business.
He further said that globally, there is a supply constraint for fibre optic cables.
Talking about order book, he said the current order book is at Rs 4,600 crore and we see it growing consistently.
Higher visibility on order book is giving us more operating leverage, he added.
Below is the verbatim transcript of the interview:
Q: Talk about your margins. At 22 percent, this is the best we have seen in a long time. What leads to this and what could be the triggers to sustain these margins in the second half of the year or for the rest of the fiscal?
A: The margins essentially have been going up on account of good capacity utilisation that we are seeing especially on the optical fibre business and that is also combined with the fact that we are selling more newer higher technology value-added products and it is largely a combination of that and other than that we have much higher visibility in terms of our order book so that creates better clarity in terms of operating leverage, in terms of overall supply chain and all that adds up to some points in the overall efficiencies and margins.
Q: Your numbers have striking consistency. We are speaking of the low base because of demonetisation for some sector but in your case nine-month is showing that there is a striking consistency. Revenue is up 25 percent for nine-months, EBITDA up almost 50 percent for nine-months, profit after tax (PAT) up 60 percent for nine months. What is a sustainable run rate for the next year?
A: We map our business clearly is we keep data growth as a proxy. we see what is the data growth happening globally, what is the data growth happening in the market that we deal with and how that translates into fibre growth which then translates into order book, revenues, the margins for us and we have seen consistently that going up. At a global level there is a supply constraint for fibre for 2018 and parts of 2019 as well. So we foresee that this sort of consistency of growth should continue and that is reflected in our order book as well. Right now our order book is at about Rs 4,600 crore on a run rate of about Rs 3,500-3,600 crore revenue that we are doing.
Q: How should we take it - 25 percent is possible next year because your order book is 25 percent higher than your revenue run rate?
A: I believe so.
Q: We could draw that conclusion?
A: Yes.
Q: Can you give a bit more details on Rs 4,600 crore order book? Where the fresh orders coming in from and what is the order visibility looking like?
A: About Rs 3,300 crore out of this order book is the products order book and about Rs 1,300 is the services and software that we do. Out of the total Rs 4,600 crore almost Rs 3,000 crore is international order book for us which is largely Europe, China, some Latin America and Middle East as well.
Q: So margin at 22 percent is sustainable or can it be bettered?
A: It will be in this range because we have four distinct businesses; we have fibre, we have cable, we have services and software and each have different margin profiles. So the absolute margin will be going up. How that fairs in percentage, will depend on the mix.
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