Homegrown optical fibre manufacturer Sterlite Technologies Limited is betting on opportunities in the US and European markets through its local manufacturing facilities. A global slowdown in fibre demand seems to be waning in the next two quarters, as high inventory levels in these markets have begun normalising, a top STL executive said.
“We are well set up for both the $42-billion BEAD project and for expansions in Europe with our local factories. We’ve already made some inroads in the US, securing wins with our connectivity solutions. That’s a positive sign. The early funds from the BEAD programme will start getting released in the next two quarters, which will be beneficial for companies like ours,” Ankit Agarwal, managing Director of STL, told Moneycontrol.
The US market has been slow for STL due to high inventory levels, which are now normalising and are expected to settle within this fiscal year fully. “The US deployed its highest-ever fibre last year. The deployment has been strong due to existing inventories, but new purchases from companies like us were quite subdued,” he said, adding that the situation is expected to change soon.
Agarwal also downplayed the impact of the European Commission’s decision to impose anti-dumping duties on the Indian optical fibre cable (OFC) manufacturers, stating that STL's factory in Italy, which has been significantly scaled up, has sufficient capacity to meet European demand.
“We are working to mitigate or minimise the impact… We are well set up to meet all our European requirements through that local facility. The focus is now on making that facility more cost-competitive. We are confident we won’t lose customers and aim to increase our market share in Europe,” he added.
Despite ongoing logistical challenges in the Red Sea region, which have caused container costs to rise, STL is ensuring timely deliveries by maintaining better inventory levels across regions. “We have enough finished goods in the US facility to ensure we can cater to customer demand,” Agarwal said.
The company is focused on generating cash after a successful Qualified Institutional Placement (QIP) of Rs 1,000 crore, and Agarwal mentioned that further funding might not be necessary. “Our intent is clear. We used the Rs1,000 crore raised through QIP to reduce our net debt. Capital expenditure has come down to Rs 150-200 crore from around Rs 500 crore last fiscal, and it’s expected to decrease further. After the QIP, our interest costs have reduced by Rs 50-70 crore. STL can generate Rs 1000 crore EBITDA annually once we operate at 75-80 percent factory utilization. The goal is for the business to generate cash, which will help us further reduce leverage,” he explained.
The company has also set a target to significantly grow its optical solutions business, aiming for it to contribute 25 percent of overall revenues in the next three years, driven by growth in the data center and enterprise segments. “We see the data center and enterprise segments on a positive growth trajectory, both in India and globally. We aim to grow their contribution from the current five to seven percent to 25 percent,” Agarwal said.
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