Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Sterlite Optical: Gearing for growth - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jan 15, 2001

    Sterlite Optical: Gearing for growth

    Sterlite Industries (India) Ltd. has recently demerged the telecom and optic fibre business to a newly formed company Sterlite Optical Technologies Ltd. (SOTL). The telecom equipment company recently declared its 1HFY01 results reporting a 102% growth in bottomline to Rs 1,466 m.

    Sterlite Optical is present in jelly filled telecom cables (JFTC), optic fibre (OF) and optic fibre cables (OFC). The company currently operates a 3 m fibre kilometer (FKm) OF plant. It now plans to augment the capacity to 13 m FKm by setting up a 10 m FKm greenfield project in a tax free zone. The capital expenditure envisaged for the project is to the tune off Rs 12 - Rs 14 bn ($250-$300 m) over a period of four years.

    In light of the strong cash flows, the company anticipates that it will be able to meet 75% of the project cost through internal accruals. The management is also thinking on the lines of a U.S listing through the American Depository Receipts (ADR) route. The listing will help position the company as a global player and also facilitate in bridging the gap in finances.

    As per initial reports it seems that the expansion is planned over two phases. In phase - I the company is expected to bring onstream 5 m FKm by 2002. The entire project is scheduled to be completed by 2003.

    Sterlite Optical is aggressively targeting the international markets, especially the U.S, which contributes 80% - 90% of its export revenues. With focus on the international scenario the company aims at increasing its market share from 1% to 5%. The meteoric rise in export sales is a vindication of the company's product quality and marketing success. Despite the strong exports the geographic sales mix is still skewed towards domestic markets. This could be due to the large purchases of JFTC by the Department of Telecom (DoT) and Mahanagar Telephone Nigam (MTNL).

    The global demand for OF is estimated to be 240 m FKm and is anticipated to grow at a compound rate (CAGR) of 30%. The domestic demand, meanwhile, is expected to report more than double the growth rates registered in the international markets. Consequently, several companies have entered the OFC business, which include Birla Ericsson, Aksh, Vindhiya Telelinks and Uniflex. In a recent ruling the Cegat (Customs, excise and gold appellate tribunal) overruled the anti-dumping duty imposed by the Commerce Ministry on OF imported from South Korea. This could adversely affect domestic prices of the commodity.

    With buoyant global demand for OF several international majors have announced their intentions of ramping up capacity. The commissioning of these projects could lead to an oversupply position resulting in depressed optic fibre prices.

    Future growth of the company will depend on its ability to execute the project on time and OF prices remaining favourable. Over the past 18 months OF prices have moved up significantly from $25 / FKm to $ 65 / FKm. At Rs 816 the company is trading at 12.7x 2QFY01 annualised results.



    Equitymaster requests your view! Post a comment on "Sterlite Optical: Gearing for growth ". Click here!


    More Views on News

    Bharti Airtel: A Good Quarterly Performance (Quarterly Results Update - Detailed)

    May 6, 2016

    Bharti Airtel has reported a8.4% YoY growth in the topline and an increase of 2.8% YoY in the bottomline for the quarter ended March 2016.

    Bharti Infratel: Ends the Year Positively (Quarterly Results Update - Detailed)

    Apr 27, 2016

    Bharti Infratel has reported a 7.3% YoY growth in the topline and an increase of 18.7% YoY in the bottomline for the quarter ended March 2016.

    Bharti Infratel: A Good Quarter (Quarterly Results Update - Detailed)

    Apr 8, 2016

    Bharti Infratel has reported a 4.9% YoY growth in the topline and an increase of 11.5% YoY in the bottomline for the quarter ended December 2015.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 09:31 AM