Sterlite Optical: Digital play - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Sterlite Optical: Digital play

Dec 19, 2000

Sterlite Industries Ltd. (SIL) demerged its copper and telecom business with effect from July '00. Subsequently, the copper and telecom business is conducted under Sterlite Industries (India) Ltd. and Sterlite Optical Technologies Ltd. (SOTL) respectively. With the demerger every shareholder in SIL was offered a share - face value Rs 5 - in the telecom company SOTL. Further, the management undertook capital reduction in the copper company reducing the face value of the shares from Rs 10 to Rs 5.

The telecom offshoot, SOTL, has two main businesses; jelly filled telecom cables (JFTC) and optic fibre (OF). The optic fibre operations are integrated, as the company is also present in the downstream optic fibre cable (OFC) business. Currently, OFC consumes 45% of the company's OF production the remaining is sold to cable manufacturers. Internationally, most of the majors sell OFC as the final product and not OF. The manufacturing of OF is a closed-door technology with only 5 players having access to the technology globally.

The company anticipates to shift its revenue mix in favour of optic fibres. Currently, the mix is 68:32 in favour of JFTC, which is likely to change to 30:70 in favour of optic fibre business. SOTL plans to further expand OFC capacities in order to exploit the demand growth in this sector. The company has said it is open to acquisitions as a strategy to augment capacities and believes that higher capacities will offer cost advantages.

The company expects global demand of OFC to grow at a compounded rate (CAGR) of 17% till FY04. Meanwhile, the domestic demand is estimated to grow at 41% CAGR for the next two years. Further, in the case of materialization of private sector investments in broadband backbone and last mile connectivity the demand for fibre could foster stronger growth.

In an attempt to stay ahead of the technology curve the company is investing 12% of its revenues in R&D. SOTL has obtained patents for three of its products and aims to acquire more. Further, the company is also moving towards higher end technologies, which are greater value add, through investments in optical component technology.

However, most companies have been able to obtain patents through small modifications in technology and to that extent patents do not create significant entry barriers. Further, the demand projections could be suspect with AT&T, the leading telecom company, postponing it purchases of optic fibre equipment. Nevertheless, SOTL is the sole producer of OF in the country and is a chance for riding the digital wave.

Equitymaster requests your view! Post a comment on "Sterlite Optical: Digital play". Click here!


More Views on News

1,300% in One Year - Are You Kidding Me? (Views On News)

Nov 29, 2021

An amount of Rs 1 lakh invested in the midcap stock a year ago would have turned into Rs 15 lakh today.

Bharti Airtel's Humongous Rights Issue to Open on 5 October. Key Points Investors Should Know (Views On News)

Sep 23, 2021

Shares of Bharti Airtel trade near record high ahead of rights issue.

This Company has Quietly Built an Enviable Startup Portfolio (Views On News)

Sep 22, 2021

The startups era has just begun, and it will provide massive opportunities to those who can spot the right trends at the right time.

Top Stocks Riding the 5G Wave in India (Views On News)

Dec 3, 2021

The 5G revolution is unfolding at a faster rate than you would expect. Here's how you can hop on to this ride.

More than 450% Gains for Tejas Networks in the Past Year. What Next? (Views On News)

Aug 18, 2021

Shares of Tejas Networks are up 173% since January 2021. Is the rally justified?

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 3, 2021 (Close)