• OUTLOOK ARENA
  • VIEWS ON NEWS
  • MARCH 23, 2000

Sterlite flirts with demerger…once again

Sterlite Industries Limited (SIL) has once again decided to reconsider the proposal to split its businesses into two companies – telecommunications and non-ferrous metals.

Sterlite Industries (FY99 Sales Rs 11.1 bn) is into the manufacture of copper (67% of turnover) and the telecommunication cables. The company manufactures jelly filled cables (22% of turnover), optical fiber telecom cables (3%), optical fiber (2%) and aluminium (6%).

Splitting the two businesses is likely to bring a semblance of focus in the company’s operations. However, it must be mentioned that the company’s copper venture was termed as a move to vertically integrate its operations as the copper could be used in its cable manufacturing business. Therefore initially a hive off could lead to a rise in costs of inputs for the telecom operations. Nonetheless the move is desirable.

This is because the company could then invite global leaders for alliances in its two areas of operations. This would enable it to effectively compete in the domestic markets as competition picks up. Moreover, in view of the cyclical nature of its non-ferrous metals business the demerger would benefit the telecom business, which is likely to witness an extended period of growth in view of the large planned spending in the sector. Fs

However it must be cautioned that the issue of splitting its has been in the air for quite sometime and it is uncertain whether this time the company will go ahead with the plan.

Market View:
The stock has been rated as a 'BUY' mainly on account of the improving demand scenario emerging after large orders, totaling 33.3 m cable km, already having been placed with cable companies.

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 (Research Analyst) bearing Registration No. INH000000537 (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, Canada or the European Union countries, 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 (Research Analyst)
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