Sterlite Technologies Ltd. (STL), a leading player in the global optical fiber market, is taking a proactive approach to the European Commission’s recent imposition of anti-dumping duty on imports of optic fiber from India. While the company acknowledges the duty, it is actively exploring ways to mitigate its impact.
“It is provisional (duty) and we’re working on ways to mitigate or minimize this,” managing director Ankit Agarwal told Mint in an interview. He confirmed ongoing discussions with the authorities without disclosing details.
Simultaneously, STL is focused on enhancing efficiency at its manufacturing facility in Italy, which supplies the European market. Agarwal emphasizes that the Italian facility is well-equipped to meet European demands and is undergoing improvements to become more cost-competitive. “We are very well set up for all our requirements in Europe through our Italian facility. We’re working on making it more cost competitive, so we are confident that we will not lose any customers,” he said. He also noted that STL is the leading provider of optic fiber cables in the UK market, which is exempt from the duty’s impact.
Despite the anti-dumping measures, STL remains bullish about its global expansion strategy. The company aims to solidify its position among the top three global players in the optic fiber manufacturing space over the next few years. The company’s growth ambitions are fueled by opportunities in the US and Europe, markets estimated to generate a combined $10 billion in revenue from optical connectivity products and fiber optics.
The US market is particularly promising, driven by the $42 billion Broadband Equity, Access, and Deployment (BEAD) program aimed at providing underserved and rural areas with internet access. “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 us,” said Agarwal. Last year, STL established an optic fiber and cable manufacturing facility in South Carolina with an investment of $56 million, demonstrating its commitment to the US market.
Another key growth driver for STL is India’s rapidly expanding data center market, which is projected to triple to 3 GW in the next five years. STL is leveraging this opportunity by expanding its enterprise business, with an anticipated contribution of 25% of its revenue from this sector within the next three years, a significant jump from its current 5-7% share. To cater to the demand of GPU-heavy data centers, the company has introduced a comprehensive AI data center portfolio encompassing high fiber density optical cables, connectivity, and interconnect solutions.
Furthermore, STL sees significant potential in supplying optic fiber cables to engineering, procurement, and construction companies in India, as well as supplying fiber optics to other cable manufacturers. These segments are expected to generate an additional $15 billion opportunity within the Indian market.
Despite its growth aspirations, STL prioritizes financial prudence and is focused on generating cash flow from its current Ebitda levels of ₹1,000 crore, which will be utilized to reduce leverage. As of the quarter ended June, net debt stood at ₹2,021 crore, while revenues for the quarter reached ₹836 crore with a loss of ₹57 crore. Capital expenditure has been reduced to ₹150-200 crore and is expected to decline further. The company’s order book stood at ₹9,883 crore as of the quarter ended June.
STL has already raised ₹1,000 crore through a Qualified Institutional Placement (QIP) in April of this year. The company has no plans for further funding rounds. “After the QIP, our interest costs have reduced by ₹50-70 crore. With ₹ 1,000 crore Ebitda, we’ll be generating significantly more cash. The goal is for the business to generate cash, which will help us further reduce leverage,” said Agarwal.
Overall, Sterlite Technologies is well-positioned to capitalize on the burgeoning global demand for fiber optic cables. The company’s strategic approach to managing the anti-dumping duty, coupled with its aggressive investments in key markets, suggests that STL is well-equipped to achieve its ambitious growth objectives and solidify its leadership position in the optic fiber market.