Investor Presentation June'19 - Sterlite Technologies
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Investor Presentation
June’19
© 2019-2020 Sterlite Technologies Limited
Safe Harbour
Certain words and statements in this communication concerning Sterlite Technologies Limited (“the Company”) and its prospects, and other statements relating to the
Company’s expected financial position, business strategy, the future development of the Company’s operations and the general economy in India & global markets, are
forward looking statements.
Such statements involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements of the Company, or
industry results, to differ materially from those expressed or implied by such forward-looking statements.
Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which
the Company will operate in the future.
The important factors that could cause actual results, performance or achievements to differ materially from such forward-looking statements include, among others,
changes in government policies or regulations of India and, in particular, changes relating to the administration of the Company’s industry, and changes in general
economic, business and credit conditions in India.
The information contained in this presentation is only current as of its date and has not been independently verified. No express or implied representation or
warranty is made as to, and no reliance should be placed on, the accuracy, fairness or completeness of the information presented or contained in this presentation.
None of the Company or any of its affiliates, advisers or representatives accepts any liability whatsoever for any loss howsoever arising from any information
presented or contained in this presentation. Please note that the past performance of the Company is not, and should not be considered as, indicative of future
results. Furthermore, no person is authorized to give any information or make any representation which is not contained in, or is inconsistent with, this presentation.
Any such extraneous or inconsistent information or representation, if given or made, should not be relied upon as having been authorized by or on behalf of the
Company.
The Company may alter, modify or otherwise change in any manner the contents of this presentation, without obligation to notify any person of such revision or
changes.
Persons should consult their own financial or tax adviser if in doubt about the treatment of the transaction for themselves
These materials are confidential, are being given solely for your information and for your use, and may not be copied, reproduced or redistributed to any other person
in any manner. The distribution of this presentation in certain jurisdictions may be restricted by law. Accordingly, any persons in possession of this presentation should
inform themselves about and observe any such restrictions
© 2019-2020 Sterlite Technologies Limited 2
Contents
Topic Page No.
STL Overview 4
The Future is Even More Exciting 14
Financial Priorities & Performance 21
Key Takeaways 26
Appendix 27
© 2019-2020 Sterlite Technologies Limited 3
STL Overview © 2019-2020 Sterlite Technologies Limited 4
STL- A Data Network Solutions Company
CUSTOMER SEGMENTS
COMMUNICATION CLOUD & CONTENT
SERVICE PROVIDERS CITIZEN NETWORKS LARGE ENTERPRISES PROVIDERS
ENABLERS OFFERINGS
A B Unified Data Network Solutions
Technology at Global Supply CONNECTIVITY SOLUTIONS
the Core chain
C D
NETWORK SERVICES AND SOFTWARE
Customer
Talent Engagement
Revenue: Rs. 5,087 Cr. 3300+ Employees 3 Innovation Centers 271 Patents
© 2019-2020 Sterlite Technologies Limited 5
Our Connectivity Solutions Portfolio
OPTICAL
COMMUNICATION
PRODUCTS
OPTICAL FIBRE OPTICAL FIBRE STRUCTURED
AND PREFORM CABLES DATA CABLES
• Full suite of ITU-T fibre • Customised cabling • For a variety of
products from low loss to products for FTTx, applications in
bend insensitive fibre utilities, oil and gas, structured cabling –
transport and defence From data centres to
• For NLD to Access Network applications
enterprise
Amongst the world’s applications
• Smarter FTTH Plug and
largest integrated Play solutions
manufacturers of OF
and OFC, with facilities
in Brazil, China, India
& Italy
1,728 FIBER COUNT Optical CAT 6A One of the slimmest
BEND INSENSITIVE Optical Fiber cables
Fiber Cable
Integrated Offerings for Network Services
INTEGRATED End to End System Disruptive Network
NETWORK Integration, Network Software Offerings
Design & Rollout
SERVICES &
SOFTWARE Key Turnkey Projects Key Solutions
• Naval communication network • Digital Experience & Engagement
• Network for Spectrum, Indian Army • Digital Monetization & OSS
• Network creation for Leading Indian Telco • Programmable Network & Intelligence
Network Design & • Bharatnet across MP, Maharashtra and • Intelligence & Insight (Intelligent Data Lake)
Telangana
Rollout
Integrated FTTX NETWORK SOFTWARE
SOLUTION DESIGN PLATFORM
System Integration
NETWORK PROGRAMMABLE PLUG & PLAY
Network Software NETWORKING KITS
ROLLOUTSIntegrating our Unique Capabilities Across the Layers of Data Network
Bringing it all
together as…
E2E
Solution
Global Leader in the End to End Data Network Solutions
© 2019-2020 Sterlite Technologies Limited 8With Technology at the Heart of the Organization
Academia
3 2 271
Software
Innovation Patents
Delivery
Centres Globally
Centres
Centre of Excellence, Centre for Smarter Speciality Products Forums
Aurangabad Networks, Gurgaon Experience Labs
Core research on optical fibre for Technology and applied research on Experience Lab for Structured Cabling
high-speed connectivity smarter networks of the future Solutions
© 2019-2020 Sterlite Technologies Limited 9Backed by Agile Delivery and Global Supply Chain
A GLOBAL PRESENCE C FY’19 ACQUISITION: MB (STL, ITALY)
Bringing production closer to the
customers
Integrated Planning with
Global Supply Chain
Market Presence Sales Offices Manufacturing Facilities
50 33
B FIBRE AND CABLE EXPANSION
State of the art silicon to fiber plant in Aurangabad 30
22 15
Fully automated machines with robotic operations
8
(Industry 4.0)
World class clean room infrastructure
FY’ 16 FY’18 Jun ’19 FY’15 FY’18 June’ 20
Cabling expansion across Italy, India, Brazil
Optical Fibre Capacity (Mn fkm) Optical Fibre Cable Capacity (Mn fkm)
© 2019-2020 Sterlite Technologies Limited 10And Strong Talent Profile
Attracting young talent from Expertise within the Organization ranges across the Fields of
• Materials Engineering • Data Science & Analytics
• Photonics & Glass Science • Wireless Technology
• Program Management • Digital Transformation
• SDN/NFV • Industrial Automation
Hiring industry experts form global world-class organizations
Workforce Profile
Qualification Location Gender
Graduates and Post Graduates PhDs Others Overseas India Females Males
18% 16%
23%
3%
74% 84%
82%
11Translating into Customer Wins and Deep Market Penetration
FY’19 Revenue by Customer Segment FY’19 Revenue by Geography Market Penetration
• Partner of Choice for key Telcos in
Citizen China India and Europe
Networks RoW 4%
7%
12% • Network creation partner for one of
the world’s largest greenfield rollouts
of 4G networks
Europe
Enterprise
25%
24% • More than 3x increase in exports
revenues in 3 years
Telcos
India
63%
65% • Breakthrough into two of the largest
Cloud & Content Providers
• Top 20 Customers account for ~75% of
the revenues
© 2019-2020 Sterlite Technologies Limited 12Delivering Strong Performance and Value Compounding
5,087 1,164
+31% +35%
3,205 789
2,594 542
2,275 475
FY 16 FY17 FY18 FY19 FY 16 FY17 FY18 FY19
Revenue (INR Cr.) EBITDA (INR Cr.)
563 34%
30%
+54%
334 20% 21%
201
154
FY 16 FY 17 FY 18 FY 19 FY 16 FY17 FY18 FY19
PAT (INR Cr. ) ROCE
© 2019-2020 Sterlite Technologies Limited 13The Future is Even
More Exciting
© 2019-2020 Sterlite Technologies Limited 14Evolving Data Network Creation Model by Telcos and New Entrants
Apps
Telcos are
focusing Cloud players
more on are investing
platforms into network
and content Platforms creation to
to stay control
relevant customer
experience
Network
Large Enterprises and Citizen centric networks
building data networks and investing in
© 2019-2020 Sterlite Technologies Limited
network modernization 15These New Data Centric Networks are being Built on
1 2 3 4
Compute and
Vendor neutral
Denser Networks Deep Fiberization Open Source storage at the
and disaggregated
Edge
Access layer end points Fiber intensive network to Vendor neutral and Data Center coming closer
will multiply support latency and disaggregated networks to point of consumption
(5G and beyond) capacity requirements (hardware & software
getting decoupled)
© 2019-2020 Sterlite Technologies Limited 16Leading to Our Demand Drivers for FY’20 and Beyond
Core Network
Mobility Access Connectivity Modernisation Data Centre
• Increasing penetration of fixed wireline broadband (FTTx) in Europe & India
• 5G roll outs across different geographies are expected to begin in 2020 and pick pace between 2020-25
• Mobile Backhaul fiberization in countries like India, which is amongst the lowest fiber to the tower
connectivity
• Increased spending by OTT players leading to Data Centre Interconnect opportunities in US
• New rollouts under the Digital Broadband Initiatives by India to bring Rural connectivity
• Network modernization initiatives by large Enterprises like Defence, Railways, Oil & Gas and Power Utilities
• Increased Virtualisation spend by operators for making network agile & scalable
© 2019-2020 Sterlite Technologies Limited 175G will require Dense Fibre Infrastructure
2G 3G 4G 5G
3G to 4G: 3.0x “For 5G rollout, I believe the OFC (optic fibre cable) deployment
2,345 is essential for largescale deployment” – Chuck Robbins, Cisco
Chairman
“Majority of our map will have 5G. So we are building fiber
2G to 3G: 1.9x right now.” – Hans Vestberg, Verizon CEO
790
426 “One of the things that I think often gets overlooked in the 5G
discussions is the need to have a quality fiber-optic
2G (CY1999 to 2004) 3G (CY2005 to 2010) 4G (CY2011 to 2017) connection.” – Kevin Morgan, Clearfield CMO
Global OFC Consumption (Mn fkm)
Biggest economies
expected spend on 5G
$400 Billion $130 - 150 Billion $100 Billion $24 Billion
© 2019-2020 Sterlite Technologies Limited Source: CRU, Industry Estimates 18STL expanding its Addressable Market through its 4 Pronged Strategy
1 INNOVATE
New Value Added
Journey towards Expanding Products and Offerings
Addressable Market 2
$75 Bn 4 SCALE
EXPAND With new
2023 Into new Customer
portfolios Acquisition
and and new
applications Geographies
3 INTEGRATE
Moving towards an
$20 Bn integrated “solutions
based” offering
2017
© 2019-2020 Sterlite Technologies Limited 19Starting the Year with Highest ever Future Visibility Through Order Book
2.1x
10,516
1.6x
5,223 5,087
1.2x
1x 3,018 3,205
2,275 2,594
2,253
FY16 FY17 FY18 FY19
Revenues (INR Cr.) Order Book (INR Cr.)
Order Book at an all time high of Rs. 10,516 Cr.
© 2019-2020 Sterlite Technologies Limited 20Financial Priorities &
Performance
© 2019-2020 Sterlite Technologies Limited 21Financial Priorities under Strong Governance
Growth Earnings Capital Allocation
• Profitable Organic • Drive sustainable EPS • Focus on Free Cash Flow
Growth growth Generation
• EPS accretive strategic • Attain earning objectives • Sound Leverage and
acquisitions across economic cycles Working Capital Ratio
• Commitment to R&D • ROCE > 25% • Stated dividend policy with
and Talent consistent returns to
shareholders
© 2019-2020 Sterlite Technologies Limited 22Financial Performance (FY’18 Vs FY’19)
P&L (INR Cr.) FY18 FY19 Growth (%) Balance Sheet (INR Cr.) FY18 FY19
Revenue 3,205 5,087 59%
Net Worth 1,257 1,815
EBIDTA 789 1,164 48%
Net Debt 884 1,733
EBITDA % 25% 23%
Total 2,141 3,548
Depreciation 182 195
Fixed Assets 1,512 2,356
Interest 104 105
Goodwill 74 107
Tax 133 278
Net Working Capital 555 1,085
Net Income (After
334 563 68% Total 2,141 3,548
Minority Interest)
ROCE % 30% 34% Working Capital Days 63 78
Note: The consolidated financials are inclusive of the performance of Metallurgica since the date of closure
© 2019-2020 Sterlite Technologies Limited 23Debt Profile and Cash Flows
1,733
477 The business continues to
generate strong operational
97 cash flow
The increase in debt is on
884 account of organic &
inorganic investments done
855
for future growth
579
The benefits of these
investments will start getting
visible from FY20 onwards
Net Debt Operating Capex Dividend Investment Net Debt
31-Mar-18 Cash Flow (Inorganic) 31-Mar-19
© 2019-2020 Sterlite Technologies Limited 24Increasing TAM and Evolving Business Profile
$75 Bn
Driven by double digit growth in profits with increasing ROCE profile
$20 Bn
$5Bn
$20 Bn
$5Bn 2019 & Beyond
Offerings : Global Data Network Solutions
$5Bn (Mobility, Access, Core Connectivity and N/W
Modernisation)
2014-2017
Customers: Telcos, Internet Content
Offerings: Design, Build & Manage
2010-2014 (Optical Fiber and Cable, System
Providers, Citizen Networks, Large
Integration and OSS/BSS Software) Enterprises (Defence, Railway, Oil&Gas, etc.)
Offerings: Telecom Products
(Optical Fiber and Cable) Customers: Telcos, Defence, Citizen Asset Light
Networks
Customers: Telcos Expected Normalised ROCE: > 25%
Capital Intensity: Medium
Capital Intensity: High Expected Normalised EBITDA %: > 18-20% *
2017 Revenue : Rs. ~2,600 Cr.
2014 Revenue : Rs. ~1,100 Cr. 2019 Revenue : Rs. ~5,100 Cr.
* Depending upon the mix
© 2019-2020 Sterlite Technologies Limited 25Key Takeaways
STL uniquely placed
Increased end point Evolving Network to leverage these
consumption of data Architecture opportunities
STL provides Data Network Solutions focussed on mobility, access, core connectivity, network modernization & data
centre to its Telcos, Cloud & Content Providers, Large Enterprises and Citizen Networks
Increasing its addressable market to $75Bn by FY23 through new offerings, solutions, market penetration and
expansion
Delivery of high growth in the past while evolving the business model to suit the needs of the customers
Financial priorities of robust growth, sustainable earnings and prudent capital allocation
© 2019-2020 Sterlite Technologies Limited *Source: Industry Estimates 26Appendix © 2019-2020 Sterlite Technologies Limited 27
Growth in Demand of Optical Fiber has been Unabated across Centuries
World’s cumulative deployment of 1Bn fkm cable
Optical fiber cable deployment
has shrunk drastically from 38 years to 2 years
has outpaced the growth of
world economy by ~5x
13.9
38 years 5 years 3 years 2 years
1 Bn Fkm 2 Bn Fkm 3 Bn Fkm 4 Bn Fkm
2.9
1970-2008 2008-2013 2013-2016 2016-2018
1.3
Population GDP (World Optical
economy) Fibrer cable
20 years CAGR: 1997 to 2017
© 2019-2020 Sterlite Technologies Limited Source : CRU 28Global Demand for Optical Fiber Continues to Reflect Strong Annual Growth
Optical Fiber Cable Demand (Mn fkm )
511
493
65
58
North America 429
Europe 48 54
382 51
China
+16% 46 43
India
314
Others 40
41
263
246 40 279
218 34 281
37
189 32 244
173 38 29 216
29 30
140 27 156
20 25
11830 132
95 121
2624 99 25 29
75 25 20 80 87 20
20 12 15 33 42 15 16
6 9
17 23 9 9 7 4 81 84
3 7 53 57 62 65 72
3 29 32 35 37 41 48
22
CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018
Continuous growth of data driven by network evolution and changing consumption pattern reflecting strong demand for Fiber
Globally >4Bn kilometre cumulative fiber already deployed in the networks; replacement lifecycles building in
© 2019-2020 Sterlite Technologies Limited 29With Fiber reaching Closer to the End Consumer Creating a Multiplicative
Demand
Reduction in average fiber link by 10x, drives a 100x increase in fibers required to support the network
Network Densification
Fibers to cover 100 Mn connections
1,000,000 Access Today’s 4G Network Future 5G Network
100-200m
100
10,000 Metro 1KM
100
100 Long 20-25x
Haul
cell sites
100
Sub
1 Sea
10 10 10
0.1
• These cell sites will be connected through fiber
100,000 10,000 1,000 100 10 in the 5G network
Link Distance (Km)
Source: Corning Source: OFS 30
© 2019-2020 Sterlite Technologies LimitedSTL’s Complete Control over the Manufacturing Value Chain
High Tech: R&D Led Model
PREFORM
Restricted:
Increasing Barriers to Entry
Players < 10
STL is Centralized Platform for Glass/ Preform
present
across the Operational Excellence Model
layer FIBER DRAWING
Limited:
Players < 50
Global Platform for Fiber Draw
Application Oriented Solutions: Locally Presence Model
CABLING
Extensive Competition:
Cable Manufactures < 200
Global Platform for Fiber Cable Systems
• Glass Science • Fluid Mechanics • Wave Optics
• Chemical Engineering • Large scale Automation • High Temp processing ~ 2000 deg C
© 2019-2020 Sterlite Technologies Limited 31Strong Corporate Governance
Independent Directors on the Board of STL
Kumud Srinivasan Sandip Das
(Non-Executive & Independent Director) (Non-Executive & Independent Director)
• VP and Director of Non-Volatile Fab Manufacturing and • One of Asia’s most respected telecommunications professionals
Automation Systems at Intel Corporation and an acclaimed Chief Executive
• Has spent 30 years at Intel in US, leading multiple global • Ex-MD of Reliance Jio, Group-CEO, Maxis Communications and
functions, prominent ones being R&D for technology Hutchison Essar Telecom (now Vodafone), India
manufacturing, industrial automation and IoT for manufacturing • One of the founding members of private telephony in India and
facilities was part of the group of individuals that founded Hutchison Max
• She served as the President of Intel India from 2012 to 2016 Telecom in 1994
A. R. Narayanaswamy Arun Todarwal
(Non-Executive & Independent Director) (Non-Executive & Independent Director)
• Chartered Accountant & Management Consultant with over 35
• Partner of Todarwal & Todarwal, a Mumbai based firm of
years of industry experience
Chartered Accountants
• Member of The Institute of Chartered Accountants of India
• Member of The Institute of Chartered Accountants of India
• Provides consulting services in accounting, financial
• Has rich and varied experience spanning over three decades in
management and information technology across several
management consultancy, finance and audit
industry verticals
© 2019-2020 Sterlite Technologies Limited 32Sustainability & Governance | Positively Impacting Lives & the Environment
Overall impact since 2006
296,800+ 35,000 MT 99% Efficient 64,000+
Lives through Waste diverted Rakholi OFC Plant Lives through Water
Health away from Landfills received India’s 1st Conservation
initiatives ZWL Certification initiatives
457,800+ 7,600+
Lives through Over 830,000 Lives through Women
Education & Rural Lives impacted
development Empowerment
initiatives initiatives
© 2019-2020 Sterlite Technologies Limited 33Corporate Structure & Shareholding Pattern
Corporate structure Shareholding pattern
Volcan Vedanta
investments 100%
Resources Plc.
22.7%
29.4%
Public
shareholders 53.8%
53.9% 54.0%
46.1%
14.2%
10.8%
9.1%
Sterlite Technologies Limited 6.0%
58.0% 100% 75.0%
Promoters & Promoter Group
Brazil JV China JV
Sterlite Tech s.p.a
FII
Other Institutional Holders
100%
Retail
Metallurgica Bresciana
Source: Company information; Karvy Shareholding Services; Data as of Mar 31, 2019
© 2019-2020 Sterlite Technologies Limited 34beyond tomorrow © 2019-2020 Sterlite Technologies Limited 35
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