Sterlite Technologies Ltd Q4 FY22 Earnings Conference Call Insights

Key highlights from Sterlite Technologies Ltd (STLTECH) Q4 FY22 Earnings Concall

Management Update:

• STLTECH achieved its highest ever revenue of INR5,700 plus crores, a growth of 19% YonY. The company’s order book is stable at north of INR11,500 crores, out of which, U.K. services now stands at INR1,000 crores.

• STLTECH said it aims to increase its U.K. revenue contribution to 25% of global business services by FY24.

Q&A Highlights:

• Pranav Kshatriya from Edelweiss asked about STLTECH considering demerger of various businesses into different entities. Ankit Agarwal MD said the company has taken in-principle approval from the Board that if the need arises, and only at the right valuation price, STLTECH may consider raising funds at the equity route. STLTECH does not plan to increase the consolidated debt any further.

• Pranav Kshatriya of Edelweiss asked about margin trajectory. Mihir Modi CFO replied that STLTECH expects it to improve QonQ, if not by significant amount, certainly in the right direction in Q1 and Q2 till the company gets to the H2 numbers.

• Pranav Kshatriya with Edelweiss enquired about the capex for FY23. Mihir Modi CFO answered that on the capex side, STLTECH is looking at about INR 500 crore capex, out of which the INR400 crore will be new capex and about the rest will be maintenance.

• Neerav Dalal of Maybank Kim asked about the BharatNet Phase 2 India tendering timeline. Ankit Agarwal MD replied that STLTECH is in a very positive investment phase in India overall, both on private sector as well as BharatNet in particular. On BharatNet, the government’s model is getting shifted from capex and opex model. So the timeline will be next 2 to 3 years.

• Mukul Garg asked about the breakup of margin impact adjusted of provision for 4Q22. Mihir Modi CFO replied that about 100 bps came from increased investment, about 200 bps came from freight and thereabouts came from raw materials.

• Mukul Garg also enquired what portion of STLTECH product order wins in 4Q had higher prices baked in. Mihir Modi CFO said that it’s safe to say that about 10% to 15% of the order booking in the cable side was on higher pricing, and STLTECH continue to have that journey.

• Tejas Sheth asked about the margin trajectory for H2 and how much of that is dependent on negotiation with clients and on a thought towards softening the costs. Mihir Modi CFO replied STLTECH is looking at about 7% to 9% margin improvement. In 4Q, STLTECH is at about 12-13% for the optical business and should get to 20-22%.

• Saket Kapoor asked about the key areas of concern for the organization and focus areas. Ankit Agarwal MD said the main concern is to maintain the stated growth at the right profitability level and to generate cash as a business. At the same time make certain investments. Additionally, generate cash for the business and able to utilize that for the capex, and make working capital more efficient.