Sterlite Tech wants to be among the world's top three optical fibre companies

A: We are very excited about having this facility come up. It has been a dream for us for a while. Just setting a context, the US is one of the largest markets globally for optical fibre. They are right in the midst of a multi-year network build-out for 5G, fibre to the home, fibre to enterprise, as well as for rural connectivity. For this, there is a $42 billion project called Broadband Equity, Access, and Deployment (BEAD), which gets launched and goes live at some point next year. So, the whole thought process was to tie up with the customers that we have, they have committed to us with some sort of long-term agreements as well. We recently launched two partnerships —one was Windstream, which is in the midst of a $2 billion network rollout across 18 states, and the other is TruVista, which is also from the same locality and is looking at providing broadband services and various applications in the region. This is part of our overall strategy to become the world's top three, which we are very excited about. Specifically in terms of North America, this helps us provide better lead times, better research & development and customisation for our customers locally.

A: We won't be able to comment for competitive reasons in terms of specific revenues from this facility. But overall, what we had talked about was our investment and capex this year. The investment would be in the range of Rs 300-350 crore. And certainly, as we see the capacities getting fully utilised in the course of the next 4-6 months, we do believe that this will be a meaningful part of our overall capacity. We have planned about 50 million fibre kilometres and around 42 million in cable capacity. So, with this US facility coming up, we will be fully invested in terms of our capacities.

A: I think that still continues and even most recently, during our discussions with customers, we continue to see both elements of inventories, which continued; there will be still some period —I believe around 4-5 months, where the inventories will take time to reduce. With the higher interest rates, probably some amount of second thought or slower deployment in the short term while all our customers are speaking to their potential customers about continued commitments from a 3-5 year perspective. So that is why we are also looking very closely at other geographies outside of the US, like Europe, and of course, our home market in India, Australia, etc. where we can look to increase our volumes.

A: Typically, for most of our investments, this year, we are looking at capex of around Rs 300-350 crore. We look at the return on our assets and  investments in around 3 years. In the past, what we have seen with various cycles of fibre and cable, also we have seen faster returns on cable, and the glass and fibre investments take a little bit longer.

A: For example, if you take a 5 million fibre kilometres (fkm) capacity and take on average about $15 to $20, you can make about $100 million of revenue annually on that investment. So that is typically the ratio. And the way we look at it is that we want to book with our customers for 2-3 years forward, and it depends on the market scenario in terms of how they are willing to commit in terms of volumes and prices.

A: Yes, that is right. It is a combination of 2-3 things. One is the inventory that I spoke about. Second, the BEAD project, which I mentioned, is a massive project by the US government. The actual funding will probably start flowing in probably second half of next year. So that will add a lot of impetus for our current customers and potential customers to scale up their network rollout.

A: Yes, absolutely. So, as I said, it will now be a function of what more we can push across North America, as well as in the other geographies. We continue to be bullish on other markets like Europe and India. So that is really where disproportionate focus is going to increase our sales there. We do have our 80-facilities running well, and we do have our factories in India running. So, the big priority will be now to reposition some of our sales in these markets.

A: We are still evaluating it. I would probably have to come back post our results.

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