Sterlite Technologies Limited (532374) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to STL Q4 FY '25 Earnings Conference Call. My name is Kunal [indiscernible] Investor Relations. We are joined by Ankit Agarwal, Managing Director, STL; and Ajay Jhanjhari, CFO, Optical Networking Business at STL, to walk us through the Q4 results and to answer any questions that you may have. [Operator Instructions] You can download a copy of presentation from the company website that is www.stl.tech. Please note that this call is being recorded. Before we proceed with this call, I would like to add that some elements of today's presentation may be forward-looking in nature and must be viewed in the relation to the risks pertaining to the business. The safe harbor clauses indicated in the presentation also applies to this conference call. I now hand over the call to Ankit Agarwal for opening remarks. Over to you, sir.

Thank you, Kunal. Good day, everyone. Thank you for joining us for our quarter 4 FY '25 earnings conference call. As we advance to the next fiscal of FY '26, directionally, our strategic priorities remain the same in the Optical Networking business. Some of the key strategic priorities for FY '26. Our focus remains on driving growth by increasing market share in optical fiber cables and improving our connectivity attach rates. To achieve our goal of generating significant revenue from data enterprise segments, we will accelerate the development of comprehensive data center product suites and tap a vast potential in this market. Additionally, we will sustain our efforts to drive technology and cost leadership in the optical domain. As we build STL Digital, our vision is clear, to be consciously investing in both technology and domain capabilities. This means not just keeping pace to the digital world, but thoughtfully choosing where and how we must grow with purpose and precision. At the same time, our focus remains firmly on profitable growth. We are not chasing scale for the sake of it. Instead, we are driving sustainable long-term value for our customers, our partners and our teams. Every step we take is guided by a balance of ambition responsibility to build a digital business that lasts. We stand before you with immense pride, as we reflect on a moment that went far beyond our routine operations, a moment defined by service, courage and nation building by our stellars. During the recent strike in Jammu Kashmir, our stellars took a critical -- took on a critical mission to restoring the Army's fiber communication network. Every team member behind the scenes showed unwavering commitment, ensuring seamless connectivity under the toughest conditions and risks rising to the challenge, not just as professionals, but as patriots. And to everyone involved, we thank you, we salute you, your resilience and dedication makes STL and the entire nation proud of you. At STL, we believe in leading with responsibility creating more connected and inclusive world. Since FY '19, our initiatives in education, women empowerment, health care and sustainability have positively impacted millions across India. Through RoboEdge program, we have reached over 6,000 students across 11 schools and are proud that 13 of them represented India recently at the International Robotics Championship in Estonia. . Our Jeewan Jyoti program, founded by Ms. Jyoti Agarwal has empowered over 5,800 women artisans in vocational skills with many now showcasing their work under the Akai brand. In sustainability, we installed 4,500 kilowatts of solar capacity, cutting emissions and advancing clean energy across our facilities. We are working with 53 villages on afforestation and water conservation, planting thousands of trees and rejuvenating ecosystems. And through Swashthya Suraksha, we had delivered health care to over 2.6 million underserved individuals in rural Maharashtra. At STL, sustainability is the heart of everything we do. We are committed to achieving net zero by 2030, which will place us far ahead of our peers in this space. Since FY '19, we have diverted over 2.6 lakh metric tonnes of waste from landfills and recycled over 9.6 lakh cubic meters of water, driving through a true resource efficiency. We are proud to be the world's first optical fiber manufacturer certified for zero liquid discharge and zero waste on landfill. And we have also collaborated with Hygenco to supply green hydrogen to our manufacturing facilities. Aligned with 16 out of 17 UN SDGs, we positively impacted over 9 lakh lives and earned over 100-plus ESG awards, a testament to our commitment to a sustainable and inclusive future. In the following slides, we'll showcase our optical networking business and our focus journey towards becoming 1 of the top 3 global players in optical connectivity. We are clearly at a pivotal moment in time with 3 major investment cycles. 5G, FTTx and data centers are coinciding and creating unprecedented opportunities for infrastructure growth across the globe. Starting with fiber-to-the-x, despite a slight global dip, North America is scaling from 39 million to 65 million kilometers fiber by 2028. Over 100 million U.S. homes await fiber. In India, Jio and Airtel are driving growth via 5G, fixed wireless and bundled broadband. The revenue potential for the telecom operators is between $11 billion to $15 billion annually. In data centers, optical cable demand is set to rise over 26% in 5 years. The North America DC market itself will hit $139 billion in total DC spend, and India investing close to INR 65,000 crores with a 25% increase in capacity by 2028. 5G is the real game changer. The target globally is expected to have about 6.3 billion subscription by 2030 and covering over 67% of mobile users. 80% of the mobile data will ride on 5G, and you will have over 3.6 billion users with just stand-alone 5G. The driving forces clearly are data centers fueling long-haul fiber demand. The Big Tech will invest over $100 billion by 2030. And as the government pushes to connect rural India and rural America, just in India, we expect $2.5 billion of BharatNet Phase 3 and in the U.S., there's over a $42 billion program for BEAD. Further, we will highlight the transformative opportunity that stand before us. The convergence of the AI revolution and the explosive growth of data centers, which is unlocking unprecedential potential, across the digital infrastructure space. As we can see, by 2030, the global data center demand will triple to 219 gigawatts with 70% potential AI, triggering a $7 trillion in investment wave. India is also rising fast. We're doubling our capacity to 1.8 gigawatts by 2026, becoming a digital powerhouse. The backbone of this shift is fiber. AI workloads need almost 36x more fiber compared to regular workloads, pushing a 70% higher density and almost a $2 billion opportunity in this decade itself. STL is ready. We have our Make in India for the world, AI-DC portfolio, which offers scalable low-latency GPU-ready solutions and which are built for this AI era, and it's working. As you will see in the numbers, 21% of our growth in DC and enterprise revenue in this quarter. As the global landscape shifts, demand for optical fiber set to rebound. After 2 slow years, 2025 makes -- marks a turning point with fiber consumption is projected to grow at 2.7% year-on-year led by strong U.S. momentum. India's BharatNet Phase 3 as well as some pockets of demand globally. The medium-term outlook is even stronger, excluding China, global demand expected to grow at almost 8.2% CAGR with North America clearly leading the charge, driven by AI infrastructure data centers and the federal programs that I spoke about like BEAD. CRU, which is a leading agency forecasts 116 million fiber kilometers of demand in this region alone. With a sharp focus on North America and the global ex-China market, we are well positioned to power the next wave of digital infrastructure with future-ready fiber and end-to-end connectivity solutions. I wanted us to take a moment to recognize that fiber absolutely continues to be the bedrock of digital infrastructure, whether you talk about 5G, whether you talk about fiber-to-the-home or the AI-led data centers, all of them will ultimately rely on a core base and foundation, which is optical fiber. Industry leaders clearly around the world are making significant bets on fiber deployment and doubling down on making sure that they stay ahead of the curve with ramping up their fiber deployments. Just some of the examples I can highlight here, like AT&T is targeting 50 million fiber connected locations by 2029. And Verizon, through its $20 billion play and acquisition of Frontier Communications is pushing forward towards 40 million fiber homes. Back home here in India, Airtel is investing heavily with over 44,000 route kilometers just in 1 year and is further expanding its data center capacity as well as fixed wireless on the back of optic fiber. Microsoft, one of the large and leading hyperscalers in the world has already started to innovate with hollow-core fiber and is looking at how fiber can play a critical role in driving its latency down across its network. Zayo, a very, very large infrastructure -- fiber infrastructure provider has noted a major shift. It has clearly talked about its long-haul fibers, which have jumped from 8 to 12 fiber counts in a cable moving to 144 to 432 fiber counts in just 12 to 18 months, all of it on the back of demand for AI. There are many such examples. These are not just isolated, and they're part of a global movement where telecom operators, hyperscalers and other companies have clearly realized that fiber is the way forward. I'm also proud to share that STL is pushing the frontiers of technology and innovation. We have achieved many global first, launched -- from launching India's first quantum secured network with multicore fiber to pioneering green hydrogen and developing the world's slimmest optical fiber at just 116 microns. Our innovation engine is strong with 740 patents and 76 new filings in just this year alone. We are building next-gen capabilities with hollow-core fiber and AI-driven fiber sensing. Our commitment to excellence is recognized with National Awards for impactful IoT solutions, social compliance and health and safety excellence. We are making global impact with BABA compliant products from our U.S. facility and Make in India solutions, which are also craning European traction Made in India and Made in Europe for the European markets. From expanding our optical and copper connectivity portfolio, earning praise for India's Telecom Minister for our AI-led data center innovations, STL is well set up for the future. As per CRU data, we have maintained our stable 8% market share in the global OFC market outside China, a strong foundation as we work towards regaining more ground. But the real highlight is clearly our optical connectivity attach rate, which is up from 13% to 22% in just 1 year. That's a significant year-on-year expansion, showing a sharp focus on value-added solutions and deeper customer integration. Now let's look at the optical network business, the financial performance. As we reflect on the financial performance of the optical business, in line with our guidance, Q4 FY '25 revenue stands at INR 979 crores, which shows a healthy improvement on year-on-year basis. EBITDA for the quarter stands at INR 125 crores at 12.8% of the revenue. EBITDA margin reflects substantial improvement year-on-year basis, driven by constant focus on the cost leadership. At STL, we are well positioned to accelerate growth in the optical business. We have scaled up local capacities and now closer to the markets with strong traction in North America. Our cost initiatives are showing results, and we continue to focus on all ways of efficiency. With 740 patents that I mentioned, innovation drives our data center portfolio and customized solutions helping us scale the optical connectivity business going forward. The most recent U.S.-China trade dynamics are also creating new tailwinds for India-led manufacturing, positioning STL to capture rising global demand, particularly in our enterprise business. Now let's discuss our STL Digital business and its performance. STL Digital continues to bring strong momentum backed by global presence, a skilled team of over close to 1,200 consultants and a robust order book of INR 451 crores as on 31st March 2025. We serve the 26 global customers across key sectors like technology, health care, manufacturing and energy, delivering enterprise SaaS, cloud and security, product engineering and AI-driven solutions. Our recent highlights include driving Vedanta's digital transformation for over 15,000 global users, securing repeat wins across industries and building a powerful partner ecosystem with 40-plus tech partners. Despite a subdued industry environment, we delivered a strong performance in Q4 FY '25, maintaining revenue of INR 78 crores. Our sharp focus on profitable growth is paying off. STL Digital's EBITDA stood at a positive INR 5 crores in quarter 4 '25. We remain committed to this trajectory and confident of this momentum in coming quarters. Let me now introduce Ajay Jhanjhari, Chief Financial Officer of STL's Optical Networking business. Ajay is a chartered accounted with nearly 15 years of experience across fundraising, capital allocation, M&A, treasury management and business patterning. He began his journey at STL as a management trainee and gone through multiple leadership initiatives and hedge finance, one of STL's core verticals. As CFO, Ajay is focused on driving shareholder value and profitable growth by aligning financial strategy and business goals. On a personal note, I can vouch that he's a very good single and dancer as well. Thanks, Ajay.

Good day, ladies and gentlemen. So I'll just present the financials of STL for the financial year 2024, '25. What we can see here is you see the year started on a note wherein we were low on the EBITDA margins, which were around INR 44 crores, all-time low at around 5.2% against our revenues. With the conscious efforts on cost sides, because we were aware that there are some tailwinds in terms of the requirement of our products, we focused a lot on our cost. And along with slight market improvement, what we can see is our growth to the EBITDA numbers of INR 146 crores. So from the 6% EBITDA number for the last quarter of the previous financial year, we could grow it up to 14%. So that is commendable. And going forward also, we are seeing this is going to be better than this. On the continued operations, we have also been at breakeven or slightly positive on our profit before tax. In Q4 of FY '25, we made strong strides with key global wins. We reentered with a major U.S. customer for high fiber count OFC solutions after a year and secured large orders from a leading OSP in America for OFC and optical interconnect products, boosting regional traction. STL Digital also signed a major tech outsourcing deal with a top Indian conglomerate and continued repeat engagement with a leading Indian networking player. Our revenue mix remains robust with EMEA rising to 55% of total revenues and India climbing to 20%. Yes. Coming on to order book. So our order book is at a healthy state of around INR 4,378 crores for the quarter. It is down in comparison to previous quarter because of the less long-term orders. We were booked for spot. What I can tell you is that going forward in Q1, we are looking for a very good traction in our order book. Our order book spread is INR 667 crores for the Q1 because majority in our Italian subsidiary and all, we always have spot orders. And going forward, for the next 9 months, it is around INR 3,710 crores. We have provided the abridged version of our reported numbers for our review. The net debt for this business now stands at around INR 1,350 crores with a debt-to-equity ratio -- with a much improved debt-to-equity ratio of 0.68x. I would like to tell you that the numbers which we are seeing here is after the demerger, which has happened on the record date of 31st of March 2025. So all the P&L numbers are reflecting numbers of ONB plus digital and services numbers will be reported separately in their Board meeting. Talking about the demerger status, the shareholders and creditors of STL India approved the scheme of arrangement in the meeting held on July 10, 2024. Following this, the demerger petition was filed admitted with NCLT during October '25. The final hearing date was January 30, 2025 with NCLT Mumbai branch. The final approval is received and the resulting company STL Networks Limited is now a separate entity effective 31st March 2025. We are in the process of listing of the resulting company shares. We expect to make it happen by June and depending on the approval processes, it may likely to extend maximum to July.

We're happy to share the successful completion of significant milestone of our journey. The strategic demerger of STL's Global Services business into STL Networks effective March 31, 2025. This move aligns with our goal of portfolio simplification and sets the stage for focused growth in each of the businesses. The demerged entity will now operate under a new and powerful brand identity, Invenia. With this rebranding, Invenia will concentrate on delivering large-scale digital infrastructure ecosystems, making a bold step into the future. We're also proud to announce the appointment of Mr. Pankaj Malik, a veteran in the industry as the CEO of the STL Networks. His proven leadership and execution expertise positions us strongly to accelerate growth in the next phase. The shareholders of STL Networks have received a 1:1 share entitlement based on the holdings as of April 24, 2025. Together, these developments mark a new era of innovation and opportunity under the Invenia banner. As we move forward in our transformation journey, I'd like to highlight the key focus areas across our core business segments. Starting with the optical business, our mission is to achieve technology and cost leadership and secure a spot in the global top 3. We're targeting increased sales in focused markets, boosting optical connectivity attach rates and expanding our data center product portfolio rapidly. In the digital business, our direction is to grow revenue while maintaining a strong focus on profitability ensuring sustainable progress. Each of these focus areas line to deliver value, innovation and long-term success for all our stakeholders. With this, I now hand over the call back to Kunal.

Thank you, Ankit. Ladies and gentlemen, we have now come to the end of our presentation, and we shall move to the question-and-answer session. [Operator Instructions] We will take our first call from Nikhil Choudhary.

And congratulations on completing the demerger of Global Services business. Ankit, the first one on the impact of tariff. It's been 1.5 months since U.S. administration imposed tariff globally. Even after rolling back, it remains at 10%. We have seen when Europe imposed about 12%, 13% tariff on Sterlite Tech last year. While we were able to manage our market share, but I think profitability took some hit, right? And given U.S. itself have some capacity in optical fiber, do you think this 10% incremental tariff for India will have some impact on Sterlite Tech?

Yes. Thank you, Nikhil. So I think you're spot on. We've been working -- let me come to the Europe part. There is an appeal that we have filed as well with the European Commission, so that will take its own due process, could be a year, 2 years process. But we definitely believe on our own merits that we should not be facing any duty in Europe. So that's something that we'll continue to work towards. What we have done, of course, and continue to work on is to continue to look at our cost structures, whether it's in India, but especially in Italy and the U.S. to really make sure that as we are increasing our supply from our local facilities in those geographies, we are making sure that we are more and more cost competitive. So that's going to be ongoing work even through the course of the current year. What we have definitely seen is actually a pretty positive movement. We are continuously seeing interest from our customers in the U.S., current and new, who are interested in both sourcing from our U.S. facility, but also are open to sourcing from India. So that balance will continue to happen, and we continue to believe that as the market demand scenario in North America improves, then also we'll be able to pass on some of these costs onwards to our customers. I think all of this will play out broadly in the next 1 to 2 quarters. Of course, the 10% itself is there currently for 3 months. Let's see how that gets played out. One thing we have seen, and I called that out earlier is that especially some U.S. customers who are dependent on certain products on the enterprise side and copper side, et cetera, who are single sourced from China or majority source from China, they are definitely seeing STL as an interesting opportunity to partner with for some of their large requirements. .

Got it, Ankit. Second one on growth recovery. I think Ankit, we have lost some market share globally from, let's say, 11% to 8% now. Do you have any time line in mind where we can get back to that particular market share, especially in context that what you have mentioned that we are seeing some demand recovery? Although, Ankit, we are yet to see those recovery in order book number. So any color there as well.

Yes, absolutely. So I think, look, broadly, we are very well set up with our capacities. You're familiar with all the CapEx we've done over the last several years. And broadly, we've been operating at that about between, say, 40% to 50% utilization. So I think all the investments are done. We are working pretty well on our product portfolio. The U.S. facility is now up and running well. So I think all the base is now well set for us to -- as this demand is now starting to come back, I think we are very well placed to increase our utilization. And as you've seen that as we just go back from, say, 50% utilization to 70% utilization, our EBITDA margins will basically go from about 14% currently to about 20%. So that's really where the focus is to generate that EBITDA and then to generate the cash. From a market share perspective, I think definitely, we will look to increase our market share globally. I won't comment on specific targets, but I would say that we are committed towards that vision of being top 3 in the world. I think that will take us probably somewhere between 3 to 5 years, but that's really where we want to get towards.

That's -- a small one, Ankit, the last one on BEAD project. I think new U.S. administration has made some changes in BEAD program. Do you think these changes will lead to further delay and more or less now looks like BEAD demand will flow in CY '26?

Yes. I mean I would say that it's really a lot of things happening in parallel, as you can imagine, in terms of the legal side, in terms of discussions happening with various stakeholders. What we understand broadly is that there is conversations around when does the BEAD finally get formalized? When does it start getting rolled out? And how much of it is fiber versus, say, wireless or satellite. So all of those conversations are happening. I think in principle, there is a push also as well to take it forward and conclude it. . From our own business planning perspective, we're largely seeing this as probably a Q4 this year or a Q1 event next year. So we're not -- and from our planning perspective, we're really looking at our current customers and new customers to drive the growth. One positive thing also that we do expect is that the permitting process in the U.S. will start getting simplified under this new regime, and that could actually also help then accelerate both the regular build-out as well as government-funded build-out.

[Operator Instructions] We'll take next question from Balasubramanyam.

I'm Bala a from Arihant Capital. Sir, my first question regarding data center side. Earlier, you have mentioned about 25% of revenue is expected from data center. I just want to understand what kind of like products we are having, what kind of launches in upcoming years? And what is the strategic focus on data centers? And if you could share some lights on that demand and supply side for especially our products in data center?

Yes. I think, Bala, thank you for the question. We'll be able to only share some information at this stage because we are still, I would say, in advanced stages of building out our product portfolio. I think what we're really looking at is how do we build an end-to-end solution on the passive connectivity layer for the data centers. We have already worked on and build a good portfolio for inter data center connectivity, which is connecting data centers within a campus. We are now working on technologies and portfolio for within the data center. I think that's something that's a very exciting opportunity for the company. And as I've shared in the last few calls, this is something that we are prioritizing on how to build up the portfolio, probably start with a few geographies and then also take it global. This is a market which we definitely believe will continue to grow over the next 5 to 10 years globally. India market, as I just said, will also look to double in terms of the sheer megawatt capacity or gigawatt capacity that is coming up in India. So from all of those conversations and discussions with market, we do believe that this is a very positive opportunity for the company. And also, if you look at the CapEx cycles of telcos, which typically go up and down every few years, the data center spend itself will be a nice for us vis-a-vis just the telco spend. So I think from those aspects, this is a very good opportunity for the company. As we set out a target, 25% of our revenue should come from the data center plus enterprise segment, and that's definitely something we'll move towards in the next few quarters.

Got it, sir. Sir, my second question on the inventory side, how are the inventory levels on the global, especially in the North America? And we have seen some like very big wins in order terms. And another thing, I want to understand the pricing side of our optical fiber and optical fiber cable side on the industry's level, whether we have seen a recovery on the prices?

Sure. I mean the pricing has been flattish. There's nothing specific. I think now with the demand growing in North America and also in India with BharatNet, which will kick start across all the packages. So I think from that perspective, probably I think pricing has bottomed out and should start improving. It will take some time directionally, but I think that's where it is at. I think from -- what was the first question?

Inventory line?

Inventory levels. Yes. I think inventory levels, we've probably seen -- I would say, broadly last 18 months, maybe even 21 months drawdown of that inventory. We've been sharing that update in our calls. I think it's -- probably we're largely done now with the excess inventory in the system, largely in North America. There's probably some pockets of some inventory probably for another quarter or so. But largely, we do see -- and hence, we are starting to see more opportunities in our pipeline. And we do expect a good movement on new orders in the coming quarters.

Yes, sir. Sir, a small quick question on the BEAD program. Like I think it is expected to start from in this financial year. I think the opportunities I see is more than $40 billion. And I just want to understand like what is the time line is given by the government and is there any plan?

As I said, Bala, because it's -- there are a lot of moving parts in the U.S. right now in terms of this project itself. Of course, principally, we do believe the projects moving forward. It's been committed by both houses. I think some of the nuances around how this gets panned out, how much is fiber versus wireless or satellite, some of that detailing will probably get clarified. But as far as the states are getting prepared to receive the funding at state level, I think all of that is moving forward. But from our own perspective, I was just sharing that we do think that this is a Q4 this year or possibly even Q1 next year event.

We will take our next question from Mr. Arun Malhotra.

This is Arun from CapGrow. I think a lot of my questions have been answered, especially on the margin front and the pricing, but still like to understand you have given a lot of demand factors in favor of the industry, especially the 5G, the AI, the data centers, what is the supply side scenario? That's one. And where do you see the pricing? Because we are not seeing the prices going up. So the margin from 13% to 20%, does that capture the price rise? Or is it just the operating leverage which you are factoring in?

No. Good question, Arun. Thank you. I think there's 2, 3 elements to this. I think principally, what I said is just in terms of utilization itself, right? So we've been operating broadly at this 40% to 50% utilization. Our facilities have been pretty well set up globally. So I think as we just see the markets, these inventories, which I spoke about coming down, our volumes going up globally and particularly in the North America market, I think that will help drive our utilizations up and help us improve our profitability. I think on top of that will be that, especially in some select markets, we do expect the realizations to improve. It might take a couple of quarters, but we do see -- if we go by past trends, then in such market scenarios, the realization should also improve marginally. I think in India market, specifically coming to that, yes, prices have been flattish, prices have been on the lower end. But again, here, I do believe that with the demand growing with BharatNet, we do expect the fiber prices and ultimately, the cable prices to go up, maybe marginally, but that's tough to predict at this stage. The BharatNet projects itself will be deployed over 3 years. So a fairly short time frame for a massive fiber network that needs to get built out. And so we do expect a healthy demand in India as well. I think overall on supply, I mean, I wouldn't say there's any major movement. We have seen lower demand locally in the China market since a lot of their 5G and maybe fiber-to-the-home is done. There is a lot of replacement of fiber that's happening because China built its networks on more than 15, 20 years ago. So we are seeing some of that demand. But from a supply side, actually, we're seeing some consolidation in the China market. Some of the larger players are consolidating. And we do see that the market should become healthy probably in China over the next 1 to 2 years.

Just a clarification. You said 13.5% to 20% you want to reach. What's the time frame which you are looking for?

I won't comment on a specific time frame, but I'm just saying directionally through the course of this year, as our volumes improve quarter-on-quarter, we do expect to move towards that range.

Sure. So my second question is on the BEAD and the BharatNet program, especially for BharatNet, our observation -- just correct me if I'm wrong, my observation is that our order wins have been much lower than the competitors. So any comments on that?

Just to clarify, Arun, the -- we have won a project in Jammu Kashmir, which is cumulatively of -- including the deployment as well as maintenance for 10 years, that is close to about INR 2,600 crores, all included taxes, everything. So that is the project that we are taking on board. This is part of the services business, which is now demerged. So I just want to clarify that. And that will -- this project will be part of that business. So the order book that Ajay spoke of earlier, this is excluding that project, and all of this will -- once we get the purchase order in that entity, then it will be part of that order book. For this business, which is the manufacturing business, we will certainly speak with all the various winners of the various packages and look to maximize our share across cable, fiber and connectivity.

Sure, sure. And lastly, on the debt part, any -- what are the plans to reduce the debt?

Okay. So see, if you see the last years, we have improved our leverage ratio significantly. As on now, our debt-to-EBITDA ratio as on 31st March '25 stands at around 3. With the cash generation from the business, which we have demonstrated in the previous year as well, we expect to touch down to 2 by end of this financial year. And the major driver for this would be the cash generation, which we will earn from the business by increasing our EBITDA margins by the better utilization of the capacities.

Sure. And lastly, is the management concerned about the shareholder -- share equity returns for the minority shareholders because if you see you're being the leader in this segment, 8% global market share, but the equity returns for the minority shareholders have been pathetic. Any comments there?

Yes. So See, what we believe is that there is a lot of value in the stock. And once we start improvising on our margins, it will definitely start reflecting. In order to generate that consistent shareholder value, what we are doing is that we are focusing to grow our optical business and build STL Digital, one target to have an attractive leverage ratio. So we have already planned, and we are on the target to deliver net debt-to-EBITDA below 2, which is going to work significantly well. I would also like to update you that in the last year, we have prepared ourselves for the better markets and better capacity utilization. So we have done a lot of things on our cost side. Now it's a time when the market starts picking up, our margins will automatically grow further, which will help us in creating a lot of stakeholder value.

We will take next question from Ranjay Popli.

I just wanted to ask a question regarding international peers, especially in U.S. They've mentioned in their calls that the inventory digestion has taken place, and they are seeing good demand, particularly in the U.S. So any comment on that?

Yes, absolutely. That's exactly what I shared earlier as well that we have seen probably -- it's taken 18, 21 months or so for the excess inventory to come out of the system. I think most of that is done, probably this quarter or so is what's -- why we see this. But we are already seeing in our pipeline of opportunities, whether there are more opportunities coming for STL, both for supply from our U.S. facility as well as from India. So that is definitely aligned with what we are seeing as well.

[Operator Instructions] Next, we'll take question from Saket Kapoor.

Yes. And welcome Ajay ji, your first interaction with the investing community, and all the best to you for that.

Thank you.

Firstly sir, if you could just give us some understanding what goes into -- currently into the consolidation earnings when we are reporting stand-alone and consolidation, if you could just provide to us which bits of businesses and the geographies go into consolidation? And Secondly, as interconnect part of the story was mentioned by Ankit that the pie has changed. So what have been the revenue and the profitability contribution from interconnect part? And third question is about the fiberization of our -- of the towers. So what is the update on -- since I think so all the telcos are speaking about 5G rollout and successful rollout all across the country. But we have not seen that kind of fiberization happening as earlier reported that our towers are under fiberized. So what is the current understanding? And what's the way forward from players like us? These are my 3 questions.

I'll take the third one. I'll just start with the third question, Saket ji. So I think, see, principally, we are -- we definitely see both in India and globally, that as you move from 4G to 5G, you need much higher tower fiberization, which means fiber directly from tower to this backhaul. So that continues to be a trend in India as well. We are seeing that all the operators, as they are increasing their 5G network, both coverage and capacity, that trend continues. What we are also seeing is that operators are looking at an end-to-end fiber network for all their requirements, whether it's fiber to home, fiber to enterprise, fiber to fixed wireless point or fiber for 5G, all of this is converging towards 1 fiber network. So we continue to see, I would say, a reasonable amount of fiber getting deployed by the telcos. I think as I said, the next big kicker will be BharatNet Phase 3. What has been launched so far is by the central government. On top of that, we also expect a few more states to launch their own BharatNet Phase 3. So I think there are multiple opportunities, which ultimately will take the fiber to every village in India. What we ourselves are taking responsibility for -- in Jammu Kashmir, will be to take fiber to every village in Jammu Kashmir. So I think this is a good opportunity for the country, great service to the country. I'll ask Ajay for the other 2 questions.

Yes. So on your first question regarding consolidation. So I would like to make clear that we demerged on 31st of March '25. So the financials, the P&L piece of service business will be reported under the new entity, which is STL Networks Limited. We are going to schedule a Board meeting for that as well, which is more likely to happen in the next 2 to 3 weeks. And therefore, the financials, which you are seeing currently consists of optical networking business and our digital business. I hope it answers the question.

No, sir. Sorry, sir. Sorry to interrupt you, my point was for the optical network business consolidation, we see revenue of INR 979 crores. And when we look at the stand-alone numbers, they are lower than that. And even the losses, they are higher. So I think so these are carved out number only for the OBM business. So I...

Yes. So because in our consolidation, there are multiple entities, which operates outside India. So we have our wholly owned subsidiary in Italy, which is Metallurgica, then we are having our own plant in U.S., which is STI U.S. And then we are having our 1 plant of draw in China as well. So that is why you are seeing different numbers in consolidated numbers and stand-alone numbers. I would also like to remind you, like 70% -- 75% of our ONB revenue comes from the international market. And therefore, these factories are set up there.

Correct, sir. So going ahead, sir, if we could just provide that split also so we can get the understanding how the other geographies are also performing. That would have been better...

What we do, Saket, is actually give you a revenue split. We don't provide more information for competitive reasons.

Correct, sir. And next question on interconnect, sir, you were answering. I interrupted you.

So on interconnect like you must have seen, we -- our attach rate, which was 13% in the last financial year has increased to 22% in the current financial year. This interconnect business, we are very optimistic upon. It has shown a decent growth in the last financial year, almost increased by 30%. And this is a very profitable business with a better ROCE. And what we are doing right now is to expand it further in the other markets where we were not supplying it earlier. So we are very optimistic on it. We are also in process to evaluate whether we need to spend some amount on it on the R&D activities to grow this business further. .

[Operator Instructions] Next, we'll take a question from Harshit Khadka.

Sir, what kind of revenues are we expecting from BharatNet in FY '26 and '27?

Harshit, again, this is just to clarify, from STL perspective, we are looking at the manufacturing of the cables, the fiber -- supply of fiber to other cabling companies as well as the connectivity products. I think it's still early for me to give a specific forecast in terms of the market, in terms of the demand as well as then what share we can take. From my perspective, basically, as I said, this is a 3-year deployment, which will kick off soon. There are some packages, which have been awarded already. Some packages still to be awarded. So I think that will take a little bit of time to clear all that out. Once the people have been awarded the package, then we will be negotiating with the various winners. We have our own consortium partners, and we'll be negotiating with them to see how we can best serve them. Clearly, our intent would be to have a good market share across the packages, including the package that we have won in Jammu Kashmir. So I think it's a bit early today to give you any forecast like this. But be rest assured, we are putting our efforts to get a good share.

We'll take next question from [ Aditya Jhawar ]. [Operator Instructions]

I'm from KK Investments. Firstly, I would like to say to the management that as investors, we are going through a lot of pain, STL Tech, from last, I mean, 5 to 6 years. And now we have demerged as a company. Now I understand this will be a manufacturing part of STL, where we are having currently optical fiber and optical thing, which is at most commodity and we say because the prices doesn't -- it is a global thing, right? So as an investor, how do you see we are shaping STL Tech going forward? That is my broader question. We'll be focusing on the manufacturing part, I mean, building hardware manufacturing or because when you see Tata's or HFCLs, right, they are the late entrants in this market and they are capturing the market share. And we've been the pioneers from last 20 years. And in the last 10 years, we have been burning cash, thousands crores of write-off, and we are going through this pain. So how will you take up the responsibility, Ankit? That is my first question.

Just to clarify, there wasn't any INR 1,000 crores of write-off. I just want to clarify. But on a serious note...

R&D investment.

Yes. I just want to fully appreciate that we are all accountable as leadership and management to create value for our shareholders and be rest assured that that's what we are fully committed to. To just reflect a little bit on our journey, we've -- over the last 3 to 4 years, actually shut down several businesses, including we had looked at wireless solutions. We had looked at OSS/BSS solutions and many others, which have -- we have exited. Some businesses, we've also been able to sell and bring the cash in. As we saw our balance sheet also over last -- in April last year, we did a QIP of close to INR 1,000 crores to make sure that our balance sheet was in the right shape. And I think we have invested in our capacities. I think what I can definitely tell you with confidence is that we are very, very clear about our strategy and our focus of what to do and not to do. We are clear that our core business is the optical business. We are going to be world leaders in this business. I would disagree with you when you say that this is a commodity business. This is a high-technology manufacturing business, and I would urge you and any of our shareholders to visit our facilities in India globally. It is truly cutting-edge technologies that we create. And along with our optical connectivity and now our data center portfolio, which is coming up, our whole thought process is to compete and be the best solution provider with -- for our customers. We truly believe that we will win on technology, and we will charge a premium for our solutions for the value they offer to our customers. That's really the thought process. We believe that this can help us drive better profitability. And also we will be very focused on generating cash and reducing our leverage going forward, as Ajay said. So that is the commitment from our side. That's where our focus is. And we are really looking forward, as now that we see the market conditions also improving, how do we make sure that we get the right market share at the right pricing and also generate cash.

We'll take the next question from Pratap Maliwal.

I'm Pratap here from Mount Intra Finance. I just wanted a clarification regarding your statement on the Chinese market and the demand that -- maybe there's lower demand in China and you see that's kind of stabilizing. I just wanted some more color on that and how that affects our business in particular? Is it that because of lower demand, because China is a large producer, they placed into -- dump more in the international market and that kind of hits into our share? Or what is the outlook here on the Chinese market, please clarify?

See, I was just -- the question was on what's the supply, right? And so I think we must understand 50% of the world market demand, if you look at the -- our past chart historically, the demand and then the supply is 50% of the world market has been China, right? That's a sheer of volume that the 3 telecom operators out there deploy, and they've been building out a massive network. On a given year, China deploys 12x amount of fiber that India deploys. That's been the kind of build-out they've been having. What we now see is that a good portion of the network has been built out for 5G as well as fiber-to-the-home, to the major cities, which is where then I commented that we do see some decline in their own demand year-on-year now and probably going forward. But as a result of which, also, there's been a consolidation in suppliers in the China market. So we do see that as a healthy sign. And we do see that the pricing also in China has bottomed out and should normalize going forward. That was the feedback. Impact to STL? I don't see -- the way the markets that we serve, particularly in North America, Europe and in India, which are our focus markets, we don't see a lot of competition, particularly on the cable side from Chinese, but in some places, they do serve and they supply fiber at lower cost. Again, that was my point earlier that our whole thought process is to compete on technology and on solution, so the more we are able to supply our customers with cable and connectivity together as a solution that will be a big advantage for our company going forward.

We'll take next question from Rohan Patel.

Sir, since last couple of quarters, you were talking about the inventory clearing out, and now you are firmly believing that inventory is mostly cleared out in America and things have been better than it was for like 12 months before or 18 months before. So considering that you are also investing in new products and spending money in R&D. So how do we look at Sterlite Technology from here on? For -- like can you just give us a landscape for next 3 to 4 years about like how much you want to grow your top line as well as your bottom line because you fairly talk about balance sheet side, if you can give us a sense about how things will move on from here.

Yes. Thank you, Rohan. We don't typically give a forecast so I won't be able to give you any specific numbers. I think 3, 4 things that we have shared. I'll just reiterate that. One, directionally, we have a vision to be a world top 3. I think that's clearly means fairly strong growth over the next 3 to 5 years for us overall, particularly in the optical business. Number one. Number two, we have fully invested into our capacities in terms of all the way from glass to fiber to cable and connectivity. So we do feel that we are well invested. I do see that over the coming quarters, our utilization of the factories will go from, say, 50% to 70% plus. And as that happens, we will move towards at least 20% EBITDA margin. So these are 2 or 3 things that we have shared. And as Ajay also shared just now, we are also looking at reducing our leverage ratio from about 3x to about 2x. So as we start generating cash, utilizing that to reduce our debt, I think that is where we take the business going forward. I think principally, the one other growth area we've talked about outside of the core telco segment is the data center segment. That's a fast-growing market and where -- the amount of fiber used inside of DC continues to grow. So we are building out our portfolio. And going forward, that will be our important and profitable segment for STL to grow within.

I just have last question. Considering that you are talking about your fiber deployment in India and as well as in America. So do you find there has been change in industry dynamics? Or there could be change in industry dynamics after the Starlink's entry in India?

No. And that's why I had that slide particularly on -- literally every telecom operator and other players, hyperscalers talking about it. There's no question in my mind or in our industry parlance that fiber will remain the core. There will be applications for Starlink or other satellite operators on the fringe, where they'll be able to -- where there's absolutely -- it's unviable for fiber to be deployed there from a cost perspective or otherwise in those regions or applications, they would probably be used for satellite. But across the board, I think for majority -- a vast majority of connectivity, the base will continue to be fiber going forward.

Okay. So not a major impact on our business?

No, we don't see that.

Ladies and gentlemen, with this, we now come to the end of our question-and-answer session. And now I hand over the call back to Ankit for the closing remarks.

Thank you all for joining our call today and for your continued interest in STL. Despite a challenging market environment, we have made meaningful progress on our strategic priority. Our focus remains on what we can control, deepening our customer centricity, fostering a lean and agile organization and driving growth through technology leadership. We continue to actively pursue opportunities in our key markets, leveraging our advanced manufacturing, innovation capabilities and industry-leading product portfolio. As the market demand stabilizes, we are well positioned to execute with discipline to deliver strong results and create lasting shareholder value for everyone. We hope your questions and comments were addressed today. For any further questions, please feel free to reach out to the Investor Relations team, including myself. We look forward to staying engaged and continuing this conversation in the near future. Jay Hind.

Thank you.