The demand for fibre optic technology is expected to grow significantly in the coming years due to its wide range of applications in areas such as cloud computing, 5G, IoT, artificial intelligence, and smart cities. Optical fibre-based network deployments have evolved during the last decade to meet the requirements of modern-day technology applications. The market share of fibre-to-the-home connections in fixed broadband connections has grown over the years and the global market size which is currently estimated at $47 billion is projected with an upward CAGR growth of 12% from 2023 to 2030.
India has the capacity and capability with the optical fibre-powered networks having done a fantastic job for the Indian economy. But since only 35% of the towers in the country are fiberised, one can only fathom the benefits that optical fibre could bring when every corner of the nation is completely covered through fibre optic connectivity. Sterlite Technologies Ltd or STL is a leading global optical and digital solutions company providing advanced offerings to build 5G, Rural, FTTx, Enterprise and Data Centre networks. The company designs and manufactures in four different continents around the world with customers in more than 100 countries. Telecom operators, cloud companies, citizen networks, and large enterprises have been relying on STL for advanced capabilities in Optical Connectivity, Global Services, Digital and Technology solutions to build future-ready digital networks. The company has made significant progress in all its strategic priorities with the optical segment increasing its connectivity business by securing the first large order in the North American region. STL has also undertaken various fixed and variable cost optimisation measures and initiatives to become more efficient and deliver better returns from its future operations.
The global services business segment has improved its EBITDA margins from 3.1% to 7.6% over the last few years. The digital services segment has scaled its business significantly having quadrupled its revenue over the last few years. The company is ready to fulfil the demands of US made optic fibre cable products as it has completed the capex cycle during the FY2024. First, it sold off its holding in MB Manshaan for Euro 5.9 million and reduced its debt by Rs 33 crores during the FY24. The cash generation and debt reduction along with a QIP fundraise of Rs 1000 crores will enable STL to significantly improve its balance sheet. The strategic priorities for the current FY25 is for STL to grow the optical business by increasing market share and drive its cost leadership. On the other hand, it will build new capabilities and value added services in the global services segment. In the STL digital business segment, the company is focusing on building new technological capabilities for profitable growth in the future. The company is implementing its ESG agenda by being the first optical manufacturer to launch eco label methodology and become a carbon neutral company over the next five years.
The medium-term demand for optical fibre cable is expected to go up to 617 million fibre kilometre by 2026 from 536 million fibre kilometre at present. Major technology trends such as AI, which are shaping the landscape, are the new buzzword which is impacting fibre demand and every technology theme. The consumption of these technologies like AI shall need massive data centre capacities and reliable connectivity. From a financial perspective, the company has seen a challenging quarter with Q4FY25 revenue at Rs 1140 crores and EBITDA at Rs 67 crores. But FY25 looks quite strong with the company winning multibillion-dollar orders from UK, Italy, and North America for its optical fibre cable and connectivity products.
The Sterlite Technologies Ltd or STL stock is being heavily recommended by serious fund managers and brokers to purchase the stock currently quoting at around Rs 128 on the bourses and it can be purchased by portfolio investors for a target price of Rs 185 in the next one-year time frame.