Investor Presentation March 2018app.pmgasia.com/InvestAsean2018/pdf/IN Sterlite...
Transcript of Investor Presentation March 2018app.pmgasia.com/InvestAsean2018/pdf/IN Sterlite...
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Investor Presentation – March 2018
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Disclaimer
Certain words and statements in this communication concerning Sterlite Technologies Limited (“the Company”) and its prospects, and other statements relating tothe Company’s expected financial position, business strategy, the future development of the Company’s operations and the general economy in India & globalmarkets, 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, orindustry 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 whichthe 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 generaleconomic, 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 orwarranty 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 informationpresented or contained in this presentation. Please note that the past performance of the Company is not, and should not be considered as, indicative of futureresults. 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 theCompany.
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 orchanges.
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 personin any manner. The distribution of this presentation in certain jurisdictions may be restricted by law. Accordingly, any persons in possession of this presentation shouldinform themselves about and observe any such restrictions
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Contents
Topic Page No.
Sterlite Tech Overview 4
Industry Dynamics 9
Products Business 21
Services & Software Business 24
Financials 28
Strategic Direction 35
Appendix 42
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Sterlite Tech Overview
5
Sterlite Tech Designs, Builds and Manages Smarter Networks
RURALBROADBAND
LARGE ENTERPRISESe.g. DEFENCE
GLOBAL SERVICEPROVIDERS
CUSTOMERS
TELECOMSOFTWARE
SYSTEMINTEGRATIONSERVICES
OPTICALPRODUCTSOFFERINGS
DESIGN, BUILD AND MANAGE SMARTER NETWORKSBUSINESS
SMART CITIES
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Uniquely Positioned to Deliver Smarter Networks
SILICONTo SOFTWARE
Software
System Integration
Fiber Cables
Optical Fibre
Glass Preform
Silicon
The only company in the world to have
integrated silicon to software capability
Translating to Industry Best Margin Profile
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With Technology at the Core of Our Offerings
focused on material science and Glass composition for advanced fiber optics
Building Fiber systems networks: 5G, Pre-connected Solutions for FTTx, IBS/DAS/ Wifi kits
trained for advanced fiber deployment rollout in Sterlite Tech Academy
and global research institutions
State of art research
Advance technologies for next generation
Sterlite Certified Fiber Installers
Partnership with academia
Centre of Excellence, Aurangabad Centre for Smarter Networks, Gurgaon Sterlite Tech Academy
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Sterlite Tech Overview
3 manufacturing locations – India , China and Brazil and 2 software delivery centers
Total 169 patents across USA, EU, India, and China and growing
$405M FY17 consolidated net revenues and $85M of consolidated EBITDA
8 of the global top 10 telecom operators use Sterlite’s innovative solutions
37% of FY17 consolidated net revenues comes from international markets
With close to 2200 full time employees
Note: Financial numbers are in Ind-AS. 1 USD = 64INR
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Industry Dynamics
10
We have already entered the ZettaByte Era
ZOOMING Traffic
Sources: Ericsson, BCG and Cisco reports
1 ZB = 1021bytes
In 2009, the WWW was ½ ZBTraffic was just 0.2 ZB
more
USERS
more
DEVICES
more
DATAPER USER
more
APPS
2021
Keeps Growing
at 26%
Global IP traffic
in Zettabytes
2011 2016
Crossed
1 ZB in 2016
1.06
11
of the Population will be using the Internet
up from 44% in 2016
58%of the traffic per month, per user
up from 24 GB in 2016
61 GB
networked devices and connection per person
up from 2.3 in 2016
3.5
of all Internet traffic will be video
up from 67% in 2016
80%average broadband speed
up from 28 Mbps in 2016
53 Mbps
average mobile Speed
up from 7 Mbps in 2016
20 Mbps
Source: Cisco
Data Consumption Trends – Roadmap to 2021
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Platforms Driving Data Consumption Trends
5GThe Future of the
EnterpriseSmart Cities
IoT is disrupting the physical world
Smart Energy
Smart Mobility
Smart Water
Smart Public Services
Smart Buildings
Smart Data Center
Smart Integration
Cognitive Analytics
Embedded
sensors
Product
Lifecycle
Management
Pervasive
Connectivity
Cloud
computing
Community-Centric Open Collaboration
Sharing Economy Enterprise App Stores
Wearables On-Demand Micro Factories
(3D printing)
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New Technologies driving Hyper-Connected Data Networks
Source: GSMA, Company estimates
Bandwidth
<1 Mbps 100 Mbps >1 Gbps
1000 ms
10 ms
1 ms
100 ms
10 Mbps1 Mbps
Wireless Cloud
based Office
Tactile Internet
Augmented Reality
Autonomous Driving
Video Streaming
Virtual Reality
Personal Cloud
Disaster AlertReal Time Gaming
On the Go ( Fully Mobile) Nomadic ( Fixed Access with Limited Mobility)
Del
ay
ULTRA LOW
LATENCY
HYPER
CONNECTIVITY
Cloud Computing
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Fiber at the Core of Networks
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With each network generation, fiber is getting closer to the users
4G Era3G Era2G Era 5G + FTTH Era
Fibre is connecting:
Major cities
most cities, towns, sub-urban areas
between towers, as backhaul
small cells, buildings, homes
Being
deployed by:Conventional Telcos CSPs / DSPs OTTs and Content Players
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Technology Evolution Driving Fiber Growth
100.063.0
14.70.5
4G- LTE & FTTH
Mobile 3G - WCDMA
/ HSPA
10000.0
5G NetworkMobile 3G -CDMA2000
/ EV-DO
Mobile 2G-GSM / GPRS
Peak Data Rate -Mbps
Source: Qualcomm, CRU & Company estimates
781 Mn fkm
2,521 Mn fkm
4G Generation & FTTH-Cumulative Fiber deployed:
CY 2010 to 2017
3G Generation Networks-Cumulative Fiber deployed: :
CY 2002 to 2009
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5G Requires Deeper & Denser Fiber
Source: ITU & Nomura Research
30 ~ 50 ms
Latency
1 ms
E2E Latency
4G
/LTE
5G
Gap 30x - 50x
100 Mbps
Throughput
10Gps
Per Connection
100x
10k
Connections
10,000kConnectionsPer Sq. Km
100x
350km/h
Mobility
500km/hHigh Speed Railway
1.5x
Inflexible
Network Architecture
LINPAbilityRequired
NFV/SDN
2017 202020192018
Global 5G Timeline
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Global Fiber Consumption
(mfkm)
Global Annual IP traffic
(Exabytes)
CAGR: 36%CAGR: 17%
More
Fibre
More
Data
Growth in data consumption is closely linked with growth in Optical Fibre consumption
Source: Cisco VNI report and CRU data
0
200
400
600
800
1000
1200
1400
1600
0
50
100
150
200
250
300
350
400
450
500
CY06 CY07 CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17
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Global Demand for Optical Fiber Continues to Reflect Strong Annual Growth
Continuous growth of data driven by network evolution and changing consumption pattern reflecting strong demand for Fiber
Globally ~3.5bn kilometre cumulative fiber already deployed in the networks; replacement lifecycles building in
Optical Fiber Demand ( Mn fkm )
35 38 40 45 53 58 63 69 72 72 78
4280 87
99121
132
156
216243
277
2024
2025
30
2932
40
40
43
48
2426
2424
32
3228
33
38
51
58
3224
20 21
3323
23
79
CY 2007
96
1593
CY 2005
317
18
139
173
CY 2006 CY 2008 CY 2009
119
12
429
382
CY 2012CY 2011
4
CY 2014
481
263
CY 2016
6
+17%
16
CY 2017
7
314
15
CY 2013
9
CY 2015
218
CY 2010
188
75
246
North America
China
Others
India
Europe
Source: CRU Data
Cumulative Global Fiber Consumption: From 1999 to 2017
3,549
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Dense Networks
Limitless and Secure Storage
Edge Computing
Open Source
SolutionsBig Data Analytics
Cloud Platforms and NFV
Hyper
Connectivity
Ultra Low Latency
Cyber Security
Network
Efficiency
Longevity
Traceability
Flexibility
Smarter
Networks
Deep Learning /
Personalisation
Customer
Experience
Omni Channel Digital Services
Not Just more FiberBut Fiber with Solutions are making Smarter Networks
FibreSmarter
NetworksSolutions
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Product Business
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Fully Integrated Manufacturing Operations
Raw materials
• Silicon & Power
• Certain natural gases
Preform
• Integrated Core rod + cladding
Optic fiber
• 30m fkmCapacity
• Expanding capacity to 50m fkm by June 2019
OF cable
• 15m fkmCapacity
• Portfolio catering to diverse end use
High end technology, fully integrated, global scale operations for manufacturing optical fibers
Center of Excellence, Aurangabad
New Technology world’s biggest Glass Preform: 7000kms, >200kg
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Scaling Product Business
New OF plant located in Aurangabad, Maharashtra (India)
Integrated plant project progressing well to achieve phased capacity ramp-up (CY 18 – partial capacity & June ’18 – full capacity)
Cabling volumes reflecting an upward trend from demand perspective
50
3028
22
12
Mar ’12 Jun ’19Mar ’17 Sep ’17Mar ’16
Sterlite Tech Optical Fibre Capacity ( Mn fkm)
FY 17
40%
85 - 100%
60 - 65%
FY 18 FY 19
Optical Fibre Cable Capacity Utilization
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Services & Software Business
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Turnkey delivery of some of the largest interstate network infrastructure projects in India – 10,000 Km of defence network in toughest terrains
Successfully deployed India’s first live Smart Services City in Gandhinagar (Gujarat)
INTEGRATED
TELECOMSERVICES
Service roll-outs begun for Tier one operators in India
As networks grow deeper, there are services opportunities to implement Smarter Networks
Defense/Other Utilities
Service Providers
Rural Broadband
Smart Cities
23,500
15,020
14,008
19,474
>INR 72,000 CrAddressableopportunities
in India
India Opportunity (INR Cr): 2018 - 2020
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System of Records
Core Network: Transmission Engineering
Passive: Fiber Network Design - Products and Solutions
System of Engagement
Radio Access Network: Topology Design
Future Network Stack
Network Management
Digital Customer Management
Marketing
Service ManagementData Management
End to End Capability to Design, Build & Manage Data Networks for Telcos, Smart Cities, Rural Broadband & Defence
Software & Solutions Layer
Network Layer
Physical Layer
Sterlite Tech is engaged in end to end data network creation
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2015 2017
Scaling Services & Software Business
Smart city orders are becoming larger in size and scope with integrated offerings
Silicon to Software and Server Capabilities will be executed in upcoming Smart Cities Projects; Ex. Kakinada Smart City Project
2016
• Govt. announces list of first 20 smart cities
• Sterlite Technologies bags its 1st Smart city order from Gandhinagar in March. Successfully completed the entire project in December
• 2nd Smart city order win with ‘Jaipur Smart City Phase – II’ Project.
• Govt announces list of second 27 smart cities
• 3rd Smart city order win with Ahmedabad Smart City’s project:-Janmarg Ltd
• 100 Smart Cities Mission launched by the Govt. of India
• Sterlite completed Jaipur smart city project
• Govt announced list of third 30 smart cities
• Sterlite wins Kakinada Smart City order
• Kakinada project under executionNetwork Solutions
• Integrated Design, Build and Management of Secure Network for Indian Army, reflecting capabilities in Designing and Rollout of Network in Toughest Part of India
• Scaling offering to Private Telcos: executing POC in MP
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Financials
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• Stronger growth in EBITDA CAGR growth at 38%
• ROCE for the business stands at 29% for 9M FY18
405355
253179171
FY 14 FY 15 FY17FY 16FY 13
+24% 8574
54
2824
FY17FY 16FY 15FY 14FY 13
+38%
605539
1514
FY17
+44%
FY 14 FY 16FY 15FY 13
EBITDA (m USD)
EBIT (m USD)
Revenue (m USD)
FY17FY 16FY 14 FY 15FY 13
20%
7% 8%
18%21%
ROCE
9M FY 18
369
86
9M FY 18
66
9M FY 18 9M FY 18
29%
5 Year Performance- Telecom Business
Values in Mn USD. 1 USD = 64 INR
30
131122116110114
Q3 FY17 Q2 FY 18 Q3 FY 18
+14%
Q1 FY 18Q4 FY17
3328
262623
Q4 FY17Q3 FY17 Q1 FY 18 Q3 FY 18
+44%
Q2 FY 18
Quarterly Financial Performance
14
111010
8
Q2 FY 18Q4 FY17Q3 FY17 Q1 FY 18 Q3 FY 18
+83%
EBITDA (m USD)
Highest ever EBITDA of more than 30 m USD
83% YoY growth in bottom line
Strong QoQ and YoY growth in Revenue, EBITDA and PAT
PAT (m USD)
Revenue (m USD)
Note: In accordance with the requirements of Ind AS, revenue for the quarter ended September 2017 is net of Goods and Services Tax ('GST'). However, revenues for all the previous quarters are inclusive of excise duty Values in m USD. 1USD = 64 INR
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Financial Performance: Income Statement & Balance Sheet
P&L FY17 9M FY18
Revenue 405 369
EBIDTA 85 86
EBITDA % 21% 23%
Depreciation 25 20
EBIT 60 66
EBIT % 15% 18%
Interest 19 12
PBT 41 54
Tax 6 15
PAT (After Minority
Interest)31 35
ROCE (Pre Tax) 21% 29%
ROE (Post Tax) 23% 27%
Balance sheet As on 31st Mar, 2017 As on 30th Sep, 2017
Net Worth 145 162
Net Debt 144 122
Total 288 285
Fixed Assets 193 200
Net Working Capital 95 85
Total 288 285
Values in m USD. 1 USD = 64 INR
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Financial Performance: Cash Flows
Cash flow 9M FY18
Cash Profit ( After Tax ) 59
Operating Cash Flow 57
Capex 45
Net Cash flow 13
0.8x
As on 31st Dec ’16
As on 31st Dec ’17
1.2x
-35%
Debt to Equity Ratio
138
161
-14%
As on 31st Dec ’17
As on 31st Dec ’16
Net Debt
Values in m USD. 1USD = 64 INR.
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International Revenue Profile
7%
19%
11%
63%
India China RoWEurope
Global Revenue Mix
9M FY18
FY17
13%
26%
13%
48%
*Rest-of-the-World majorly constitutes of Americas and MEA
85
150
FY 16
24% of Total Revenues
FY 17
+75%
37% of Total Revenues
9M FY 18
52% of Total Revenues
191
Revenue from exports (m USD)
34
Strong sales outlook riding on substantially built order book
242 231 234 233 209
176 241 256366
506
Q3FY18
418
Q1FY18
491
+71%
Q4FY17
715
Q3FY17
599
Q2FY18
472
Services & SoftwareProducts
• Increasing Order book reflects predictable outlook for the company
Order Book Mix
Numbers are in Ind-As, Values in m USD. 1USD =64INR
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Strategic Direction
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OFbusiness
Glass/Pre-Form Technology:
OFC businessApplication Engineering
Services,Software
Solutions business
GROW
Add new products
GROW
Value AddNew Markets
EXCELIn Execution
Roadmap: GROW 3 TIMES IN 3 YEARS
Reach
$ 100 MnIn Net Income
by FY20
3 Years
3X Growth
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Balanced Approach to drive Shareholders Value
Defined principles for Inorganic Growth:
Capability addition
Integrated Solutions with focused customer base
Focus on Technology & Research:
Increasing patent portfolio
Expanding ROCEfor the business > 20%
Consistent Returns to the Shareholders:
30% of PAT as dividend
Approach
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Creating Shared Value
Total lives impacted
458,000+ HEALTH
ENVIRONMENT
WOMEN EMPOWERMENT
EDUCATION
Covered almost 200,000 patients since inception
9332 patients attended to in FY 2017-18
172,000 students covered since inception and 89958 during FY 2017-19
480 schools covered in 2017-18
Classes 3 to 7 and 10 covered by the
program
409 farmers impacted through Phase II of Project Jaldoot and a total of 867 since 2016
94188 cu. m of water conserved in 2017 and a total of 738,188 m3
8 check dams in 5 villages redeveloped in 2017
218 women trained at the institute in FY 2017-18 and a total of 539 till date
93 villages covered till date
28,000 villagers indirectly impacted
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Strong corporate governance
A. R. Narayanaswamy(Non-Executive & Independent Director) Chartered Accountant & Management Consultant with over 35
years of industry experience Member of The Institute of Chartered Accountants of India Provides consulting services in accounting, financial management
and information technology across several industry verticals
Arun Todarwal(Non-Executive & Independent Director) Partner of Todarwal & Todarwal, a Mumbai based firm of Chartered
Accountants Member of The Institute of Chartered Accountants of India Has rich and varied experience spanning over three decades in
management consultancy, finance and audit
Avaantika Kakkar(Non-Executive & Independent Director) Corporate and commercial lawyer Currently Partner and Co-head of the Competition/Anti-trust law
practice of Khaitan & Co. Has significant experience with structured finance, foreign direct
investment in real estate, private equity and on-market & off market acquisition transactions and joint ventures
Sandip Das(Non-Executive & Independent Director) One of Asia’s most respected telecommunications professionals and
an acclaimed Chief Executive Ex-MD of Reliance Jio, Group-CEO, Maxis Communications and
Hutchison Essar Telecom (now Vodafone), India One of the founding members of private telephony in India and was
part of the group of individuals that founded Hutchison Max Telecom in 1994
Independent Directors in the Board of Sterlite Tech
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Sterlite Tech is well placed to strengthen its leadership position in new age digital infrastructure creation
Data Broadband networks focused technology play
High ROCE & ROE business profile
Focused on Customers & Stakeholders value creation
Geographic, customer and business diversification provides natural hedge to business
Business model evolution to offer high future cash flow predictability
Key Takeaways
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Corporate structure & Shareholding Pattern
Corporate structure Shareholding pattern
Source: Company information; Karvy Shareholding Services; Data as of Jan 23, 2018
Volcan investments
Sterlite Technologies Limited
Brazil JV China JV
58.0% 75.0%
53.4%
45.9%
Vedanta Resources Plc.
Public shareholders
69.7% 22.1%
54.1%15.6%
8.2%
Other Institutional Holders
FII Retail
Promoters & promoter group
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Thank You