Investor Presentation March 2019 - STL Tech |Telecom ... Presentation_mar 2019_INR.pdfCertain words...

www.sterlitetech.com

Investor Presentation – March 2019

1

Copyright © 2018 Sterlite Tech.1

http://www.sterlitetech.co/

2

Safe Harbour

Certain words and statements in this communication concerning Sterlite Technologies Limited (“the Company”) and its prospects, and other statements relating to theCompany’s expected financial position, business strategy, the future development of the Company’s operations and the general economy in India & global markets, areforward 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 or warrantyis 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 theCompany or any of its affiliates, advisers or representatives accepts any liability whatsoever for any loss howsoever arising from any information presented orcontained in this presentation. Please note that the past performance of the Company is not, and should not be considered as, indicative of future results.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 suchextraneous or inconsistent information or representation, if given or made, should not be relied upon as having been authorized by or on behalf of the Company.

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

Copyright © 2018 Sterlite Tech.

3

Contents

Topic Page No.

Changing Data Networks Industry Dynamics 4

STL uniquely placed to leverage this opportunities 10

Our Capabilities across the Layers of Data Networks 18

Future Outlook & Strategic Direction 22

Sustained Value Creation with Strong Corporate Governance 28

Appendix 32


4

Changing Data Networks Industry Dynamics


5

Unconstraint consumption

of dataWhateverWheneverWhereverWhosoever

Driven by Increased End Point Data Consumption

Man

Machine

Enterprise

Home, Work

Driving across Highway

Bullet Train: 325 km/h

Peak hour traffic growing at a CAGR of 37%

Consumer Industry

All industries

Copyright © 2018 Sterlite Tech. Source : Cisco VNI ,and Industry Estimates

The Industry is Ripe for a Disruptive Change

6Copyright © 2018 Sterlite Tech.

175 ZB

Global Data Creation by 2025

75BnConnected Devices by 2025

EXPANDINGCapex Spend

FLATTISHTelco ARPU

1523

75

CY15 CY18 CY25

1833

175

CY15 CY18 CY25

$125

$200

$6

$67

CY07 CY17

Telcos Cloud

No. of Devices (Bn)

Source: IDC, IIHS Markit, Strategy&, Industry Estimates, Company Research

+25%

+37%

ARPU ($)$40

$35

$22

$15

$8 $6 $3 $3

CY11 CY16North America W. Europe M. East Asia

Capex Spend ($ Bn)Data Creation (ZB)

7

Driving Change in Network Architecture

CentralisedDecentralised & Deep

Fiberisation

Hardware Defined Software Defined

Closed Ecosystem Open Framework

Unorganised Network RolloutOrganised and Structured

Network Rollout

Scattered Analytics and Intelligence



Supported by Growth in Fiber Consumption

Optical fiber cable deployment has outpaced the growth of

world economy by ~5x

1 Bn Fkm 2 Bn Fkm 3 Bn Fkm 4 Bn Fkm

38 years 5 years

1970-2008 2008-2013 2013-2016 2016-2018

3 years 2 years

World’s cumulative deployment of 1Bn fkm cable has shrunk drastically from 38 years to 2 years

1.3

2.9

13.9

20 years CAGR: 1997 to 2017

Optical Fibrer cable

Population GDP (World economy)

Source : CRU

9

Increased end point consumption of data

Change in Network Architecture

STL uniquely placed to leverage these

opportunities

Data is the new Commodity

Building network infrastructures to match the

humungous data need

Riding on the opportunity to create

sustainable value

7x growth in 5 years (CY15-CY20)*

Dense Network with deep fiberization, Open source and

Edge computing

Expanded TAM, Tech Focus riding on the disruption

*Source: Industry EstimatesCopyright © 2018 Sterlite Tech.

Sterlite Tech is Shifting Orbits to Ride on this Change

10

STL Uniquely Placed To Leverage These Opportunities


11

CUSTOMER SEGMENTS

COMMUNICATION SERVICE PROVIDERS

CITIZEN NETWORKS DEFENCEINTERNET CONTENT PROVIDERS

OFFERINGS

Unified Data Network Solutions

TELECOM SOFTWARE

SYSTEM INTEGRATION SERVICES

OPTICAL PRODUCTSPassive layer

Network layer

Software & Solutions Layer

Global Supply chain

Technology at the Core

NETWORK LAYERS

Sterlite Tech- A Data Network Solutions Company

Talent Customer Engagement

ENABLERS


12

Working with Top Telco Service Providers Globally

Serving 8 out of top 10 telcos of the world


Market Presence

Sales Offices

Manufacturing Facilities

CUSTOMER SEGMENT 1

TELCOS

13

Developing Customized Solutions For OTT Players

GLOBALCLOUDCOMPANIES

Data Centers Edge Networks

CUSTOMER SEGMENT 2

6

67

CY07 CY17

Capex spent ($Bn)

14

Enabling the largest digital inclusion in the world

CITIZEN NETWORKSSMARTCONNECTEDEMPOWERED

Gandhinagar

Jaipur

Kakinada

Impetus to bringing large populations online

600 mn online

Connecting gram panchayats across the country

2,50,000

Bandwidth to each gram panchayat

100 Mbps

Indian government’s commitment to BharatNet

$ 7 bn

SMART CITIESBHARAT NET

CUSTOMER SEGMENT 3


15

Securing national borders through world-class communication networks


Indian Defence

INDIAN NAVYINDIAN ARMY

CUSTOMER SEGMENT 4

44Network Locations

• Designed world’s largest intrusion proof defence network

• Designing world class naval communication network

33Data Centres

30telepresence

studios

10,000Km

of OFC network

100%Network on Sterlite Fibre

25+Years

Network Life

Serving through world class communication networks

16

With Technology at the Heart of the Organization

3Innovation

Centres

234Patents Globally

2Software DeliveryCentres

Academia

ForumsCentre of Excellence, Aurangabad

Core research on optical fibre for high-speed connectivity

Centre for Smarter Networks, Gurgaon

Technology and applied research on smarter networks of the future

Speciality Products Experience Labs

Experience Lab for Structured Cabling Solutions

NPD Revenue : >20%


17

Built on the Foundation of 5 Pillars


Customer Segments

Pillars

Offerings

Communication Service

Providers

Internet Content Providers

Citizen Networks Defence

Deep Customer

Engagement

Strong Technology Platforms

Best in Class Talent

Global Delivery & Supply Chain

Products | Network Services | Software

Across 8 Manufacturing Facilities Globally and 2 Software Delivery Centres

Sustainability & Governance

18

Our Capabilities Across The Layers Of Data Networks


Network Design

Bringing Together The Offerings To Create End To End Data Network Solutions

19

An integrated Best in class Network ...

Bringing it all together as…

E2EService

Modular customized kits

Innovative Cable Designs

Design & Build- End to End Network Design & Rollout

Open Source- Virtualized Access

Next Gen OSS/BSS

BEST NETWORK DESIGN

DEPLOYED FASTEST

OPTIMIZED FUNCTIONS

MAXIMIZED CAPACITY

Integrated Silicon to Fibre


Only company in the world to provide end to end data network solutions

20

Leading To Strong Performance And Demonstrated Value Compounding

*The strategic guidance given on July’17 considered currency conversion at $1 = INR 65

1,1481,619

2,2752,594

3,205

FY18FY17FY 14 FY 15 FY 16

+29%

154201

334

FY 16 FY 17 FY 18

+47%

3 Year PAT (INR Cr.) - Post de-merger of Power Business

Revenue (INR Cr.)

181

345

475542

789

FY 16FY 14 FY 15 FY17 FY18

+44%

EBITDA (INR Cr)


20% 21%

30%

FY18FY17FY 16

ROCE


P&L (INR Cr.) FY18 9M FY18 9M FY19

Revenue 3,205 2,359 3,296

EBIDTA 789 551 836

EBITDA % 25% 23% 25%

Depreciation 182 130 145

EBIT 606 421 691

EBIT % 19% 18% 21%

Interest 104 79 75

PBT 503 343 616

Tax 133 97 196

Net Income

(After Minority Interest)334 222 398

ROCE % 30% 28% 34%

Note: The consolidated financials are inclusive of the performance of Metallurgica since the date of closure

• 9M FY 19 performance surpassed the full year FY18 performance

• 9M PAT growth of 79%

• Consistent ROCE > 25%

FY19- The Year that it Has Been

• 9M FY 19 performance surpassed the full year FY18 performance

• 9M PAT growth of 79%

• Consistent ROCE > 25%

22

Future Outlook & Strategic Direction


23

Strategic Aspiration Of 100 Mn PAT By FY 20 On Track


Talent

Customer Engagement

• Unified solution approach

• New Tier -1 customer relationships

• Long term engagement cycle

• New Product Revenue > 20%

• 234 patents

• 3 Innovation Centers

Technology

• Strong CTO Organisation and hiring across all Offerings

• 48% of workforce are Tech Graduates

• 27% of workforce are Post Graduates

Delivery and Supply Chain

• Capacity expansion from 30 mnfkm to 50 mnfkm on track

• New point of presence in Europe through Acquisition of

Metallurgica

• Cabling expansion to 33mnfkm announced in Sep 2018

24

Backed By Growing Order Book

* Revenue representative of last 4 financial quarters

2,2752,594

3,205

4,143

2,253

3,018

5,223

10,231

FY16 FY17 As on 31st DecFY18

1x

1.2x

1.6x

2.5x

Revenues(INR Cr) Order Book (INR Cr)

Order Book at an all time high of Rs. 10,231 Cr.


25

Sterlite Tech’s Outlook In The Digital Ecosystem

Participate in data network creation Capex

Software

Server

Fiber

Leverage Strong position in Core Optical Products

business

Capitalizeon disruption

Through new agenetwork software

products

Integrated Network Design

and Build Services

Offer ApplicationCentric Solutions



Expanding Addressable

Market2012 2017 2023

$5Bn

$20 Bn

$75 Bn

Telecom Products

Design, Build & Manage Networks

Global Data Network Solutions

TIMEFRAME

OFFERINGS

Graph not to scaleSource : Industry Estimates and Company Analysis

Increasing Customer Relevance & Addressable Market

Graph not to scaleSource : Industry Estimates and Company Analysis

Engines of the Growing Addressable Market


• FTTx• Citizen Centric• Small Cell Solutions• Data Centers

Network Layer

• New product development• Geographic Expansion• Bouquet of adjacent products

Passive Layer21

• Next Gen OSS/BSS• Open Source - Virtualised

Access• Programmable Networks• New Customer Acquisition

Software Layer3

Global Reach4


28

Sustained Value Creation With Strong Corporate

Governance


Financial Priorities Under Strong Governance


Growth

• Profitable Organic Growth

• EPS accretive strategic acquisitions

• Commitment to R&D and Talent

Earnings

• Drive sustainable EPS growth

• Attain earning objectives across economic cycles

• ROCE > 25%

Capital Allocation

• Deploy Free Cash flow strategically

• Sound Leverage and Working Capital Ratio

• Consistent Corporate Actions and returns to shareholders

Strong Corporate Governance


Balanced Approach to Drive Shareholders Value

Defined principles for Inorganic Growth:

Capability addition

Integrated Solutionswith focused customer base

Focus on Technology & Research:

Increasing patent portfolio

Expanding ROCEfor the business > 25%

Consistent Returns to the Shareholders:

30% of PAT as dividend

Approach


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

Kumud Srinivasan(Non-Executive & Independent Director)

• VP and Director of Non-Volatile Fab Manufacturing and Automation Systems at Intel Corporation

• Has spent 30 years at Intel in US, leading multiple global functions, prominent ones being R&D for technology manufacturing, industrial automation and IoT for manufacturing facilities

• She served as the President of Intel India from 2012 to 2016

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 on the Board of Sterlite Tech

32

Appendix


Our Portfolio Of Optical Communication Products

OPTICALCOMMUNICATIONPRODUCTS

OPTICAL FIBREAND PREFORM

• Full suite of ITU-T fibre products from low loss to bend insensitive fibre

• For NLD to Access Network applications

OPTICAL FIBRECABLES

• Customised cabling products for FTTx, utilities, oil and gas, transport and defence applications

• Smarter FTTH Plug and Play solutions

STRUCTURED DATA CABLES

• Manufacturing world class data cables for a variety of applications in structured cabling –Applications varying from Enterprise networks, data centre, healthcare to education

Amongst the world’s largest integrated

manufacturers of Optical fiber & Cables, with

facilities in Brazil, China, India & Italy

• Expanding capacity from 30 Mn fkm to 50 Mn fkmby June 2019

• Expanding capacity from 18 Mn fkm to 33 Mn fkmby June 2020 in a phasewise manner

• 1.2 Mn boxes per year addressing demands of global customers for enterprises and data centres


Our Integrated Telecom Services To Empower Digital India


Key Turnkey Projects

• Naval communication network

• 3 Smart Cities

System Integration

End to End system integration across all layers of ICT stack

Key Turnkey Projects

• Network for Spectrum, Indian Army

• Network creation for Tier-1 Telcos of India

• Bharatnet across several Indian states to ensure rural connectivity and digital inclusion

Integrated network rollout to build backbone for any communication network

End to End Data Network Design

Network Design

INTEGRATEDTELECOM SERVICES

Our Software solutions to re-invent CSPs


5G Monetization

FTTx & Cable Smart Cities Enterprise/ IOTSD-WAN, SD-Core

WiFi SD-WAN, SD-Core

Digital Commerce& CustomerManagement (DCCM)

Neox

Crestel CRM

Digital Experience& Engagement

Crestel DBRM

Partner Billing & Management

Netvertex PCC

DigitalMonetization

EliteWiFi SMP& IOT

EliteANDSF server

Crestel Provisioning & Activation

Digital OSS

Programmable Network and Intelligence

MANO

SDN Controller

VNFS

NOS

Intelligent Data Lake (IDL)

Intelligence & Insight

Integration with AI

Solutions

36

Our unified solution – FTTx MANTRA to transform digital worldOne solution, countless opportunities

TRA

A

N

ASSIVE

GILE

ETWORK

NSFORMATION

M

INGENIOUS PRODUCTS

INTEGRATED NETWORK DESIGN

INCLUSIVE ROLL OUTS

INNOVATIVE VIRTUALIZATION

INTELLIGENT SOFTWARE SOLUTIONS

1

2

3

4

5


37

1

Ingenious Products

Fast, cost efficient,

future ready roll-outs

INNOVATIVE CABLESOLUTIONS

HIGH FIBRE, TRURIBBON & MICRO MODULE

• High density

• No preferential bending

• Easy identification

• Easy stripping & cleaving

BEND INSENSITIVE OPTICAL FIBRE

BOW LITE E

• Low bend loss

• Better performance at higher wavelengths

• 2X more splitting in same optical power budget

Faster, scalable, backward

compatible, future fit roll-outs

COMPACTKITS

FTTx KITS

• Suited for high rises &standalone homes alike

• Plug & play

• Pre connectorised solution

• 2 stage splitting

Agile FTTx roll outs,

de-skilling of field termination

Copyright © 2018 Sterlite Tech. 37

38

2Integrated Network Design

Integrated

Centralized Planning

One Backbone

Re-Use Existing Infra

Everything Survey

I

C

O

R

E


39

3Inclusive Approach to Fibre Roll Outs

REDUCED TIME TO MARKET

COST OPTIMISATION

FASTER NETWORK MONETISATION

ENHANCEDNETWORK

PERFORMANCE


40

Innovative Virtualization

Superior control, cost effective,

vendor agnostic, agile network

SOFTWARE DEFINED

ACCESS NETWORK

• Centralised control plane

• Virtualised network functions

• Open and white box integrated solution

• General purpose hardware

Wholesale Carrier Service

Residential Network

Enterprise Network

Mobile Network

EPC

Border Gateway

Subscriber Gateway

vEPC

vBorder Gateway

vSubscriber Gateway

SDN Controller

Optical Splitter

OLT MAC

Aggregation Router

Compute, Storage & Network

Infrastructure

Central Office

4


41

Intelligent Software Solutions5

Customised products,

scalability, faster product launches,

simpler provisioning

INTELLIGENT DATA LAKE

• Scalable storage support

• Advanced analytics

• IP log management system

• High quality data processing

BILLING & REVENUE MANAGEMENT

• Integrated analytics

• Modular architecture

• Real time, converged charging

Actionable business insights, smart

decision making, enhanced

monetisation opportunity


42

Global Demand for Optical Fiber Continues to Reflect Strong Annual Growth

22 29 32 35 37 41 48 53 57 62 65 72 81 843

25 29

17 23 33 4280 87 99

121132

156

216244

281 279

12 1520

24

20 2530

2932

40

40

43

48 54

2526

30

2729

3837

34

41

46

51

5865

720

3

CY 2018

75

CY 2005

9

CY 2006

97

246

CY 2007

20

CY 2008

140

9

CY 2009 CY 2010

4

189

CY 2011

6

CY 2012 CY 2013

15

429

CY 2014

16

CY 2015

218

CY 2016 CY 2017

314

95118

173

263

382

493511

+16%

North America

Europe

China

Others

India

Optical Fiber Cable Demand (Mn fkm )

Continuous growth of data driven by network evolution and changing consumption pattern reflecting strong demand for Fiber

Globally >4Bn kilometre cumulative fiber already deployed in the networks; replacement lifecycles building inCopyright © 2018 Sterlite Tech.

43

With Fiber Reaching Closer to the End Consumer Creating a Multiplicative Demand

Fib

ers

to c

ove

r 1

00

Mn

con

ne

ctio

ns

Reduction in average fiber link by 10x, drives a 100x increase in fibers required to support the network

Source: OFSSource: Corning

0.1

100,000 10,000 1,000 100 10

Link Distance (Km)

1

100

10,000

1,000,000

100

Sub Sea

Metro

10 10 10

Long Haul

Access

100

100

Network Densification

Today’s 4G Network Future 5G Network

20-25x cell sites

1KM

100-200m

• These cell sites will be connected through fiber in the 5G network


44

Evidenced By The Changing Mix Of Telco Capex Profile

Global OFC Consumption (Mnfkm)

426

790

2,345

2G (CY1999 to 2004) 3G (CY2005 to 2010) 4G (CY2011 to 2017)

2G to 3G: 1.9x

3G to 4G: 3.0x

Global OFC Consumption (Mn fkm)

• Capex intensity remains strong for global telcos with every evolution of network generation• Reflective of changing mix of Telco capex profile, with increasing proportion of fiber led capex

602

822

1,342

2G (CY1999 to 2004) 4G (CY2011 to 2017)3G (CY2005 to 2010)

2G to 3G: 1.4x

3G to 4G: 1.6x

Cummulative Capex (USD Bn)

Top 20 Global Telco Capex (USD Bn)

Source: CRU, Factset, Company AnalysisCopyright © 2018 Sterlite Tech.

45

Sterlite’s Complete Control Over The Manufacturing Value Chain


PREFORM

Restricted:

Players < 10

FIBER DRAWING

Limited:

Players < 50

CABLING

Extensive Competition:

Cable Manufactures < 200

Sterlite

Tech is present across the layer

Incr

eas

ing

Bar

rie

rs t

o E

ntr

y

• Glass Science• Chemical Engineering

• Fluid Mechanics• Large scale Automation

• Wave Optics• High Temp processing ~ 2000 deg C

High Tech: R&D Led Model

Centralized Platform for Glass/ Preform

Operational Excellence Model

Global Platform for Fiber Draw

Application Oriented Solutions: Locally Presence Model

Global Platform for Fiber Cable Systems

46

Accelerating the Capacity Expansion and Utilization

Integrated plant project progressing well to achieve phased capacity ramp-up (June ’19 – full capacity of 50 mnfkm).

Driven by strong global demand for fiber cable solutions, we have announced our OFC capacity expansion from 18 to 33 Mn fkm which would come onboard by June 2020 in a phased manner.

12

22

28 30

50

FY’17FY’ 16 Jun ’19Sep ’17FY’12

Optical Fibre Capacity (Mn fkm) Optical Fibre Cable Capacity (Mn fkm)

8

15

33

FY’18FY’15 June’ 20


47

Demonstrated Growth On Q-o-Q Basis


835 847 8771084

1335

Q3 FY 2018

Q2 FY 2019

Q1 FY 2019

Q4 FY 2018

Q3 FY 2019

208238 252

279304

Q1 FY 2019

Q3 FY 2018

Q4 FY 2018

Q3 FY 2019

Q2 FY 2019

90112 121 131

146

Q2 FY 2019

Q1 FY 2019

Q3 FY 2018

Q4 FY 2018

Q3 FY 2019

Revenue (INR Cr.) EBITDA (INR Cr.)

+46%

+62%

+60%

PAT (INR Cr.)

Highest ever Revenue of Rs. 1,335 Cr.

Highest ever EBITDA of Rs. 304 Cr.

Highest ever PAT of Rs. 146 Cr.

Q3 FY19 Highlights


Debt Profile and Cash Flows

884

354

604

97

472

1,703

Net Debt 31-Mar 18

AcquisitionOperating Cash Flow

Net Debt 30-Sep 18

Capex Dividend

Amounts in INR Cr.

The business continues to generate strong operational cash flow

The increase in debt is on account of organic & inorganic investments done for future growth

The benefits of these investments will start getting visible from FY20 onwards


Corporate Structure & Shareholding Pattern

Corporate structure Shareholding pattern

Volcan investments

Sterlite Technologies Limited

Brazil JV China JV

58.0% 75.0%

53.9%

46.1%

Vedanta Resources Plc.

Public shareholders

100%

Source: Company information; Karvy Shareholding Services; Data as of Sep 30, 2018

22.7%

54.0%14.2%

9.1%

53.9%

6.6%

12.9%

26.6%

Promoters & Promoter Group

Retail

FII

Other Institutional HoldersSterlite Tech s.p.a

100%

Metallurgica Bresciana

100%

50

India’s first optical cable facility to get ZWTF certificate


51

Developing Educating

EQUAL OPPORTUNITY FOR ALL

Colouring Section in Cable plant by all Women

All women Night shift in FIBRE plant

Leadership championing DIVERSITY - Target Ratio: 30% by 2019

WIN (Women in Networks) @STL

Hiring

Inclusive & Diverse culture leading to better ideas


52

We Aspire to Positively Impact a Million Lives

282,149by Health initiatives

257,988by Education & Rural

development initiatives

64,012by Water Conservation

initiatives

7,220by Women

Empowerment initiatives

75%Wealth Pledged to

Charity by Chairman



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