Sterlite Technologies, the Pune-based power and telecom cable major, sees realisation in its optic fibre cables business improving
MUMBAI: Sterlite Technologies, the Pune-based power and telecom cable major, sees realisation in its optic fibre cables business improving over the next five-six months as increased demand soaks out excess capacity, a senior company official said.
The firm is looking at increasing utilisation of its copper cable manufacturing facility-currently at under 50% by focusing on the international market.
The Rs 1,700-crore Sterlite Technologies has two business divisions — power transmission conductors and telecom cables. The telecom cables business, under which it manufactures optical fibre, fibre optic cables and copper cables, contributes about 40% to its revenues, but has a higher operating margin of 14% against 11% for power.
The segment is expected to reach the size of Sterlite’s power segment by 2010, by which the company hopes to be a billion-dollar organisation.
KS Rao, the chief operating officer of the telecom business, said most optical fibre manufacturers were running full capacity, but could squeeze out increased production through process efficiencies. “We expect the market to absorb this production over the next 4-5 months and post that, prices should rise. We are increasing our volumes and this should decrease costs,” he said.
It is investing Rs 200 crore in doubling its optical fibre capacity to 12 million fibre km (fkm) and tripling fibre optic cables capacity to 6 million km by June 2009.
In its April report, brokerage house Emkay Shares said it expects the cost of producing optical fibre to go down to $4.5 per fkm from the current $6.2 per fkm after capacity expansion.
Rao said the global demand environment was robust, and this year, 140 million fkm was expected to be sold, a growth of 16% over the previous year. “We have growth visibility of 16-17% per annum for the next 5-6 years. We will consider further capacity expansion after we reach our monthly production of 1 million fkm, which we expect by June 2009,” he said.
In copper cables, the company has the capacity to manufacture 1,00,000 conductor km, which is underutilised at 50%. Rao said copper cables is a declining segment and the global market stands at about 4 million km. “We have begun to focus on exports and have won some orders. If we get even 1% of the global market, 50% of our capacity would be utilised. Our focus is to approach 2-3% of the global market. This would fully utilise our capacity,” he said.
Sterlite Technologies is moving its copper telecom business to structured data cables and has the capacity to manufacture 3,60,000 boxes. It has forward integrated to manufacturing cable modems and may enter IPTV and set-top boxes space too.
On cost pressures, Rao said the company enters into short-term contracts and ties up raw material contracts. This is why it can protect itself from raw material cost volatility.
g_rabin@dnaindia.net
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}