Sterlite Technologies | Digital India play

Which company is now in a position to incur huge CapEx for 5G…idea / vodaphone ? Airtel? BSNL? MTNL?

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Well to be perfectly fair, 50% of their existing biz is from Govt of India orders. In case that continues biz should do well. Ofcourse margin will be adjusted downwards due to global price reduction.

MTNL,BSNL and JIO.Vodafone is not participating in 5G spectrum.airtelmight.

President Trump Delivers Remarks on United States 5G Deployment

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Sterlite Technologies planning to raise funds
12th Apr 2019

Sterlite Technologies is planning to raise funds by issue of equity shares or any other securities convertible into equity shares or a combination of such securities by way of further public offer, rights issue, American Depository Receipts/Global Depository Receipts/Foreign Currency Convertible Bonds, qualified institutions placement, preferential issue or any other method as may be permitted under applicable laws, subject to such regulatory/statutory approvals as may be required.

The meeting of Board of Directors of the company will be held on April 23, 2019, to consider the same.

This means dilution of equity…no respect towards small investors…not investment friendly?

Pleas advise.

There is another such instance of the promoters treatment towards listed subsidiaries - please refer to the link in my last post.

Is there any possibility of release of pledge by this amount?

Check the Q4 Board Meeting agenda for last 5 years - they have discussed raising funds over and over. They don’t need the cash - extremely strong balance sheet. 80%+ EBITDA is converted to cash flow

Had cautioned about the promoter group some time back. The history of the promoter group is crucial to study if one wants to bet on a business for the long term.

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I completely agree with you…I learned a lesson with this stock with -40 % loss…

After seeing two or three quarters
.planning to book losses…

Disc: Invested…No buy/sell recommendation

The problem is these cautions are not liked / welcome when a bull market is underway :grinning:

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Yes. People should be more open minded to accept healthy criticism. Not always people are spreading negativity if something said not good about the stock.

One of my key learning is that however good the story and numbers, a doubtful promoter can erode the wealth like nothing else can. If one is not reasonably confident of promoters as at-least minority shareholder friendly, one must just move on. There are far better choices always available.

My simple thesis to invest in STech is: I was aware of promoter’s bad reputation even before I invested in it, so its a ‘risk’ that i was willing to take for the growth that it was offering, as i feel the opportunity size for Stech is so huge that it can’t but grow if one has slightly longish horizon of 3-5 years.

For the pledge part, I don’t think a sharp promoter like Mr Anil Agarwal will let go off even a single share. Esp given that the reason for pledge was to own vedanata out and out. Still the danger is always lurking.

However, I am more focused on the business, Looking at the kind of products that they are launching FTTX Mantra etc. and also hiring key leadership to grow its biz I feel, Management is pretty focused on growing its business. From an operation perspective I feel they are going in the right direction are making them selves ready for any future growth opportunity.

Pricing of OFC remains a huge draw-down, but given that 50% of its revenue is from service, I feel it will not be impacted as much as a pure OFC player like HFCL or Aksh.

Again, the idea of sharing my thoughts is not to negate the negative points ( which i feel are very much there) but to share my thoughts that if one where to take a detailed look at business, I don’t think things have changed too much in last 6-10 months ( other than china mobile order at 50% less price). I still don’t know when 5G demand will kick in, if it does in next 12 months we might see better pricing and good volume growth. I don’t see for Govt of India project which other domestic player can provide cables/services.

Having said this, I agree that its far more easier to partner with an owner/promoter who takes MSH along as that helps us to avoid second guessing on the outcome. But I think its all part of the learning process. Helps us evolve and refine the process.

It might look stupid in the hindsight as well but i am still invested, as i feel most of the negatives are already priced in and down side is kind of limited from a business perspective. Its always a mental battle. Fingers crossed that now no new negative event comes up.

Looking forward to contra thoughts.

Disc: Invested at a slightly higher price.

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The reason why in India, a management is more important that the business, is that if the management is retail-investor unfriendly, then no matter how well the business does, the minority shareholders will get cheated out. So, it is more critical to focus on the management than the business in such cases.

History keeps repeating itself!!

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Q4FY19 Earnings Concall Notes – 4/23/2019

• EBITDA margin lower by 5%; 3.5% coz of revenue mix and 1.5% because of price softening. Services contributing close to 50% of the revenue.
• OF business operates in price range of $7-$8. Now pricing has reached closer to $7. Average price has been between $7 and $7.5. India fiber price similar to global pricing levels.
• 100% capacity utilization in products business.
• Service business EBITDA margin at 11%. Products margin is at 26% (moved down from 28%-28.5%). Future blended EBITDA should be 18-20%.
• Current order book of Rs. 10,500cr. 50:50 split of products and services. 70% of product order book is exports.
• CAPEX for current year will be 500-550cr (includes maintenance capex). FY21 CAPEX will come down to 200-250cr.
• FY19 full year revenue mix; 37:63 between services and products. This should move to 50:50 in FY20.
• Were at about 70 days of WC days last year. Now at 75 days of WC days.
• ROCE is higher ins services than products business as its asset light business.
• Not approached by long-term customers for re-negotiation of contract pricing.
• For a given servicing networking project; 70% of work is deployment/installation part – and 30% is kind of annuity revenue for maintenance of the network which lasts 7-8 years after deployment. STL don’t do management of networks that it doesn’t create.

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anyone any idea what is a contract assets in current assets for 1093 cr (it wasnt there before) and also trade payables have risen to 1820 cr (from 640 cr last year)?

I think equity dilution planned

Please see below link

https://www.bseindia.com/corporates/anndet_new.aspx?newsid=d26ecf0a-cb8e-4cec-9c87-bb06a9a335ce

No reason mentioned where these funds are going to use.

But reasons not mentioned why funds needed …as it generating huge cash flows…
More than 750 cr…last year