I am thinking of exiting at a minuscule profit so that I can avoid the decision making of choosing between the devil and the deep blue sea and then buy it later when the demerger comes through ex the power biz. Thoughts invited on same.
Can someone guide me on today’s fall from previous close of 91 to 73. is it going to happen tomorrow too. When is the demerger date finalized? please help as didnt track the stock for a long time
Found a mention of Sterlite Technologies ltd., in livemint today. Sterlite is currently working in building Internet network capacities and system in two smart cities, Jaipur and Gandhinagar. Its chief technology officer, Badri Gomatam, believes that for a smart city, a network is required that creates applications for e-governance, public safety, traffic and utilities, basically a high level ICT (information and communication technology) architecture. He added, “Creating Smart
City Networks requires a balance between traditional ICT, leveraging new technologies to improve efficiency and capacity and create new services of value to the citizenry.”
Few interesting set of info:
- Preforma captures more than half of margins…thats where Sterlite has dominance as its the only player doing so in India
- Chinese are a net importer as of now
- Revenue mix shift towards services can help improve ROCE further even though margins are poor
- Order participation is worth 100b while order book is 8b. Any visibility on new orders can be a huge kicker. Already Sterlite is receiving good order conversions as seen in Smart City projects
Short Summary of Q3 conference call:
we have also prepared few other summaries. Sharing here: https://goo.gl/5RTk0o
Read disclaimer for summaries here: https://goo.gl/HELov8
The credit rating outlook has been improved to “Positive” and reaffirmed at AA-. One step closer to a AAA…And will valuation catch up too…
@giridesh3 - Bro, saw you have followed this demerger closely. I have a question if you can help - What would have happened to one’s stake in Sterlite if one didn’t reply to the demerger communication? The choice shareholders had was either to get out with 22 bucks, or to remain invested in power business with preferential allotment? If someone didn;t reply, what would have happened by default?
If you havent replied, the default is to get Sterlite Power shares. They should be in your demat account by now in the ratio of 1 share of Sterlite Power for every 5 shares of Sterlite Tech.
Yes, i realized that on further digging. Here is one interesting article i came across as to the real motive of demerger. Power transmission segment is at an inflexion point and promoters wanted to take this future cash cow private to get full benefits. They shrouded it with value unlocking for sterltie tech shareholders, which is partially true, but ideally this power business should have been listed.
Some follow up news post demerger -
Sterlite Power sees transmission business doubling to 30-35000 cr by 2020
Sterlite Power readies $5-7 b investment in transmission business
InvIT: Sterlite Power to get SEBI nod today
Well the only option for those invested now is to remain invested. Company will have to come with some exit route (probably IPO) in next 4-5 years to give exit to some big ticket investors (Standard Chartered). I am very bullish on power transmission segment due to changes in the sectoral dynamics. Sterlite power is very well placed to exploit these benefits. Yes, it would be difficult to follow an unlisted company, but this i feel is much better than opting out at 22 INR from what will be a future cash cow. For retail investors, it would have been like funding for a great business, and opting out just before the exploits begin to happen.
In Sterlite Tech, the management commentory is that they will double the
order book in just 1 year itself ie 2018. Non need to wait for 2020. Ster
Tech is very asset light relative to Ster Power, and if this demerger had
not happened, i doubt i would have bought Ster power for the embedded value
of Ster Tech…A different view…
Please note carefully what i wrote -
The best bet would have been to demerge and list the demerged entity, so that shareholders could have benefited from both Sterlite Tech and Sterlite Power. Power segment will have longer gestation but much long lasting revenue stream (transmission BOOT contracts are for 25 years, extendable up to 35 years).
PS: Just look at Adani Transmission, Techno Electric…all these companies are at an inflection point. And so is Sterlite Power.
Emkay upgrades the target price of Sterlite technologies by 38% from here
KR Choksey sets a target price of Rs225/- which is more than a 50% upside.KRChoksey_SterliteTech.pdf (601.9 KB)
Sterlite Technologies selected to be the master implementor of Kakinada smart city project. This becomes its third order in smart city domain.
With reference to the discussions which we had, I would like to add on my views as well.I have minute holdings in the stock for tracking purpose.
Demerger has taken place. As per the scheme of arrangement of demerger, the power products and transmission grid business of Sterlite Technologies would be transferred to a separate entity viz. Sterlite Power Transmission (STPL).
Hence, this would provide immense de-leveraging to telecom. Sterlite is one of the leading fully integrated players in the optical fibre/cable space It has 25-30% market share in the domestic optical fibre cable market.
The company intends to become an end-to-end broadband infrastructure provider.
Hence, Sterlite had acquired Elitecore in FY16 to strengthen its offerings on the services front. We believe the company would be a significant contributor to the National Optic Fibre Network (NoFN) initiative wherein the government intends to connect 250000 Gram Panchayats with 60 mn km of fibre cables. Sterlite is also expected to benefit from the unprecedented capital investments planned over the next five years by telcos, government and be a significant contributor to “Digital India”, “Make in India” and “Smart Cities” initiatives.
Great set of results by Sterlite. Aksh too enjoying the optimism of govt spending in optical connectivity. If the Govt continues smart city and digital india push, Sterlite in particular can be a good growth story for a few years to come.
Latest research report by K R Choksey…with a target price of Rs 300. About 50% more from July 20th pricesKR Choksey Ster Tech.pdf (535.5 KB)
My notes from Q1 FY18 concall -
Order book (July) - 3140 cr
Embarking on a 1200 cr greenfield capes in 3 phases to increase fiber capacity from 30 to 50 ml km, by jun 2019. Impact will come in 2019/2020.
On path to increase profits by 3 times in 3 years! PAT Guidance - USD 10 cr by 2020.
More than 1 year of fiber capacity already booked.
3rd smart city win (Kakinada). Will be developed over next 6 years.
On hiring spree eyeing global footprint expansion.
ROCE - 26%
During the quarter, net cash generation of about Rs. 60 crore post CAPEX and taxes, which led to the overall net debt reducing further to Rs. 860 crore.
Very bullish on China for next 15 years in regard to fiber demand (fiber to home rollout) and 5 g roll out. 400 billion usd investments planned by China for next 15 years. Few telcos in South Korea and China have planned for 5 g roll out next year. India remains under fiberised, but there has been lot of talk. Airtel CEO said that there fiber spending will be 3 times in next 3 years than what they have spent in the last 3.
15 million cable capacity. Till last year, only 6 million utilisation. Very bullish on this going forward. Export demand from Europe very good. India would contribute gradually as well.
Sub 10% interest rate scenario, with 24-26 cr/qtr.
75/25 for product and services. Product part keeps on decreasing and services part keeps on increasing gradually. Current order book is 50/50.
EBIDTA margins for the services segment is 10-15% and that of the product segment is 20s.
Indian telecom contributes only 10% of the order book. Things are slow but will get better as fiber is key to 4g roll-out.
Almost 3000 cr of the order book is to be executed in next 18 months. So 6 qtrs.
300 cr capex will be in this year i.e. FY18, remaining 900 cr will be in next 2 years (till 2020).
1,000/1100 per cabled fiber
Sterlite Technology proposes to lay 5G ready OFCs at Mumbai…
Sterlite technologies selected by Du - the UAE based telecom provider to roll out smarter networks, IoT and FTTH solutions over the next 3 years.