Sterlite Technologies Limited Investor Presentation. July 2016

Transcription

1 Sterlite Technologies Limited Investor Presentation July

2 Disclaimer Certain words and statements in this communication concerning Sterlite Technologies Limited ( the Company ) and its prospects, and other statements relating to the Company s expected financial position, business strategy, the future development of the Company s operations and the general economy in India & global markets, 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, or industry 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 which the 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 general economic, 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 warranty 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 information presented or contained 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 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 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 or changes. 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 person in any manner. The distribution of this presentation in certain jurisdictions may be restricted by law. Accordingly, any persons in possession of this presentation should inform themselves about and observe any such restrictions 2

3 Contents Overview of Sterlite Tech 4 Opportunity Landscape 13 Financials 20 Strategic Direction 24 Key Takeaways 31 Appendix 32 3

4 Sterlite Tech Overview 4

5 Sterlite Tech: Leading Provider Of Telecom Products & Solutions Rs 2,161 Cr FY16 consolidated net revenues and Rs 465 Cr of consolidated EBITDA 25% of FY16 consolidated net revenues comes from international markets 6 of the global top 10 telecom operators use Sterlite s innovative solutions 3 manufacturing locations India, China and Brazil with full time employees 50 patents in the telecom business across USA, EU, India and China and 73 more under global approval 5

6 End to End Integrated solutions What Sterlite Tech offers Specialty Fibre Products Bend Insensitive Optical Fibre Intrusion Proof Cables Customized Cables For Varied Applications Raw materials Preform Optic fiber OF cable Full control over the entire value chain driven by capacities and capabilities SYSTEM INTEGRATION SOFTWARE & SERVICES Design, Build & Manage Data Networks Specialized team with FTTH experience Network engineering, Roll out and O&M OSS / BSS software solutions Managed Services 6

7 Products Network & System Integration Telecom Software Sterlite Tech: Business Verticals Optical fibers & preforms Fiber optic cables Structured data cables Pre-integrated Fiber to the Home/ Antenna (FTTx)Solutions Kits End-to-end project management Specialized team with FTTH experience Network engineering, Roll out, Integration and O&M Telecom Operations Support System Products (OSS) Telecom Billing Support System Products (BSS) Telecom Software: Managed Services Passive connectivity solutions 7

8 Products Business Center of Excellence - Dedicated to Nation System & Network Lab Raw materials Preform Optic fiber OF cable Silica & Power Certain natural gases Integrated Core rod + cladding 22m fkm Capacity Portfolio catering to diverse end use Glass and reliability Lab High end technology, fully integrated, global scale operations for manufacturing optical fibers Optical characteristics Lab Strong patent portfolio 50 granted patents across the globe and break through products 8

9 Network & System Integration Business Services Design Build Integrate Manage Opportunities Network Layer 3 ICT Application Digital India System integration Smart Cities 2 Active network Fiber Infra network Network integration 1 Passive network Access Solution Sterlite offers end to end integrated services in addition to its product portfolio across the various network layers which presents a multi billion multi year opportunity as India s broad band infrastructure is built 9

10 Telecom Software Business Fastest growing IRCM companies in Gartner MQ IRCM 2014 Fastest growing IRCM companies in Gartner MQ IRCM 2014 Global Top 16 BSS vendors Elitecore Wins 2015 Deloitte Fast 50 Award Core competencies Monetization of Next Generation Networks Real Time Analytics Real Time Customer Experience management Sterlite to be able to offer complete suite of products and solutions for telecom service providers and become a partner of choice - fiber and cable portfolio, network creation and OSS / BSS products 10

11 Strong Global Footprint Manufacturing Locations Optical Fiber Aurangabad(India) and Haimen, Jiangsu Province (China) Optical Fiber Cable Silvassa (India) and Curitiba (Brazil) Structured data cables Silvassa (India) Joint Ventures China - 75:25 with Tongguang for drawing optic fiber Brazil 50:50 JV with Conduspar for fiber cabling Sales Offices China, India, Netherlands, Russia, South Africa, Turkey, UAE, UK Services and Solutions NFS Project execution in J&K Smart City Project in Jaipur & Gandhi Nagar Sales Manufacturing Market presence 11

12 Sterlite Tech: Revenue Profile Q1FY17 Export 27% Revenue Profile CIS 0% Asia 15% Export by Region Africa 4% Others 1% Europe 30% Middle East 9% Revenues from International Market :27% India 73% China 35% Latin America 6% China & Europe are our key International markets 12

13 Opportunity Landscape 13

14 Our Product Business: Global Opportunity Landscape 1,200 1, Global Data Traffic (In Extabytes) e 1 Extabyte is equal to 1,000 Gigabytes Includes both fixed and mobile traffic +205% Optical Fiber Cable (OFC Consumption- Mn fkm) North America % Europe China India Others Global Demand for Optical fiber remains strong and continues to show annual growth India remains highly under fiberized compared to other geographies 14

15 India Broadband Space Population (Mn) vs Cumulative Fiber Deployed (Mn Fkm) 1,320 1,381 83% % users above >4 Mbps 1,060 41% % 99 US Population India China Cummulative Fiber Deployed US India China Total Cumulative Fiber Deployed to Population Ratio in US is 1.3x, China is 0.8x while India is just 0.1x India just has 17% of users which enjoys 4 mbps and above speed India highly under-invested in Digital Infrastructure Unique Opportunity to capitalize on Digital India & Telco s Investment 15

16 Our e2e System Integration: India Opportunity Landscape Next 5 years Opportunities Government Opportunity $19 Bn $3.5 Bn Mobile access Small-cells (2G/3G/4G) and WiFi $18.5 Bn Fixed access & backhaul and network build Private Telco s Opportunity $3 Bn Residential Enterprise Mobile Core $12 Bn $4 Bn BharatNet Smart cities Unprecedented capital investments planned over the next 5 years by Telcos and Government STL will continue to be integral partner for initiatives such as Digital India, Make in India and Smart Cities 16

17 System Integration Opportunities FY 17 >5,000 >16,000 SI Projects >10,000 >1,000 Under Execution Bid-Participated- Result Awaited Pipeline:FY17 Total India market envisaged to provide continued large SI opportunities of similar size in next 3-4 years Values in INR Cr. 17

18 Our Telecom Software Business: Global Opportunity Landscape Layer Presence Sterlite Tech addressable : Current Global OSS-BSS Market (In USD Mn) 12,296 BSS & Business Appz 1 Pure play BSS/OSS players Landscape in Telecom OSS/BSS Space Specialized BSS/OSS players System Integrators (SIs) Typically build on their strong integration skills 3 8,177 OSS & Middleware 2 Middleware (MW) Selectively partner for solutions and don't offer integration services FY15 (Current Market) FY 18 (New Geo s) Network & Control Leverage their network and control core capabilities to offer solutions with own and partner products Increased network complexity, due to heterogeneity of technology and vendors 4 Telecom Equipment Manufacturers (TEMs) Own product business Partnering for solutions Integration Way to Play Increased competition, demanding agility of BSS/OSS systems to deploy new offers and monitor success in real-time 18

19 Our Market Strategy OSS BSS Glass Fiber Cable Products Sustained Cash flows Profitable Growth Global Telco Focus Network Integration Solutions & Services System Integration Grow Capabilities Execution Excellence India Telco s/ Govt. Focus Telecom Software Build/Acquire Capabilities E2E Software & Services Global Telco Focus End to End Integrated Telecom Play 19

20 Financials Notes: On May 24th, 2016, Sterlite Tech had announced a demerger effective from the appointed date of 1st April, Post demerger, FY 16 performance is representative of only Telecom business. The FY 15 reported numbers would not be comparable to FY 16 reported financial numbers. The following information is prepared for the like to like comparison of telecom consolidated financials. 20

21 5 year journey - Telecom Business : Consolidated P&L 799 1, % 1,148 1,619 2, % FY 12 FY 13 FY 14 FY 15 FY 16 FY 12 FY 13 FY 14 FY 15 FY Revenue +40% % 7% 8% EBITDA 18% 18% FY 12 FY 13 FY 14 EBIT FY 15 FY 16 FY 12 FY 13 FY 14 ROCE FY 15 FY 16 Continued growth in Revenue, last 4 Year CAGR growth at 28% Stronger growth in EBITDA, last 4 Year CAGR growth at 36% Expanding ROCE with expanding margin for the business IGAAP numbers & Values in INR Cr. 21

22 5 Year Journey - Telecom Business : Volume Analysis Values in Mn fkm +15% % FY 12 FY 13 FY 14 FY 15 FY 16 FY 12 FY 13 FY 14 FY 15 FY 16 OF Volume (Mn Fkm) OFC Volume (Mn Fkm) Volume of OF continues to of 15% CAGR levels Cabling volume also continues to of 15% CAGR levels OFC Volume decline on YoY basis due to shift in the product mix and solutions positioning 22

23 Annual Financial Performance: Consolidated Telecom Business Values in INR Cr. P&L FY 15 (Adj. proforma) FY16 ( Audited) Balance sheet FY 15 ( Adj. proforma) FY16 (Audited) Revenue 1,619 2,161 EBIDTA EBITDA % 21% 22% Depreciation EBIT EBIT % 15% 15% Interest PBT Tax PAT (After minority Interest) EPS (Diluted) in Rs Net Worth Minority Interest Net Debt 674 1,008 Total 1,274 1,738 Fixed Assets 984 1,318 Net Working Capital Total 1,274 1,738 Return on Equity (Post Tax) Na 22% 23

24 Strategic Direction 24

25 Strategic Direction E) Consistent Returns to the Shareholders: 30% of PAT as dividend D) Defined principles for Inorganic Growth: Capability addition Strategic Direction A) Market focused approach to drive sustained profitable growth: End to end solutions & services B) Focus on Research & Development: Increasing patent portfolio C) Expanding ROCE for the business~20% 25

26 A) Market Focused Approach New Fiber & Cables Products Unique Offerings Smart Networks Fiber network as a Core to CSP Offer pre-connected intelligent products and services to Telco s Building Fiber networks as brain and heart of CSP Increase capacities through minimal Capex & Debottlenecking initiatives Enabling Government to rollout citizen centric services by offering end to end System Integration service 26

27 B) Focus On Research & Technology Center of Excellence, Aurangabad Strong Patent Portfolio Customer Experience Center, Gurgaon Sterlite Academy Strong focus on the Glass Research Strong Patent portfolio of 123 patents :50 granted and 73 under evaluation Building advance technologies : 5G, Pre-connected Solutions, IBS/DAS :Customer Experience Center at Gurgaon Sterlite Academy : Sterlite Certified Fiber Installers : Skilled FTTH workforce required for sophisticated Fiber to the Home Technology rollout 27

28 C) Targeted Expansion Of RoCE Increase proportion of Higher value products from 10% currently to 20% in 2018 on growing revenue base Cost leadership in manufacturing through increasing manufacturing yields through analytics 18% Strong in-house design and engineering capabilities for creating high performance, long life networks for customers, thereby reducing TCO: o Working with leading international firms to bring world class practices and technologies for fiber network creation Increased proportion of cabling mix in business ~ OFC Capacity ramped up to 15 Mn 7% FY13 FY16 Brownfield & Debottlenecking capex with a focus on increased asset sweating ROCE 28

29 D) Inorganic Growth : Defined Principles Product & Solutions (core) System Integration (targeted) Telco Software (new) Target Strategic Fit Innovative product or technology Technology innovation: IoT, Education, Healthcare, NFV, & SDN OSS/BSS innovative portfolio Business ROCE 20%-30% EPS Accretive to STL < 36 Months Enhancing core competency & market access ( Design, Engineering, R&D, Global Customer Access) Buying decision driven by capability augmentation and not adding scale/capacity Tuck in acquisitions to elevate competitiveness of offerings 29

30 E) Consistent Returns to Shareholders Consistent Dividend payment history Increasing ratio of profit sharing Stated Dividend Policy going forward Dividend Payout History 34% 31% 31% 29% 28% o Board will endeavor to maintain a Dividend pay-out of around ~ 30% of profits after tax (PAT) on Consolidated financials basis FY 12 FY 13 FY 14 FY 15 FY 16 30

31 KEY TAKEAWAYS Sterlite Tech is well placed to strengthen its leadership positon for connectivity enhancing products and solutions High ROCE & ROE business profile Focused on Customers & Stakeholders value creation Demerged company allows simplicity in business and focused Telecom play Implementing Customer centric alignments to transform go-to-market approach New organization effective from April 1, 2015 and the record date for the Demerger tentatively expected to be in Mid-June, subject to regulatory approval 31

32 Appendix 32 32

33 Quarterly Financial Performance Consolidated Telecom Business % % Q1 FY16* Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17* Q1 FY16* Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17* Revenue EBITDA % Revenue profile reflect 22% growth on YoY basis EBITDA grew by 21% on YoY basis Q1 FY16* Q2 FY16 Q3 FY16 PAT Q4 FY16 Q1 FY17* Net profit of 40Cr (post minority interest) for Q1FY 17 (30% YoY growth) Notes:* numbers are in Ind AS & Values are in INR Cr. 33

34 Quarterly Financial Performance : Products % % Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 OF Volume(MnFkm) OFC (Mn Fkm) Quarterly volumes for OF have consistently crossed the 5.5 million mark for the last 2 quarters- annualized rate of 22 Mn fkm OF capacity ramp -up to 25 Mn FKM by mid of FY 17 through debottlenecking initiatives-accelerated expansion Capacity of 30 Mn OF volumes by mid of the next financial year OFC volume expected ramp up in H2 through increased demand in India and acquisition of new customers globally 34

35 Consolidated Financials: Q1FY16 Vs Q1FY17 P&L (Rs. Cr.) Q1 FY16 Ind AS Q1 FY17 Ind AS Revenue EBIDTA EBITDA % 22% 22% Depreciation EBIT EBIT % 17% 16% Interest PBT Tax PAT (After minority Interest)

36 Demerger Concludes: Sterlite Tech Now A Pure Play Telecom Focused Company New Company structure to accelerate execution and enable demonstration of superior performance Leaner structure to allow for simplicity and focus while enabling greater agility Implementing Customer centric alignments to transform go-to-market approach Pre- Demerger Sterlite Technologies Ltd. Post -Demerger Sterlite Technologies Ltd. (Pure Play: Telecom Company) New organization effective from April 1, 2015 Record date to be announced soon Telecom Power Sterlite Power Transmission Ltd. 36

37 Sterlite Tech: Pre Vs Post Demerger-key Financial Metric Values in INR Cr. 3,097 Revenue EBITDA PAT -30% 2, % Consol. FY15 Consol. FY16 Consol. FY15 Consol. FY16-3 Consol. FY15 Consol. FY16 Sterlite Tech is pure play Telecom focused company post Demerger PAT surges to Rs 151 Cr. Vs losses at Consolidated level last year 37

38 Sterlite Tech: Pre Vs Post Demerger- Balance Sheet Metric Values in INR Cr. 4,882 Net Debt Interest Cost Net Debt to Equity x -79% -65% -69% x 1,008 Consol. FY15 Consol. FY16 Consol. FY15 Consol. FY16 Consol. FY15 Consol. FY16 Significant deleveraging of the balance sheet, considerable reduction in Net Debt Interest burden reduces by almost 1/3rd from Rs 327 Cr to 113 Cr Leverage ratio improves substantially 38

39 Sterlite Tech: Pre Vs Post Demerger- Return Profile Metric Values in INR Cr. 6,835 Capital Employed ROCE (Pre-Tax) ROE (Post-Tax) 18% 22% 1,819 5% Consol. FY15 Consol. FY16 Consol. FY15 Consol. FY16 0% Consol. FY15 Consol. FY16 Capital Employed post demerger pertains to Telecom business only Significantly improved ROCE & ROE post restructuring 39

40 Options For Shareholders As A Part Of The Demerger 5 share in Sterlite Technologies Limited Sterlite Technologies Limited Telecom (Listed) 5 share Option A SPTL (Unlisted equity) 5 equity share (Value fixed at Rs per share) Scheme offers multiple options to cater to investor s preference Option A : Continue to hold equity shares and partner in the value creation of the power sector In case shareholder is unable to hold shares due to conflict with their investment mandate then will be issued Redeemable Preference Shares (RPS) Option B : Provides a liquidity event at the end of 18 months Option C : Provides an initial liquidity window for 30 days or Option B or Option C SPTL Listed RPS 5 Redeemable Preference shares to be redeemed at the end of 18 months (includes 8% dividend p.a - Rs 123.5) SPTL Listed RPS 5 Redeemable Preference shares to be redeemed within 30 days of the allotment date Note : * Representative for resident shareholders options for other shareholders and Promoters may be different and is covered in the scheme document. 40

41 Post Restructuring Company Structure Pre-Demerger Post Demerger Sponsors 54.8% Public shareholders 45.2% Sponsors 54.8% Public shareholders 45.2% Sponsors Public shareholders Telecom division Sterlite TechnologiesL imited Power Products division Standard Chartered PE Grid Projects subsidiary 27.1% fully diluted Sterlite TechnologiesL imited Telecom Business Sterlite Power Transmission Ltd. (SPTL) Power Products Business Standard Chartered PE 27.1% fully diluted Grid Projects subsidiary 100% Sterlite Power Transmission Ltd Demerger of power products division and transmission grid business undertaking 41

42 Thank You 42