Sterlite Technologies Ltd

NSE:STLTECH

Earnings Call Transcript 2023-Q4

[Pankaj Dhawan, executive]

Ladies and gentlemen, good day, and welcome to the STL Quarter 4 and Full Year FY '23 Earnings Conference Call. I am Pankaj Dhawan, Head Investor Relations at STL. To take us through the quarter 4 and full year FY '23 results and to answer your queries, we have Ankit Agarwal, Managing Director, STL; Tushar Shroff, Group CFO, STL; and Raman Venkatraman, CEO, STL Digital.

[Operator Instructions] Please note that this call is being recorded. You can also download a copy of the presentation from our website at www.stl.tech. Before we proceed with the call, I would like to add that some elements of today's presentation may be forward-looking in nature and must be viewed in relation to the risks pertaining to the business. The safe harbor clause indicated in the presentation also applies to this conference call. For opening remarks, I now hand over the call to Ankit Agarwal. Over to you, Ankit.

[Ankit Agarwal, executive]

Thank you, Pankaj. Good day, everyone. Hope you and your family are safe. Thank you for joining us Q4 and full year FY '23 earnings conference call. So if you look at the year gone by, we've made significant progress on all of our outlined strategic priorities. Starting from the optical business, the revenue grew by 46% on a year-on-year basis to INR 5,439 crores in FY '23. In terms of EBITDA margin, we delivered 20% plus margins from Q2 onwards, which is what we had shared and committed to the market.

We have reached 12% market share in global ex-China market, cleaning almost 3% market share in 1 year. This is something we're all very proud of as an Indian company to get this kind of market share in a global technology product. These gains have come particularly on the back of winning multiple long-term contracts from Tier 1 customers in North America. We've become much more interest in the U.S. market and have commissioned a greenfield manufacturing facility for optical fiber cable, which will start commercial production in Q1.

We have launched new products such as the Multiverse as well as 180-micron fiber cable. I'm very proud of these developments because the 180-micron in particular will be one of the first companies to make it and it will be the smallest fiber optic in the world going from 240 micron all the way now down to 180 microns. All of these steps have propelled us to move forward in our journey to become top 3 optical networking players globally. In the global services business, we have moved our revenue share towards private customers in India, and we have also achieved operational breakeven in the month of March for U.K. business. We're also very happy to share that we have entered the IT services industry with our STL Digital business unit and we have Raman as well, who will share some details with us later.

We have seeded the business this year and now have almost 900 consultants on board, we shall give more details in the upcoming slides. Last but not the least, we have exited 3 subscale or loss-making businesses, in line with our stated strategy to focus on few businesses and become world-class in them. We have sold Ideas business to Hexatronic Group for approximately GBP 14 million. We have sold our telecom software business to Skyvera, an American company, which is part of TelcoDR for $15 million, and we have also exited from the loss-making wireless business in quarter 4 which was impacting us almost INR 40 crores to INR 50 crores per quarter.

In FY '23, in order to increase transparency, we started segmented financial reporting in 3 businesses -- in 3 business segments, namely optical networking business unit, global services business unit and digital and technology business unit. We also met our revised guidance. Our revenue growth for the full year has been 27%. We have reached normalized EBITDA margins by quarter 4, '23, delivering 15% EBITDA margin for the quarter. And net debt now stands at INR 3,121 crores at the end of quarter 4 FY '23.

As we enter FY '24, our strategic direction remains the same. Firstly, we shall continue to grow the optical business by increasing optical fiber cable market share and the connectivity attached that we have been speaking about. We have also started projects to optimize our raw material and fixed cost in the business to become even more competitive. Secondly, we shall continue to consolidate our global services in the segments of our choice. We have reduced our government's exposure in certain places and focus more on the private segment where we are working with players like Airtel and Jio to continue to provide solutions for them. We're building new capabilities for value-added services, and of course, we're also working on improving our U.K. operations from a profitability perspective.

Last but not the least, we shall continue to build digital India business through focused investments in building new technology and capabilities to grow the business going forward. In the next few slides, let's talk about our first top strategic priority to become top 3 player in the optical fiber and cable connectivity business. As for the latest industry reports, the global telco spend and telecom equipment is set to grow by 1% in 2023 despite the overall decline in telco CapEx. Also interestingly, in the data center space, overall CapEx continues to grow, although it is by single digit compared to 15% growth in 2022.

So what we're seeing that in 2023, the growth in the private segment is slightly moderated as compared to 2022. Having said this, on the public investment side, the commitment and execution of various government programs remain strong. Some of the examples that we can share are clearly the U.S., about $97 billion in broadband funding through various programs, including RDOF, BEAD, which is a $42 billion program, the middle mile program, et cetera. Similarly, in Europe, places like the U.K., Germany, France and Austria are investing anywhere between $24 billion to $15 billion, respectively, around various digital programs. And of course, closer to home in India, we're extremely proud and committed to as a BharatNet project where there is a program to connect over 3 lakh villagers and investment north of $10 billion.

The 5G deployments also continue to remain strong globally. As you see from the chart on the left, by end of 2022, there are already 1 billion 5G subscribers globally, which is expected to triple by the end of FY '25. As per Ericsson, there are now 235 service providers that have launched commercial 5G services globally with almost 35 stand-alone 5G networks. Leading the 5G deployments is China, which plans to increase its 5G base stations from $2.3 million to almost $2.9 million or $3 million by the end of this year.

As 5G continues to proliferate, we also see that various countries and bodies are already starting to look at 6G, next generation of technology and what that will mean for the networks. Fiber-to-the-home deployments also remains strong, as you can see on the chart on the right. In the U.S. alone, roughly 8.2 million homes were passed in 2022, which is expected to go up to 12.2 million homes in 2025. This is a very positive development in the market.

In Europe and particularly in the U.K. and Germany, home pass in 2023 is expected to go up compared to 2022. In China, very interestingly, as a next frontier from fiber to the home, telecom operators are now talking about FTTR, which means fiber to the room. That's really, really interesting when you look at next generation of capability, low latency, high capacity that is actually being used and asked for by users. This will also mean that the speeds that ultimately go to the homes will actually move from about 1 gigabit to almost 10 gigabit. And you're seeing this not only in China, but parts of Europe, parts of Japan and also in the U.S. where people are starting to offer 10 gigabit services for fiber to the home.

The vision for 6G is an area where digital, physical and human world will seamlessly fuse. Intelligent knowledge systems will be combined with robust competition capabilities to make humans endlessly more efficient and redefine how we live, work and take care of the planet.

6G network will increase data translation rates to more than 100 Gbps and reduce latency to sub-milliseconds levels. It's use cases will be in the areas of precision health care, smart agriculture, digital twins and robot navigation. For 6G mobile operators will need to use higher frequencies and deploy more wireless nodes. All of these nodes will be connected on fiber. In terms of time lines, 6G is planning to introduce 60 applications as early as 2025. But first, commercial 6G networks will be available globally in our view by 2030.

So that's something important for everyone to understand that currently, we believe that we have 5 to 6 years of network deployment linked to both 5G, fiber-to-the-home, fiber to enterprise. And then within 2028, 2029, we should start seeing network investments continue to accelerate for 6G and other technologies linked to it.

Now coming to the demand outlook. As for CRU the medium-term demand optical fiber cable volumes is expected to go up to 607 million fiber kilometers by 2025 up from 534 million in 2022. In short term, however, demand situation shall be catalyzed in the next 1 to 2 quarters. What we are seeing, particularly in North America is that the lead times have come down significantly. And therefore, there is a correction in inventory that is also taking place and carriers are drawing down from the inventory first before they start placing significant orders again.

Of course, the labor constraint is also not helping the situation as there is and hence, a need for some of the connectorized solutions have become more pronounced. Europe and Indian markets remain robust. And coming to China, there has been a delay in the China mobile tender. We expect some temporary softness in demand but we do expect the growth to come back strongly as inventory corrects and the new tender comes out probably in the next few months.

Structurally, however, we would like to reiterate that the actual field deployments seem strong and certainly, within a quarter or 2, we do expect the demand to start picking up again. As you can see from the chart here that they were consistent -- that we are consistently gaining market share in the optical fiber cable business.

I'm proud to share that in FY '23, we reached an estimated 12% market share globally, excluding China up from 9% in FY '22. Our connectivity business has also grown in line with the cable business. We are following a framework for growth in optical business. In short term, we would continue to sweat our capacities, particularly across the markets, but also in the U.S. In medium term, we would like to grow our connectivity business and enhance our business in data center segments over the long term, we will build new capacities backed by specific customer commitments.

I'm very happy to share that, as you can see on the left side, celebrations of our China factory. Very happy to share that almost 80% of the team rejoined us when we restarted the factory that speaks a lot about our culture and our management. This is a factory that continues to operate really well and we continue to support from this facility our global cable requirements. Also, in the U.S., this is the photo of our first cable that was manufactured. We have a strong team that is being built there. We have our equipment now in the facility and the first commercial production and supply will start from this quarter, Q1 onwards.

At STL, we continue to invest in R&D to develop and launch industry-leading new products in FY '23, we launched multi-core fiber, which has 4x the transmission capacity than normal fiber with the same diameter. Recently, we are also very proud to launch the 180-micron optical fiber, a slimmest fiber yet and the slimmest fiber in the world. This fiber-enabled small -- the smallest diameter in cables with the highest fiber densities. This becomes extremely critical as we both were looking to increase the capacities for 5G eventually for 6G as well as for fiber-to-the-home applications.

As the service providers densify the networks with more fiber, the duct space would become a precious asset. This is where Sterlite's high-density micro cables will enable operators to pack more capacity in a limited duct space and thereby reducing the cost and also speed of deployment timings.

We also continue to work as per our framework to grow the connectivity business as last year, we had taken concrete steps to increase our wallet share in key accounts in Europe. As a next step, we plan to enter multiple new markets on the back of this year, our strong product pipeline. As we speak, we're going to product approval cycle for multiple products across geographies. We are very mindful that typically these approval cycles can take anywhere between 9 months to 12 months. So we're working very closely with our customers and installers, both from product development stage all the way to testing and approval process.

As these products commercialize, we expect our attach rate to witness an improvement and a jump. Now let's discuss the progress in Indian market and how we're pivoting in the global services business. The 5G deployments have clearly picked up pace in India, and the 5G subscribers have reached an excess of 50 million. Bharti Airtel has offered 5G services in more than 3,000 cities while Jio has also launched 5G services more than 2,300 cities. Both the operators are aggressively driving the deployment and plan to cover the whole of India by 2024. As these deployments take place, we expect operators to roll out between $1.5 billion to $2.5 billion for fiber rollout in the next 2 to 3 years. And in cable kilometers, we expect the Indian telecom operators to deploy more than 2,000 cable kilometers in the next 2 years.

One thing we clearly see is that the operators need to get to the 70% to 80% of their towers to be backhauled by fiber. So there's a very strong push for tower fiberization we see a clear focus from the operators to increase fiber-to-the-home penetration. And when you look at the enterprise business, that's certainly an area where they're seeing growth. And again, that will come on the back of very, very strong fiber connectivity.

In this 5G deployment, we are partnering with both the leading telecom operators, Airtel and Jio, we are very proud to share that we are one of the preferred partners for Airtel in India, in particular. This position will help us improve our revenue share from India private customers from 31% in FY '22 to 43% in FY '23. We continue to build our capability towards value-added services to improve our margin profile and also reduce our fund involvement. We are very happy to share that we are one of few companies in India and in the world to have received the CMMI Level 5 certification. This is a very, very important certification and is a testimony to our quality and our processes. That is a testament of the high-quality team that we have in our services business.

Coming to U.K. services business. In line with our expectations, I'm very happy to share that our STL U.K. has achieved operational breakeven in the month of March 23. Building on the same, we expect the U.K. business to be profitable in FY '24. Our sales engine is focused on increasing wallet share from current customers and our delivery engine is focused on being very efficient in scaling out and deploying the fiber networks. Our project execution on services is on track. Among the India public projects, our BharatNet projects in the state of Telangana is about 63% complete, including all packages. And the network modernization project for Indian PSU is also 63% complete.

Additionally, we have started a new fiber rollout and managed services project. In the Indian private site fiber rollout for large Indian telecom operator is 100% complete for Phase I and Phase II, for Phase III, it is currently 13% -- 17% complete. Fiber rollout for another large telecom operator is -- and the Phase 2 is about 10% complete. Fiber rollout for a large modern optical network for another private customer is 42% complete. And coming to the U.K. fiber -- for fiber-to-the-home rollout for all projects combined is currently about 23% complete.

Now we shall talk about STL Digital, which is our entry into the IT -- into the exciting IT services industry. At this juncture, I'm delighted to introduce Raman, who is a leading STL Digital. Just to give you a brief about Raman, he's an absolute veteran in the IT services industry with more than 30 years of experience.

Prior to STL, he was associated with TCS, a Senior VP and Global Head of High Tech and Professional Services vertical and Global Head of Alliances and partnerships. As a leader, Raman focused on cultivating trust, empowerment and teams. He lives by his mantra, failure is success and progress. In his leisure time, he loves to play cricket, I can vouch that he is a very good bowler, traveling and spending time with nature. Raman, I now hand over to -- Raman, I now hand over to you to discuss how we are building the STL Digital business.

[Raman Venkatraman, executive]

Thank you, Ankit. That is a very generous introduction, thank you. So the IT services industry, as you all know, is in a continuous growth cycle for a very long time. And the global IT spending is in trillions -- it's in multiple trillions, and we expect it to grow at least for the next 2 to 3 decades with lots of changes that are happening with cloud adoption and data and everything. So the growth is just going to continue.

And from an STL perspective, there are lots of innate capabilities that we have, whether it's in manufacturing, whether it is in telecom and also core technology expertise that is there. And our vision is to combine those capabilities of what is there in STL. And along with focusing on the areas of growth in the IT industry, specifically the new areas of digital, which is cloud, data analytics, the cybersecurity and those areas and then drive through a differentiated experience to our customers and bring more agility into it. And that's where we feel we have a great path ahead in building a very strong business in this area.

Within -- see, what we have done is I joined towards end of 2021, and it took about 6 months or so to build a strong leadership team. Team of strong domain consultants, delivery leads and your industry vertical leads. And as we build this team together and then we started executing. And the response has been tremendous from the market. We reached out to our relationships. We spoke to various customers across markets. And in a very short period of time, we've built a very strong team of 900 consultants, delivery consultants and a very strong leadership team of more than 50 people.

And happy to say that a significant part of that team is -- has been driven as well. And we said, rather than focusing on the entire IT area, we'll just focus on a few areas, as I said, with respect to digital, just focusing on cloud, data analytics, cybersecurity, enterprise SaaS and core product engineering and we created delivery centers in India and also sales offices in U.S. and in U.K. and started discussing various customers.

I'm very happy to say that in a very short time frame of about 8 to 9 months, we have been able to acquire 18 global customers, and these are customers in the Fortune 1000, Fortune 2000 kind of areas. They are absolute leaders in each of those different spaces in different industries like technology, life sciences, comms, media energy resources and all of those. And with whom we are engaged as a strategic partner, and we are executing long-term engagements to the order book of more than INR 650 crores.

The order book continues to grow in this quarter and revenues have been accelerating and the revenues for last year has been about INR 70 crores of revenue, which is pretty much in the last 6 to 7 months. And we expect the revenue to accelerate in this year. So overall, it has been a pretty strong journey so far in terms of what we have created as a very strong team and the future looks extremely promising for us as we continue to march forward.

From a differentiation perspective, as I mentioned, there are lots of innate capabilities of the STL from a technology perspective. We have been able to see a very strong domain capability and industry capability as well that we have been able to bring together. These are people with multi -- again, just similar to me, who have spent lots of years in the industry, who have built multi-hundred million dollar businesses earlier in their various roles in other companies. And what we want to focus is just build a company, which is going to focus on specifically on Agile.

Agile is our mantra and differentiate the customer experience is a key thing that we are going to focus on. And as we build capabilities in cloud data, cybersecurity, enterprise SaaS and as we bring them together and specifically focusing on customer needs for the specific domain, we do see a significant part in terms of how we can deliver a differentiated experience to our customers.

And this is already reflecting in the kind of wins that we are seeing in the marketplace where we are able to take head on against the establish large players today and able to win key engagements in SAP or in data or in cloud, design and all those kind of things. And there is a very strong focus in terms of how we are going to build our partnerships because to be able to lead in this world, we need to build a very strong ecosystem of partners predominantly in the technology side. So we are doing that as well, which is helping us to build the capability. And again, thereby delivering the kind of experience that we are looking at. So all in all, we have made a fantastic beginning so far, and we hope to accelerate in this journey in FY '24, '25 and in our path forward.

So with this, I would like to hand over Tushar from an overall financial perspective.

[Tushar Shroff, executive]

Thanks, Raman. Good day, ladies and gentlemen. We shall now discuss our financials entity. Before discussing the financials, I would like to state that in accordance with Ind AS 105, noncurrent asset held for sale and disclosure of a discontinued operation for our IDS wireless business and Telecom software business are reported as discontinued operations in the financials accordingly for a like-to-like comparison prior period financials are restated.

Q4 FY '23 revenue grew by 25% on a year-on-year basis to INR 1,872 crores, EBITDA grew by 71% on a year-on-year basis to INR 280 crores. EBITDA margin increased sequentially and correspondingly to 15%. Net margin increased to INR 82 crores Revenue was driven by a strong growth in optical business. Margin improvement is mostly on the back of improvement in the margins in our optical business.

For the full year FY '23, the revenue grew by 27% to INR 6,925 crores. EBITDA grew by 29% to INR 931 crores. Net profit increased by 51% to INR 245 crores. For the full year, also revenue growth and margin improvement was driven by the growth and margin improvement in optical business.

Now coming to optical networking business unit Q4 FY '23 revenue has gone up by 40% on a year-on-year basis to INR 1,505 crores and EBITDA has gone up by 161% on a year-on-year basis to INR 321 crores. For the full year FY '23, revenue grew by 46% to INR 5,439 crores, and EBITDA grew by 93% to INR 1,045 crores. Full year revenue has grown on the back of the improvement in OFC volumes and better realization in some of the markets, along with increase in the connectivity revenue. Key drivers of the margin improvement were a product mix shift to higher-margin products and reduction in logistic cost.

In global services, Q4 FY'23 revenue stands at INR 352 crores. EBITDA has gone up sequentially to INR 14 crores. EBITDA margin for the quarter stands at 4%. Full year FY '23 stands at INR 1,511 crores. EBITDA for the full year FY '23 stands at INR 47 crores as we have said, we are prioritizing cash flow over the growth. So we are being selective and presently, we are being selective in order intake. We expect the profitability for FY '24 to improve as U.K. business has turned profitable in March 2023.

Our revenue mix is shifting to customer segment and geographies of our choice. We are increasing our shares in telco segment. In terms of geography, we have increased our revenue share in American market from 13% to 38%. This amazing growth in U.S. market is a reward of our investment in research and development over the years. In terms of new orders this quarter, we continue to partner with leading Indian telcos in long-distance intracity fiber rollout in India.

We continue to win multimillion-dollar orders for optical fiber cable in Europe and Americas. In addition to optical fiber cable, we have also won optical connectivity orders in APAC region. Our open order book at the end of Q4 FY '23 is INR 11,052 crores. Our order book is well diversified across the customer segment and also across our businesses. We also have significant O&M orders, which are already yielding a revenue for this year.

We have placed the abridged financials for your perusal. In FY '24, we expect revenue growth to be around 10% to 12%, which shall revisit this estimation periodically as the industry situation crystallizes in upcoming quarters. As we have also communicated earlier, in terms of net-debt-to-EBITDA, we want to reach lower than 2.5x over the next 12 months.

STL's endeavor is to be a responsible leader in ensuring the connected and inclusive world. This focus reflects in a way we have designed and implemented our ESG agenda. We have diverted 225,000 metric tons of waste away from land fields from FY '19 to FY '23. We have reduced the emission of 23,000 tonnes of carbon dioxide equivalent through various initiatives in plant from FY '21 to FY '23. We have recycled 675,000 metric cube of water from FY '19 to FY '23. We are zero waste to landfill and zero liquid discharge certified. We have announced our commitment to become a carbon-neutral company by 2030.

Through our various initiatives in education and women empowerment, over 815,000 lives have been positively impacted from FY '19 to FY '23. We have also positively impacted 2.2 million lives through our various initiatives in health care from FY '19 to FY '23. For our work, we have won 90-plus ESG award from FY '20 to FY '23. In response to the corporate action, we have proposed to demerge the global service business to STL Network Limited, a wholly owned subsidiary of STL on a going concern basis. For the purpose of demerger, the company will be filing the scheme of arrangement with NCLT. Pursuant to the demerger STL Network Limited will be a separately listed entity with a mirror shareholding of STL.

The demerger is intended to meet the requisite conditions under the Income Tax Act to be a tax neutral. This demerger will be very positive for both the optical and the service business. Both the business can now pursue the growth opportunities independently with any -- without any capital constraints, this move shall also help both the businesses to further engage with clear value proposition to the customers and other stakeholders. It should also provide the new opportunities of growth for our employees. Last but not the least, the demerger shall help us to widen our investor base for both the entities, thereby unlocking the shareholders' value.

In summary, I would like to say that our profitable growth journey in optical business continues. We continue to gain the market share across the focus markets, increase the optical connectivity attach rate and simultaneously work to optimize the cost base. In the global services, we continue to focus on India, private and move towards value-added services with improved margin profile and better fund involvement and digital business, we are consciously invest to grow on a quarter-on-quarter basis. We are also working to improve the utilization to move towards the profitability.

Last but not least, we have targeted to generate free cash and reduced net debt to EBITDA to less than 2.5x by the end of the financial year. With this, we come to the end of our opening commentary, and we shall now move to Q&A.

[Operator]

[Operator Instructions] So we'll take the first question from the line of Mr. Pritesh Chheda.

[Pritesh Chheda, analyst]

Considering your outlook, which you mentioned on Slide 12 and your backlog, which is flat for the year end, is it fair to assume that you will not grow in the first half and on your 10%, 12% net growth, which you have given as a guidance, will mostly fall in second half of the year?

[Ankit Agarwal, executive]

So what we've tried to share is what is our credibility. Of course, it's a dynamic situation or 2 parts. There has been inventory buildup that we have seen from our customers, but also our peers and our competitors in the U.S. have also witnessed. How quickly our inventory get drawn down, how fast can the operator execute on the fiber deployment. That's something that we continue to watch on a monthly basis.

So I think our current visibility certainly is that by H2 our financial year, there should be an improvement in pickup. And we are watching very closely on our current customers, but we're also seeing how we can increase our customer base across Europe, U.S. as well as India and Australia to further improve our sales of the cable and the connectivity. So definitely better visibility of H2 compared to H1. But even in H1, certainly continue to look what more we can do given some weakness in the North America market.

[Pritesh Chheda, analyst]

Any reason why our optical connect rate cost has not improved this year?

[Ankit Agarwal, executive]

Yes. So as we had shared in the past that there are 2, 3 specific areas that we are focused. One is the product development itself on the back of acquisition of Optotec, we have invested and look to scale up our product portfolio itself. As I shared earlier, also the portfolio requirements are very different even with -- again, different for U.S. and the rest of the world.

So there's a lot of working on building a product portfolio, creating our own IP to make sure that we can sell them successfully. At the same time, one thing that we have seen has taken longer than expected is the customer approval cycle, both at the supply chain level as well as the install level.

So these are areas that we have built based on our learning. I'm confident over the next 6 to 9 months as some of these -- both products get developed as well as customer approvals come that's certainly going into H2 there should be an improvement in the sales of optical interconnect solutions.

[Pritesh Chheda, analyst]

On the fund raise, I think you guys have taken a resolution of INR 1,000 crores instead of INR 500 crores earlier? And what would be your build of mind if you have to raise? Will it be a right issue? Or you will go and seek funds from investors?

[Tushar Shroff, executive]

So at this point in time, the current proposal is the enabling resolutions that we are taking it. It is a part of new existing solution that we have. So this is basically an enabling resolution that we have. When we come to a very specific, at that point in time, we will again inform everyone with respect to our plan in terms of raising of the funds. However, we already have -- we are in the process in terms of looking for the right opportunity, right window to raise the funds by way of the right issue, which is already there in there on the card.

[Pritesh Chheda, analyst]

And just my last question, sir. We had a INR 1000 crores, INR 1,100 crore kind of an EBITDA, INR 1,000 crores kind of an EBITDA. And we also had some asset sale totaling about, let's say, $50 million, $60 million with 3 asset but when I look at the debt, it's not come off a lot. So if you could give the cash flow bridge, where did we deploy our -- cash flows which came in?

[Tushar Shroff, executive]

So I would say that INR 400 crores have been deployed in terms of the CapEx and the working capital have been involved -- working capital blockage is about, I would say, including the operating margin is more or less flat. So I would say that major part has gone for a CapEx, which is almost like INR 400 crores.

[Pritesh Chheda, analyst]

So we will see a material reduction next year or we won't?

[Tushar Shroff, executive]

So yes, with the improvement in the EBITDA, the kind of -- we have -- if you look at our guidance and the profitability in terms of the numbers, definitely, we'll see that kind of a cash generation that we've been targeting. We will see the definite reduction in terms of our debt.

[Ankit Agarwal, executive]

And that's why we talked about net debt EBITDA to 2.5x.

[Pritesh Chheda, analyst]

But that number, when you are saying 2.6x the EBITDA doesn't show any debt reduction and that's why I was confused, because that statement is a mix -- is an open-ended statement lower than 2.6x . If I just assign 2.6x, there is no major reduction. So that's why I was confused.

[Tushar Shroff, executive]

Yes. So it will be a reduction of about INR 200 crores or INR 200 crores to INR 300 crores kind of things that we've been looking at, overall next year.

[Pritesh Chheda, analyst]

1 year period.

[Tushar Shroff, executive]

1 year, yes.

[Pritesh Chheda, analyst]

Which means your CapEx will be higher than your depreciation number?

[Tushar Shroff, executive]

Yes. At this point in time, we have considered our CapEx, which is, I think, which is about INR 350 crores to INR 400 crores kind of CapEx that we have considered in our plan.

[Pritesh Chheda, analyst]

Is this growth or maintenance?

[Tushar Shroff, executive]

It has some part in terms of a growth in terms of investment that we have in connectivity business, that is why business as well as some part in terms of maintenance CapEx.

[Ankit Agarwal, executive]

But it's largely in line with what we had already shared. So we talked about getting the U.S. facility up to speed. So some linked to that, the optical connectivity scaling that up and then some maintenance CapEx. And I think fair to say, at least with current visibility, we do -- we have talked about overall cable capacity going from $33 million to $42 million. So that all will come in full stream by H1 of current year.

[Operator]

We will take the next question from the line of Mr. [ Bala Subramanian ].

[Unknown Analyst]

My first question, what is the current scenario for OF and OFC realization side? DGTR recommends anti-dumping duty on optical fiber for imported from China, Korea and Indonesia and other countries? And what would be the impact after this under realization side? These are my first questions.

[Ankit Agarwal, executive]

Yes, I'll take the second one first. So far, just to be clear, there is a recommendation by DGTR, DGAD for the anti-dumping versus in countries like China, Indonesia, et cetera. This is still to go to Ministry of Finance for their approval. So it is not -- this is something that is still work in progress. Of course, we are very confident of the merits, and we do believe that there is a clear case of dumping.

We also believe that Indian capacity is far more than sufficient to meet the country's requirements amongst all of us in terms of the leading players. So I think it's still in the next, say, few months, we'll see the results of Ministry of Finance. And I think the amount of percentage that could be charged in terms of duty will also vary, I think, anywhere in the range of 5%, 10%, 15% depending on the country and within that, the respective player.

So I think let's wait and watch in terms of how the actions progress. But we are hopeful that this will be a positive outcome for the Indian industry, both I think from bringing the -- supporting the Indian industry, but also I think from a quality perspective, ensuring right kind of fiber and quality of fiber is coming into the country.

I think in terms of the overall market, as we said that there has been some delay in the China mobile tender and so to that extent, we've seen some softness in the fiber pricing in China. I think as we shared that we don't really see that immediately impacting the cable prices, at least in our focus markets of Europe and U.S. because a lot of these markets are quite protected against, say, Chinese cable in particular. But yes, we do see some softness in fiber prices locally.

The current imports of fiber into India or into markets like Indonesia and other places, we do see some reduction in prices. We are positive that China Mobile, given its focus on 5G and fiber to the home, we do -- we are hopeful that in the next few months, there should be a good volume tender and pricing tender for the China market and prices should also normalize after that. So that's our current visibility. It is -- we are watching it closely. But we are also confident given that we have long-term contracts with Tier 1 customers that we will continue to have a positive growth. As we have shared, there is also inventory in the U.S. that we see and also our POC.

So as the operators continue their deployment and scale up their deployment as the inventory gets reduced but then we shall continue to see fresh demand growth from North America in particular.

[Unknown Analyst]

Sir, my second question is, could you please share the volume growth for OEF and OFCs for the quarter and full year? And also, would you please share on the optical interconnect attach rate, value terms?

[Ankit Agarwal, executive]

So just to be transparent, we are not sharing actual capacity and volumes for last couple of quarters for competitive reasons. What we can share is that the volumes have increased in quarter 4 versus quarter 3. And then certainly, going forward, we have positive -- as I said, the shift from 33 million to 42 million will be completed by H1. So I think that's a good capacity that will be coming on stream.

On the fiber side, we continue to look at options to scale up our fiber both in India as well as our fiber operations in China. So I think that's also something that will be positive. So I think we will have a good amount of capacity available. And as we continue to secure our contracts in our focus markets, we will -- we should start seeing a volume increase, particularly in second half of this year.

[Unknown Analyst]

Sir, my last question is, could you please share the capacity utilization on -- across plants in India, China and U.S. This is my last question.

[Ankit Agarwal, executive]

Sorry, I won't be able to share that, as I just shared, we are not sharing our capacities and utilizations at a unit level. Suffice to say that we had good utilization in Q4. We are watching the market closely in quarter 1 and quarter 2, but certainly confident of our capacity is coming on stream, and we are working hard to fulfill those capacities.

[Operator]

We'll take the next question from the line of Mr. [ Hiten Boricha ].

[Unknown Analyst]

So my first question is on the inventory buildup, which happened in U.S. So can you shed some light what exactly happened and why this inventory, we saw inventory build in the U.S.?

[Ankit Agarwal, executive]

Yes. So I think overall, what we had seen in the last 12 to -- say, 12 to 16 months, is that the lead times had increased quite significantly going up to almost 40 to 50 weeks in the U.S. for certain cables and connectivity. At the same time, various telecom operators, service providers in the U.S. had some very strong and ambitious plans to deploy the fiber, which still continues, by the way.

So in this period, because of the large lead times and their clear visibility of deployment, they had started building a lot of inventory. What we now see is that they are probably not being able to execute on the ground, mainly because of labor shortages. Trained labor shortages and some permitting issues. So because of this imbalance, they have a certain amount of inventory built up and other side, they are not able to deploy.

Also, what we have seen is now the lead times have come down from about 40, 50 weeks to probably anywhere between 6 to 10 weeks. So the operators are also now are aware that as and when they need it, they can get the cables quickly. So that's where we are in this in between phase. They intend to deploy continues across the operators most of them are listed and they announced their CapEx plans. So we are tracking that very closely. And our own conversations with them they continue to remain committed, but they are sharing this visibility of the inventory. Our current visibility is that it will improve in H2. But of course, we are working on how to further improve our sales in H1 as well.

[Unknown Analyst]

So this is the main reason for -- just want to understand how has the pricing volatility for the cable because of this inventory buildup?

[Ankit Agarwal, executive]

Yes. So I said it's at two levels, one is in certain markets like in China, Southeast Asia, pockets of Africa, where we do see some of the Chinese players, there we have seen some reduction in pricing because of, say, demand reduction in China, which we believe is a temporary phenomenon probably for the next few months. So that is on one level. I think we have seen limited competition or almost zero competition of Chinese in Europe and North America.

So pricing is still stable. It might have come down a little bit given these inventory levels. So our bigger focus is to continue our commitments with our long-term customers. And the way the contracts are set up, generally is that there is a good understanding both of volume and pricing. But given the long-term nature of these contracts, we continue to negotiate with them, and ensuring that the volumes also continue.

The other element, Hiten, is very important is that our factory in U.S. is also coming up. So there's a good amount of effort we're putting in to ensure that we get good long-term contracts to support those facilities to be fully utilized.

[Unknown Analyst]

Sir, can you quantify the pricing? What was it in FY '22 and in FY '23?

[Ankit Agarwal, executive]

No, I think it will really vary by market. I think for example, we would have seen probably a 10% to 15% reduction in China on the fiber prices, but it would be smaller in other markets. And again, I wouldn't generalize but each operator and depending on which market they are, who the competition is, I think that varies anywhere between 5% to 10% is possible in other markets as well. And that's, again, just a general data point. Each customer and depends on our contracts and our negotiations that would vary.

[Unknown Analyst]

So only one last question and then I'll again get back in the queue. So just question is on the dividend. We are giving the dividend of INR 1 and the other side, we are also looking to raise a fund. So yes, I know the dividend outflow is very low when we compare to the fund raise but just wanted to understand the rationale behind that, why we are giving dividend and other side, we are looking for fund raise as well?

[Tushar Shroff, executive]

Yes. So Hiten, as I said, that dividend is important because it's a source of learning for a lot of investors for us. So keeping that in mind and as per the policy, we are supposed to declare the dividend. So that's the reason that we have declared the dividend. Yes, we will be raising the right issue, but right issue will be continued on the right timing and the right market condition. So we'll be watchful of that to get into the market with respect to the right issue.

[Operator]

We will take the next question from the line of Mr. Pratik Singhania.

[Unknown Analyst]

In terms of the deployment rate, how do you track it? Like what metrics do you observe whether it is monthly, quarterly, full yearly, should determine whether the ground-level demand of fiber optics in U.S. is not slowing down?

[Ankit Agarwal, executive]

Sure. yes. Good question, Pratik, it's also my brother's name. So I'll give you a good answer. So I think 3, 4 metrics, as I said, a lot of these customers of ours are public both in Europe, U.S., Australia. So they regularly publish both their CapEx spend, therefore, cash for CapEx, at least for next month. And then on a quarterly basis, they share both in terms of subscribers as well as homes passed. So it's clear, and they give a target of home pass generally, at least for 1 year forward, and some of them even have 3- to 5-year targets.

So that's something that is from their own data gets published. On top of that, we see very interesting data points deployment companies. So we can give you some examples there are companies in U.S. called Dycom and MasTec, which are listed and then they share their data points of how they are deploying the fiber on behalf of these customers. And again, you can see the latest Dycom results. They've just signed multiyear contracts with many of our customers on the -- we supply cable and they would do the deployment.

So these are kind of 2 or 3 data points. Of course, then we have CRU data, which we also share with you from time to time, which is probably a third data point. Of course, the more important being our own conversations with the customers, how they are seeing the visibility. And of course, on a very regular basis, that conversation happens at senior levels. So I think multiple data points. And hence, the outlook we are giving you as a submission of these data points.

[Unknown Analyst]

So for the calendar year 2023, H1, we are witnessing a slowdown in deployment rate as well as the inventory level coming down at the customer level or how it is? Like do you have any growth rate in terms of deployment, whether it is down sequentially or up in terms of percentage?

[Ankit Agarwal, executive]

So happy to share probably some data points with you offline, purely based on what some of our customers have shared but I think what definitely we can tell you is that there is the biggest constraint in North America, in Europe, various parts of the world is even if operators want to scale up, say, 10%, 20% year-on-year they are getting constrained by availability of manpower. This is a global concern where operators are now investing directly in building in a training capability of people. And so this is something that is now becoming the major constraint to rapidly scale up the deployment. So we don't see a constrain in capital. We don't see a constrain in intent.

In fact, most of them have talked about how they want to grow their deployment. But they're clearly seeing a challenge in execution on the ground. And then in some pockets of U.S., some pockets of Europe, there's also constraints in terms of permission and permitting, which also, again, is an ongoing effort to ease those out like we see in India as well.

[Unknown Analyst]

And in the digital business, you talked about having an order book of almost INR 650 crores. So this amount would be executable over how many years and in next, say, 2 to 3 years' time, how like scale this business can reach?

[Ankit Agarwal, executive]

Yes, Raman. Over to you.

[Raman Venkatraman, executive]

Yes. The orders are both near term and long term. So we have some orders that stretch 2, 3 to 4 years duration. And then there are many orders that has to be executed over the next 18 to 24 months. So from that perspective, and most of the orders that we have got is in the third and the fourth quarter. So we see the future pretty good in terms of how we are going to execute those orders, and we continue to gain new orders in this quarter as well. So it's pretty good the way we see it.

[Unknown Analyst]

In next 3 years, what kind of scales you aspire to reach in this business in terms of top line?

[Raman Venkatraman, executive]

This particular year, if you look at our guidance that we have given, we will at least grow the business by at least 3x to 4x. That's what we're expecting for this year. And I would say that for FY '25 or FY '26. Again, futuristic, too much in the future. But still looking at the way that we are scaling from a quarter-to-quarter perspective, it looks pretty good. It will have a decent growth in FY '25 or FY '24. I already mentioned.

[Ankit Agarwal, executive]

I think it's a bit early to give a longer-term forecast. I think from an STL perspective, definitely one focus, as for everything in STL is first focused on profitability. So we have put in about INR 120 crores last year into this business, where as an investment. Also, probably similar level will go into this year and a real priority now for Raman, while tremendous work on the order booking and right team now to break even and start becoming profitable towards the end of this year is what he has committed.

So I think that is more where we are really focused. I think clearly, a lot of success with very high-quality clients. So we are watching this on, say, quarterly basis, and certainly, there's good potential to grow it.

[Unknown Analyst]

And in terms of the demerger, the right issue or the fund raise that you planned to do, would it be like any -- like segregation is there, wherein how much you will put in the services plus the digital business versus how much you'll be using for the product business?

[Tushar Shroff, executive]

No, at this point in time, this entire demerger is going to take anything between, I would say, 9 to 12 months depending on the NCLT approval process. So whatever the proceeds that we may get will be used for both the business in order to bring down the overall debt. So whatever we discussed in terms of debt-to-EBITDA, 2.5x is not considering any kind of right issue proceeds that you may have.

[Unknown Analyst]

And in terms of optical interconnect, I assume that a lot of our products are under the trial phase, testing phase with the clients. So any like visible breakthrough that you anticipate in FY '24 for your optical interconnect business to grow maybe 2x or something like that? Because it's a very good business per se. So anything with respect to Australia and the U.S. market where you anticipate a good growth in optical interconnect can come from this geography?

[Ankit Agarwal, executive]

Yes. I mean, look, I think good question. As I said, it's a balance of all 3. There's still work to be done to build product portfolio both telecom operators and I think also eventually for data centers, I think that those are areas we clearly need to build that out. We continue to build our internal teams also who has specialist knowledge technically and sales-wise in this field. So that's another work in progress.

The third part is on the IP part, as I said earlier also, this is a field with a lot of IP, and we want to make sure that we build the right product with the right IP as we're entering these global geographies.

And then obviously, the part that is probably taking longer than we expected is the customer approval cycle and I think that's probably something where there's been learnings for us, and we'll really look to fast track that as much as possible going forward. And that's both at the customer level and at the installer level. So I think these are some of the, say, learnings, but I continue to be positive, there's no question. I think as you said, it's a good business to be in. It's complementary to our cables.

The customers are looking for solutions of cable and connectivity together. And really, even if you look at, for example, our latest product, the 180-micron essentially with a thinner fiber you can get a thinner cable, those thinner cables can be more compact and lead to a more compact interconnect solution, right? So it's all interconnected for us. And the more of these solutions we can provide to our customers, it is going to create value for them and for us.

[Unknown Analyst]

Right. So that leads to my other -- another question that, can we expect at least a fiber division of STL to be running at 90% capacity utilization for the current year because the you have such a good product in terms of your capability and everything is all top notch. So at least whatever we need internally, we can consume in the balance, is it possible to increase that like external sales of fiber in this current year?

[Ankit Agarwal, executive]

So I think it's -- look, we -- as I said, we -- strategically, we've always said we want to focus our fiber towards our cable and interconnect will be our go-to market. So that continues to be our strategic focus going forward. And there, as I said, we want to be tied up with Tier 1 customers globally to make sure that they buy our cables and interconnect solutions. So that remains our priority.

And I think then it really is a function of how quickly can we scale up as these capacities are coming on stream that I spoke of in the U.S. and other places, how quickly can we utilize those capacities and then obviously then pull in the fiber for making that happen. Very positive about our capacities coming on stream by end of H1. I think we have to watch the market very closely particularly in U.S. to make sure that we can pull through those volumes and then on the back of that, the fiber.

[Unknown Analyst]

Right, because at present, we have 50 million FKM fiber capacity and it will be a 42 million FKM cabling capacity. So the balance, at least -- the balance, whatever is 8 million -- at least 90% of that can be -- can we do like the external sales till the time we set up another cabling capacity maybe in the U.S. or domestic?

[Ankit Agarwal, executive]

No, I think, see, that those options will continue to remain, and we will be doing some amount of fiber sales very strategically to some long-term customers and also value-added fiber, so next-generation fiber, et cetera. So those are things that will continue, but also to be mindful between cable and fiber, there's typically a 5% scrap. So it won't be that the delta is exactly what we will sell externally. Some portion of that, we would be utilized -- we would use larger portion than 42 in our own internal capital requirement.

[Unknown Analyst]

And my last question would be respect to the services receivable. Can you update anything with respect to that? What's the current status?

[Ankit Agarwal, executive]

Receivable for services.

[Tushar Shroff, executive]

So I think receivable for the services with respect to some of the projects, as we continue to execute some of the projects, it starts to liquidate the outstanding that we have on the business.

[Unknown Analyst]

Okay. So what kind of operating cash flow can we expect from the services business this year given the release in working capital from there?

[Tushar Shroff, executive]

So we are targeting something like INR 100 crores to INR 200 crores to be released from the service business this year.

[Operator]

We'll take the question from the next question from the line of Sunny Gosar.

[Sunny Gosar, analyst]

Congratulations on an improved set of numbers and also some debt reduction after quite a few quarters. My first question is in terms of the growth rate that you've highlighted at 10% to 12%. Can you basically help us understand what would be the growth in the service business in that and what could be the mix of growth from the optical business?

Because that growth rate seems to be very conservative, considering your digital business will grow significantly. Although the base is very small, but there is very high growth there. So are you assuming a flattish or a degrowth in the service business?

[Ankit Agarwal, executive]

Yes. So look, I think -- so maybe I'll break it up. Certainly, optical, we have capacities coming on stream on one side. Other side, there are some, I would say, near-term as we need to get in North America in particular. We also need to be mindful and watch closely on the pricing and lead time. So I think those are a combination of things we're watching out for particularly in H1 but certainly quite positive or more positive in H2 on the optical.

At the same time, as we also shared briefly, there's a lot of focus now internally to improve our cost structures and reduce our working capital. which should support the business as well. So that's broadly what we're trying to do on the optical part. And of course, then continue to look at options to grow our interconnect business as well. So that's only optical.

On the services part, I think 3, 4 large opportunities for us. We are looking at scaling up our deployment with operators like Airtel and Jio, so some interesting opportunities there. There are some couple of opportunities we've started to get into on the managed services, and so looking to scale up out there. And then, of course, there could be a big bang at some point in the current year if BharatNet materializes in some form. And certainly, that's an area, again, with the right payment terms, right milestones and cash visibility, we would look to participate and be a leading provider, both on cable connectivity and the services for that business.

And then I think, as Raman alluded to, we started with a base of about INR 70 crores. We think it's a good base to now scale up from there. But again, it's a small number compared to the overall STL number for the current year, currently, we're at about INR 6,800 crores, INR 900 crores. And so even if you take 10% growth of that, that's another say, INR 700 crores, INR 800 crores growth on that.

So I think that's where I would say that balance is there. Some growth will happen on optical clearly. Services, we do see the opportunities, but we are very, very mindful of cash being a priority in the services business versus top line growth. And hence, probably we are conservative there on the scaling up of services. And as I said, IT services are a small base today.

[Sunny Gosar, analyst]

Sure. But just to confirm -- reconfirm on this. On your guidance of 10% to 12%, you are not assuming any big -- or basically largely flattish numbers in the service business, right?

[Ankit Agarwal, executive]

Sure, yes.

[Tushar Shroff, executive]

Coming back to your specific point, the purpose of creating 2 separate entities that, the capital should not become a constraint for the growth of these 2 businesses. That is the fundamental way that we have been looking at. So that both the business can grow independently without having any constraint on the capital. So that's our fundamental. That's the reason that creating this company. There's one of the pure reasons that we are looking at. So that both the companies can grow independently.

[Sunny Gosar, analyst]

My second question is on the demand outlook that you highlighted. Basically, you've been highlighting that there is some kind of demand softness in North America. So considering the situation, do you foresee any volume declines on a Q-o-Q basis or what you're trying to communicate is on whatever base we have in Q4, there may not be a significant growth at least for next 1 or 2 quarters, and then we can see growth in the second half? Or do you see some declines for the next 1 or 2 quarters?

[Ankit Agarwal, executive]

So we're still -- I won't be able to comment on quarter 2 because as said the -- it is -- quarter 2 for us would be end of H1 in calendar year for the U.S. So we are watching the data still closely. But I would say that quarter 1, there is possibility of quarter-on-quarter volume decline. Also I have to be mindful that both Europe and U.S. are typically a better margin regions.

So I think those are elements that we are watching closely in terms of not just volume impact but also our profitability impact. As I said, there's -- we've got these inputs from the customers. We're actively looking at how do we look at alternate customers, what more can we do? Can we get more wallet share from our current customers. And of course, we're also looking at other markets outside of North America and Europe, including in India and other markets where we can further scale up our cable sales.

[Sunny Gosar, analyst]

Got it. Got it. Fair enough. My third question is on the margin profile. So you've done a very good job of scaling the optical margins to about 21% more than 21% in Q4. So basically, on the cost, you've given a good direction on the pricing and demand. But on the cost side, are all the cost savings in the base? Or are there further potential cost savings possible from, say, either helium cost or any other raw material or logistics costs. So how should we look at the margins for FY '24 as a whole. I understand Q1, Q2 may be slightly challenging, but how should we look at FY '24 as a whole?

[Ankit Agarwal, executive]

Yes. So I think still, as I said, a little bit early to say. I can tell you what we are focusing on. I do believe there are opportunities for cost reduction purely from the operations. Then of course, as we had called out, helium has been one big X factor for us. And that -- we still continue to see challenges and shortages in the market from a pricing and availability perspective. Our own current view is that probably another 5 to 6 months at least, that will continue to be a concern.

On the positive side, obviously, we have talked about trying to push forward on the connectivity side, where we have seen higher margins. So I think that is something that certainly into H2, we do believe that should improve and there's a focus there. So I think it's a balance of these 2, 3 things, some possible volume declined, some challenges in margins because of U.S. sales, some cost areas where we are focusing to improve but helium continues to be a concern and then possible upside from the interconnect.

So I think it's a balance of all of these things. I would say currently, we are focused that at least we should get to 20% margins, but again, it can vary a little bit at least in H1.

[Sunny Gosar, analyst]

And my last question is on the service -- the margin profile in the service and the digital business. So there was some margin improvement that we saw in the service business in Q4. And now with U.K. business stay breaking even March '23. How should we look at the margin profile in the service business going forward, say, for the immediate quarters and full year FY '24?

[Tushar Shroff, executive]

So Sunny, we have been looking at the margin profile, EBITDA margin profile to improve presently from 4% to -- on a consolidated service level to the 8% kind of level that we've been looking at. So gradually moving on quarter-on-quarter basis, with improvement in terms of the overall operations in U.K., we see that there will be a gradual growth in terms of an EBITDA.

[Sunny Gosar, analyst]

So will it be fair to assume that 4% is the base now and you should see gradual improvement every quarter going forward?

[Tushar Shroff, executive]

Ideally, yes.

[Sunny Gosar, analyst]

And my last question on the Digital business. So the EBITDA burn was about INR 35 crores in this quarter.

[Ankit Agarwal, executive]

One part. Sorry, sorry, 1 part mindful of that, especially monsoon is typically lower deployment, right, in India. So I think that's something we'll have to watch for in this kind of June, July, August monsoon period where our actual deployment would be a challenge for our projects across India.

[Sunny Gosar, analyst]

And on the Digital business, your burn in Q4 was about INR 35 crores. So is this the peak quarterly burn that we should see? Or there could be for the next 1 or 2 quarters, higher EBITDA loss and then basically breakeven towards the end of the year. So how should we look at that?

[Ankit Agarwal, executive]

Yes. We believe this is the peak. It should start coming down as our utilization of our teams and the projects that we have start to improve. And then, as we said, get to breakeven by, say, between quarter 3, quarter 4 period time period.

[Sunny Gosar, analyst]

But that you -- in one of the statements you highlighted that your investment in this business for FY '24 also could be INR 125 crores but then that was add up, right?

[Ankit Agarwal, executive]

Correct. So between, I would say, currently, visibility is around INR 100 crores to INR 120 crores. Obviously, say, for example, if entire quarter 4 breaks even then to that extent, INR 20 crores, INR 30 crores could be lower. So -- but we are in that range of -- I mean, I would say take safely take about INR 100 crores, for example.

[Operator]

So ladies and gentlemen, with this, we come to the end of Q&A session, and I now hand it over back to Ankit Agarwal for closing remarks.

[Ankit Agarwal, executive]

Before I do my closing remarks, I just wanted to highlight that I was recently in a forum in Brussels with our ministers and representing panel with Indian CEOs. And I must say there was a lot of excitement and positivity for increasing partnership between Europe and India. And really, I think that represents a lot opportunities even for STL across our businesses on optical and services and, of course, on IT services as well.

So I think there's a very, very strong interest. I think it was a privilege and very grateful to be part of that forum with the ministers. And I am very bullish that the business between India and Europe will grow significantly from here given the kind of conversations happening.

So overall, again, thank you, everyone, for attending this call, showing interest in our company, for all your inputs over several quarters. We hope we are able to address and clarify all your queries. We hope we've given you good visibility of how we see the market in the coming quarters.

For any further questions and discussions, feel free to contact Investor Relations team, which includes myself and Tushar. We really look forward to continuing this conversation with you in the future. We welcome you to visit our facilities, which I think you'll find very interesting. And do keep in touch. Thank you. Stay safe. Thank you all.