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“We are in a multi-year network investment period with telcos globally. We continue to see very strong demand,” Ankit Agarwal, managing director of STL, told ET. “On a sustainable basis, optical networking business growth should be in the range of 20-22% and the services business should be in the 10-12% range. We continue to push forward R&D investments and in wireless and digital space,”
STL reported a revenue of Rs 5,754 crore for the quarter to March but its profit came down to Rs 62 crore from Rs 275 crore a year ago.
Agarwal said there is a cost increase linked to logistics, including container costs and costs of certain raw materials. “We do believe some of these costs we can pass on to some of the large customers in Europe and the US. With this cost increase, the margins are below but H2 onwards, we should start coming back to normalised levels of profitability,” he said.
He said the company’s optical fibre business will see new investments, having met with success in Europe and the US. The company will invest Rs 160-180 crore in its digital and wireless businesses. It has taken board approval to raise up to Rs 1,000 crore through the equity route.
“Our core business is on the optical side and that’s where we see maximum growth. We have had some good success in Europe where we have 25% market share and 6% share in the US market. In these geographies, strong growth is expected over five-seven years,” said Agarwal.
He said a bulk of the company’s investments will be in this domain. “We are also adding a factory in North America and the UK,” he said.
STL is also focusing on building its own supply chain and is looking to diversify its vendor base.