To walk us through the Q4 results and to answer any questions that you may have. Please note that all the participant lines are in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. You can download a copy of the presentation from the company website, that is www.stl.tech. Please note that this call is being recorded. Before we proceed with this 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 clauses indicated in the presentation also apply to this conference call. I now hand over the call to Ankit Agarwal for opening remarks. Over to you, sir.
Thank you, Kunal. Good day, everyone. Thank you for joining us for our Q4 FY2025 earnings conference call. As we advance to the next fiscal year of FY2026, directionally, our strategic priorities remain the same in the optical networking business. Some of the key strategic priorities for FY2026: our focus remains on driving growth by increasing market share in optical fiber cables and improving our connectivity attach rates. To achieve our goal of generating significant revenue from data center enterprise segments, we will accelerate the development of comprehensive data center product suites and tap our vast potential in this market. Additionally, we will sustain our efforts to drive technology and cost leadership in the optical domain. As we build STL Digital, our vision is clear: to be consciously investing in both technology and domain capabilities.
This means not just keeping pace with the digital world, but thoughtfully choosing where and how we must grow with purpose and precision. At the same time, our focus remains firmly on profitable growth. We are not chasing scale for the sake of it. Instead, we are driving sustainable long-term value for our customers, our partners, and our teams. Every step we take is guided by a balance of ambition and responsibility to build a digital business that lasts. We stand before you with immense pride as we reflect on a moment that went far beyond our routine operations, a moment defined by service, courage, and nation-building by our sellers. During the recent strife in Jammu Kashmir, our sellers took on a critical mission to restore the army's fiber communication network.
Every team member behind the scenes showed unwavering commitment, ensuring seamless connectivity under the toughest conditions and risks, rising to the challenge not just as professionals, but as patriots. To everyone involved, we thank you, we salute you. Your resilience and dedication makes STL and the entire nation proud of you. At STL, we believe in leading with responsibility, creating a more connected and inclusive world. Since FY 2019, our initiatives in education, women empowerment, healthcare, and sustainability have positively impacted millions across India. Through the RoboEdge program, we have reached over 6,000 students across 11 schools, and I'm proud that 13 of them represented India recently at the International Robotics Championship in Estonia. Our Jeevan Jyoti program, founded by Jyoti Agarwal, has empowered over 5,800 women artisans in vocational skills, with many now showcasing their work under the Akai brand.
In sustainability, we installed 4,500 kW of solar capacity, cutting emissions and advancing clean energy across our facilities. We are working with 53 villages on afforestation and water conservation, planting thousands of trees and rejuvenating ecosystems. Through Swasthya Suraksha, we have delivered healthcare to over 2.6 million underserved individuals in rural Maharashtra. At STL, sustainability is at the heart of everything we do. We are committed to achieving net zero by 2030, which will place us far ahead of our peers in this space. Since FY 2019, we have diverted over 260,000 metric tons of waste from landfills and recycled over 960,000 cubic meters of water, driving true resource efficiency. We are proud to be the world's first optical fiber manufacturer certified for zero liquid discharge and zero waste to landfill. We have also collaborated with Hyjenco to supply green hydrogen to our manufacturing facilities.
Aligned with 16 out of 17 UN SDGs, we've positively impacted over 900,000 lives and earned over 100 ESG awards, a testament to our commitment to a sustainable and inclusive future. In the following slides, we'll showcase our optical networking business and our focused journey towards becoming one of the top three global players in optical connectivity. We are clearly at a pivotal moment in time with three major investment cycles. 5G, FTTX, and data centers are coinciding and creating unprecedented opportunities for infrastructure growth across the globe. Starting with fiber to the X, despite a slight global dip, North America is scaling from 39 million to 65 million kilometers fiber by 2028. Over 100 million U.S. homes await fiber. In India, Jio and Airtel are driving growth via 5G, fixed wireless, and bundled broadband.
The revenue potential for the telecom operators is between $11 billion-$15 billion annually. In data centers, optical cable demand is set to rise over 26% in five years. The North America DC market itself will hit $139 billion in total DC spend, and India is investing close to INR 65,000 crore, with a 25% increase in capacity by 2028. 5G is the real game changer. The target globally is expected to have about 6.3 billion subscriptions by 2030 and covering over 67% of mobile users. 80% of the mobile data will ride on 5G, and you will have over 3.6 billion users with just standalone 5G. The driving forces clearly are data centers fueling long-haul fiber demand. The big tech will invest over $100 billion by 2030. As the government pushes to connect rural India and rural America, just in India, we expect $2.5 billion of BharatNet phase III.
In the U.S., there is over a $42 billion program for BEAD. Further, we will highlight a transformative opportunity that stands before us: the convergence of the AI revolution and the explosive growth of data centers, which is unlocking unprecedented potential across the digital infrastructure space. As we can see, by 2030, the global data center demand will triple to 219 GW, with 70% potential AI triggering a $7 trillion investment wave. India is also rising fast. We are doubling our capacity to 1.8 GW by 2026, becoming a digital powerhouse. The backbone of this shift is fiber. AI workloads need almost 36 times more fiber compared to regular workloads, pushing a 70% higher density and almost a $2 billion opportunity in this decade itself. STL is ready.
We have our Make in India for the World AI D.C. portfolio, which offers scalable, low-latency, GPU-ready solutions and which are built for this AI era. It is working, as you will see in the numbers, 21% of our growth in DC and enterprise revenue in this quarter. As the global landscape shifts, demand for optical fiber is set to rebound. After two slow years, 2025 marks a turning point, with fiber consumption projected to grow at 2.7% year on year, led by strong U.S. momentum, India's BharatNet phase III, as well as some pockets of demand globally. The medium-term outlook is even stronger, excluding China. Global demand is expected to grow at almost 8.2% CAGR, with North America clearly leading the charge, driven by AI infrastructure, data centers, and the federal programs that I spoke about, like BEAD.
CRU, which is a leading agency, forecasts 116 million fiber kilometers of demand in this region alone. With a sharp focus on North America and the global ex-China market, we are well positioned to power the next wave of digital infrastructure with future-ready fiber and end-to-end connectivity solutions. I wanted us to take a moment to recognize that fiber absolutely continues to be the bedrock of digital infrastructure. Whether you talk about 5G, whether you talk about fiber to the home, or the AI-led data centers, all of them will ultimately rely on a core base and foundation, which is optical fiber. Industry leaders clearly around the world are making significant bets on fiber deployment and doubling down on making sure that they stay ahead of the curve with ramping up their fiber deployments.
Just some of the examples I can highlight here, like AT&T is targeting 50 million fiber-connected locations by 2029. Verizon, through its $20 billion play and acquisition of Frontier Communications, is pushing forward towards 40 million fiber homes. Back home here in India, Airtel is investing heavily with over 44,000 route kilometers just in one year and is further expanding its data center capacity as well as fixed wireless on the back of optical fiber. Microsoft, one of the large and leading hyperscalers in the world, has already started to innovate with Holocore fiber and is looking at how fiber can play a critical role in driving its latency down across its network. Zayo, a very, very large fiber infrastructure provider, has noted a major shift.
It has clearly talked about its long-haul fibers, which have jumped from eight to 12 fiber counts in a cable to moving to 144-432 fiber counts in just 12-18 months, all of it on the back of demand for AI. There are many such examples. These are not just isolated, and they're part of a global movement where telecom operators, hyperscalers, and other companies have clearly realized that fiber is the way forward. I'm also proud to share that STL is pushing the frontiers of technology and innovation. We have achieved many global firsts, from launching India's first quantum-secured network with multicore fiber to pioneering green hydrogen and developing the world's slimmest optical fiber at just 116 microns. Our innovation engine is strong, with 740 patents and 76 new filings in just this year alone.
We are building next-gen capabilities with Holocore fiber and AI-driven fiber sensing. Our commitment to excellence is recognized with national awards for impactful IoT solutions, social compliance, and health and safety excellence. We are making global impact with BABA-compliant products from our U.S. facility and Make in India solutions, which are also gaining European traction, made in India and made in Europe for the European markets. From expanding our optical and copper connectivity portfolio, earning praise from India's telecom minister for our AI-led data center innovations, STL is well set up for the future. As per CRU data, we have maintained our stable 8% market share in the global OFC market outside China, a strong foundation as we work towards regaining more ground. The real highlight is clearly our optical connectivity attach rate, which is up from 13% to 22% in just one year.
That's a significant year-on-year expansion, showing a sharp focus on value-added solutions and deeper customer integration. Now, let's look at the optical network business, the financial performance. As we reflect on the financial performance of the optical business, in line with our guidance, Q4 FY2025 revenue stands at INR 979 crore, which shows a healthy improvement on year-on-year basis. EBITDA for the quarter stands at INR 125 crore, at 12.8% of the revenue. EBITDA margin reflects substantial improvement year-on-year basis, driven by constant focus on the cost leadership. At STL, we are well positioned to accelerate growth in the optical business. We have scaled up local capacities and are now closer to the markets with strong traction in North America. Our cost initiatives are showing results, and we continue to focus on all ways of efficiency.
With 740 patents that I mentioned, innovation drives our data center portfolio and customized solutions, helping us scale the optical connectivity business going forward. The most recent U.S.-China trade dynamics are also creating new tailwinds for India-led manufacturing, positioning STL to capture rising global demand, particularly in our enterprise business. Now, let's discuss our STL Digital business and its performance. STL Digital continues to bring strong momentum backed by global presence, a skilled team of over close to 1,200 consultants, and a robust order book of INR 451 crore, as on 31 March 2025. We serve the 26 global customers across key sectors like technology, healthcare, manufacturing, and energy, delivering enterprise SaaS, cloud, and security product engineering and AI-driven solutions. Our recent highlights include driving Vedanta to digital transformation for over 15,000 global users, securing repeat wins across industries and building a powerful partner ecosystem with 40+ tech partners.
Despite a subdued industry environment, we delivered a strong performance in Q4 FY2025, maintaining revenue of INR 78 crore. Our sharp focus on profitable growth is paying off. STL Digital's EBITDA stood at a positive INR 5 crore in Q4 FY2025. We remain committed to this trajectory and confident of this momentum in coming quarters. Let me now introduce Ajay Jhanjhari, Chief Financial Officer of STL's optical networking business. Ajay is a chartered accountant with nearly 15 years of experience across fundraising, capital allocation, M&A, treasury management, and business partnering. He began his journey at STL as a management trainee and has gone through multiple leadership initiatives and heads finance for one of STL's core verticals. As CFO, Ajay is focused on driving shareholder value and profitable growth by aligning financial strategy and business goals. On a personal note, I can vouch that he's a very good singer and dancer as well.
Okay, okay. Thanks, thanks, Ankit. Good day, ladies and gentlemen. I'll just present the financials of STL for the financial year 2024-2025. What we can see here is, you see, the year started on a note wherein we were low on the EBITDA margins, which were around INR 44 crore, all-time low at around 5.2% against our revenues. With the conscious efforts on cost sides, because we were aware that there are some tailwinds in terms of the requirement of our products, we focused a lot on our cost. Along with slight market improvement, what we can see is our growth to the EBITDA numbers of INR 146 crore. From the 6% EBITDA numbers for the last quarter of the previous financial year, we could grow it up to 14%. That is commendable.
Going forward, also how we are seeing this is going to be better than this. On the continued operations, we have also been at breakeven or slightly positive on our profit before tax. In Q4 of FY2025, we made strong strides with key global wins. We re-entered with a major U.S. customer for high fiber count OFC solutions after a year and secured large orders from a leading OSP in America for OFC and optical interconnect products, boosting regional traction. STL Digital also signed a major tech outsourcing deal with a top Indian conglomerate and continued repeat engagements with a leading Indian networking player. Our revenue mix remains robust, with EMEA rising to 55% of total revenues and India climbing to 20%. Yeah. Coming on to order book, our order book is at a healthy state of around INR 4,378 crore for the quarter.
It is down in comparison to the previous quarter because of the less long-term orders we were booked for spot. What I can tell you is that going forward in Q1, we are looking for a very good traction in our order book. Our order book spread is INR 667 crore for Q1 because the majority in our Italian subsidiary and all, we always have spot orders. Going forward for the next nine months, it is around INR 3,710 crore. We have provided the abridged version of our reported numbers for our review. The net debt for this business now stands at around INR 1,350 crore, with a much improved debt-to-equity ratio of 0.68 times. I would like to tell you that the numbers which we are seeing here are after the demerger which has happened on the record date of 31 March 2025.
All the P&L numbers are reflecting numbers of O&B plus digital, and services numbers will be reported separately in their board meeting. Talking about the demerger status, the shareholders and creditors of STL India approved the scheme of arrangement in the meeting held on July 10, 2024. Following this, the demerger petition was filed, admitted with NCLT during October 25. The final hearing date was January 30, 2025, with NCLT Mumbai Branch. The final approval is received, and the resulting company, STL Networks Limited, is now a separate entity, effective 31st March 2025. We are in the process of listing the resulting company shares. We expect to make it happen by June, and depending on the approval processes, it may likely extend maximum to July. Sure, yeah.
I'm happy to share the successful completion of a significant milestone of our journey, the strategic demerger of STL's global services business into STL Networks Limited, effective March 31, 2025. This move aligns with our goal of portfolio simplification and sets the stage for focused growth in each of the businesses. The demerged entity will now operate under a new and powerful brand identity in Venue. With this rebranding, Venue will concentrate on delivering large-scale digital infrastructure ecosystems, making a bold step into the future. We're also proud to announce the appointment of Mr. Pankaj Malik, a veteran in the industry, as the CEO of STL Networks Limited. His proven leadership and execution expertise positions us strongly to accelerate growth in the next phase. The shareholders of STL Networks Limited have received a one-to-one share entitlement based on the holdings as of April 24, 2025.
Together, these developments mark a new era of innovation and opportunity under the Venue banner. As we move forward in our transformation journey, I'd like to highlight the key focus areas across our core business segments. Starting with the optical business, our mission is to achieve technology and cost leadership and secure a spot in the global top three. We're targeting increased sales in focus markets, boosting optical connectivity attach rates, and expanding our data center product portfolio rapidly. In the digital business, our direction is to grow revenue while maintaining a strong focus on profitability, ensuring sustainable progress. Each of these focus areas is lined to deliver value, innovation, and long-term success for all our stakeholders. With this, I now hand over the call back to Kunal.
Thank you, Ankit.
Ladies and gentlemen, we have now come to the end of our presentation, and we shall move to the question and answer session. Please note that if you want to ask a question, you can click on the raise hand button, and we shall take your question one by one. We will take our first call from Nikhil Choudhary.
Hey, hi. Thanks for the opportunity and congratulations on completing the demerger of the global services business. Ankit, first one on the impact of tariff. It's been 1.5 months since the U.S. administration imposed tariffs globally. Even after rolling back, it remains at 10%. We have seen when Europe imposed about a 12%-13% tariff on a satellite tech last year. We were able to manage our market share, but I think profitability took some hit, right?
Given the U.S. itself has some capacity in optical fiber, do you think this 10% incremental tariff on India will have some impact on satellite tech?
Yeah, thank you. Thank you, Nikhil. I think you're spot on. We've been working. Let me come to the Europe part. There is an appeal that we have filed as well with the European Commission. That will take its own due process. It could be a year or two years' process. We definitely believe on our own merits that we should not be facing any duty in Europe. That is something that we'll continue to work towards.
What we have done, of course, and continue to work on is to continue to look at our cost structures, whether it's in India, but especially in Italy and the U.S., to really make sure that as we are increasing our supply from our local facilities in those geographies, we are making sure that we are more and more cost competitive. That is going to be ongoing work even through the course of the current year. What we have definitely seen is actually a pretty positive movement. We are continually seeing interest from our customers in the U.S., current and new, who are interested in both sourcing from our U.S. facility, but also are open to sourcing from India. That balance will continue to happen.
We continue to believe that as the market demand scenario in North America improves, we will be able to pass on some of these costs onwards to our customers. I think all of this will play out broadly in the next one to two quarters. Of course, the 10% itself is there currently for three months. Let's see how that gets played out. One thing we have seen, and I called that out earlier, is that especially some U.S. customers who are dependent on certain products on the enterprise side and corporate side, etc., who were single sourced from China or majority sourced from China, they are definitely seeing STL as an interesting opportunity to partner with for some of their large requirements.
Got it, Ankit. Second one on growth recovery. I think, Ankit, we have lost some market share globally from, let's say, 11% to 8% now.
Do you have any timeline in mind where we can get back to that particular market share, especially in context that, you know, what you have mentioned that we are seeing some demand recovery? Although, Ankit, we are yet to see those recovery in order book number. So any color there as well?
Yeah, absolutely. I think, look, broadly, you know, we are very well set up with our capacities. You're familiar with all the CapEx we've done over the last several years. You know, broadly, we've been operating at about between, say, 40%-50% utilization. I think all the investments are done. We're working pretty well on our product portfolio. The U.S. facility is now up and running well.
I think all the base is now well set for us to, as this demand is now starting to come back, I think we're very well placed to increase our utilization. As you've seen, as we just go back from, say, 50% utilization to 70% utilization, our EBITDA margins will basically go from about 14% currently to about 20%. That's really where the focus is, to generate that EBITDA and then to generate the cash. From a market share perspective, I think definitely we will look to increase our market share globally. I won't comment on specific targets, but I would say that we are committed towards that vision of being top three in the world. I think, you know, that'll take us probably somewhere between three to five years, but that's really where we want to get towards.
That's a small one, Ankit, the last one on the BEAD project. I think the new U.S. administration has made some changes in the BEAD program. Do you think these changes will lead to further delay? More or less now looks like BEAD demand will flow in CY2026?
Yeah, I mean, I would say that it's really, you know, a lot of things happening in parallel, as you can imagine, in terms of the legal side, in terms of discussions happening with various stakeholders. What we understand broadly is that, you know, there are conversations around when does the BEAD finally get formalized, when does it start getting rolled out, and how much of it is fiber versus, say, wireless or satellite. All of those conversations are happening. I think in principle, there is a push also as well to take it forward and conclude it.
From our own business planning perspective, we're largely seeing this as probably a Q4 this year or a Q1 event next year. So we're not, from our planning perspective, we're really looking at our current customers and new customers to drive the growth. One positive thing also that we do expect is that the permitting process in the U.S. will start getting simplified under this new regime, and that could actually also help then accelerate both regular build-out as well as government-funded build-out.
Got it, Ankit. Thanks a lot and good luck for coming today.
Thank you.
Thank you, Nikhil. Dear participant, we would request you to mention your organization name along with your introduction. We'll take the next question from Balas ubramanian.
Thank you so much for the opportunity. I'm Bala from Arihant Capital.
Sir, my first question regarding the data center side, earlier you have mentioned about 25% of revenue is expected from data centers. I just want to understand what kind of products they are having, what kind of launches in upcoming years, and what is the strategic focus on data centers? If you could share some lights on that demand and supply side for especially our products and data centers.
Yeah, I think, Bala, thank you for the question. We'll be able to only share some information at this stage because we are still, I would say, in advanced stages of building out our product portfolio. I think what we're really looking at is how do we build an end-to-end solution on the passive connectivity layer for the data centers.
We have already worked on and built a good portfolio for inter-data center connectivity, which is connecting data centers within a campus. We are now working on technologies and portfolio for within the data center. I think that's something that's a very exciting opportunity for the company. As I've shared in the last few calls, this is something that we are prioritizing on how to build up the portfolio, probably start with a few geographies and then also take it global. This is a market which we definitely believe will continue to grow over the next five to ten years globally. The India market, as I just shared, will also look to double in terms of the sheer MW capacity or GW capacity that is coming up in India.
From all of those conversations and discussions with the market, we do believe that this is a very positive opportunity for the company. Also, if you look at, you know, the CapEx cycles of telcos, which typically go up and down every few years, the data center spend itself will be a nice hedge for us vis-à-vis just the telco spend. I think from those aspects, this is a very good opportunity for the company. As we've set out a target, 25% of our revenue should come from the data center plus enterprise segment. That's definitely something we'll move towards in the next few quarters.
Got it, sir. Sir, my second question on the inventory side, how are the inventory levels on the global, especially in North America? We have seen some very big wins in other terms.
Another thing, I want to understand the pricing side of our optical fiber and optical fiber cable side on the industry's level. Whether we have seen a recovery on the prices?
Sure. I mean, the pricing has been flattish. There is nothing specific. I think now with the demand growing in North America and also in India with BharatNet, which will kickstart, you know, across all the packages. I think from that perspective, probably I think, you know, pricing has bottomed out and should start improving. It will take some time directionally, but I think that is where it is at. I think from what was the first question? Inventory levels. Inventory levels, yeah. I think inventory levels, we have broadly seen, I would say broadly last 18 months, maybe even 21 months, a drawdown of that inventory. We have been sharing that update in our calls.
I think it's probably largely done now with the excess inventory in the system, largely in North America. There's probably some pockets of some inventory probably for another quarter or so. Largely, we do see, and hence we are starting to see more opportunities in our pipeline. We do expect a good movement on new orders in the coming quarters.
Yes, sir. A small quick question on the BEAD program. I think it is expected to start from in this financial year. I think the opportunity I see is more than $40 billion. I just want to understand, what's that timeline given by that government? Is there any plan?
As I said, Bala, because there are a lot of moving parts in the U.S. right now in terms of this project itself. Of course, principally, we do believe the project's moving forward.
It's been committed by both houses. I think some of the nuances around how this gets panned out, how much is fiber versus, you know, wireless or satellite, some of that detailing will probably get clarified. As far as the states are getting prepared to receive the funding at state level, I think all of that is moving forward. From our own perspective, I was just sharing that we do think that this is a Q4 this year or possibly even Q1 next year event.
Got it, sir. Thank you.
Thank you.
Thank you, Bala. We'll take our next question from Mr. Arun Malhotra.
Yeah, thanks for taking my question. This is Arun from CapGrow. I think a lot of my questions have been answered, especially on the margin front and the pricing.
Would still like to understand, you have, you know, given a lot of demand factors in favor of the industry, especially the 5G, the AI, the data centers. What is the supply side scenario? That's one. And where do you see the pricing? Because we are not seeing the prices going up. So the margin from 13% to 20%, does that capture the price rise, or is it just the operating leverage which you are factoring in?
No, good question, Arun. Thank you. I think there's two, three elements to this. I think principally what I said is just in terms of utilization itself, right? So we've been operating broadly at this 40%-50% utilization. Our facilities have been pretty well set up globally.
I think as we just see the markets, these inventories which I spoke about coming down, our volumes going up globally, and particularly in the North America market, I think that will help drive our utilizations up and help us improve our profitability. I think on top of that will be that especially in some select markets, we do expect the realizations to improve. It might take a couple of quarters, but we do see if we go by past trends, then in such market scenarios, the realization should also improve marginally. I think in India market, specifically coming to that, yes, you know, prices have been flattish. Prices have been on the lower end.
Again, here I do believe that with the demand growing with BharatNet, we do expect the fiber prices and ultimately the cable prices to go up maybe marginally, but that's tough to predict at this stage. The BharatNet projects itself will be deployed over three years. Fairly short time frame for a massive fiber network that needs to get built out. We do expect a healthy demand in India as well. I think overall on supply, I mean, I wouldn't say there's any major movement. We have seen lower demand locally in the China market since a lot of their 5G and maybe fiber to the home is done. There is a lot of replacement fiber that's happening because China built its networks more than 15-20 years ago. We are seeing some of that demand.
From a supply side, actually, we're seeing some consolidation in the China market. Some of the larger players are consolidating. We do see that the market should become healthy probably in China over the next one to two years.
Just a clarification, you said 13.5-20 you want to reach. What's
the time frame which you are looking for? I won't comment on a specific time frame, but I'm just saying directionally through the course of this year, as our volumes improve quarter on quarter, we do expect to move towards that range.
Sure. My second question is on the BEAD and the BharatNet program, especially the BharatNet. Our observation, just correct me if I'm wrong, my observation is that our order wins have been much lower than the competitors. Any comments on that?
Just to clarify, Arun, we have one project in Jammu Kashmir, which is cumulatively of, you know, including the deployment as well as maintenance for 10 years. That is close to about INR 2,600 crore, all included, taxes, everything. That is the project that we are taking on board. This is part of the services business, which is now demerged. I just want to clarify that. That project will be part of that business. The order book that Ajay spoke of earlier is excluding that project. All of this will, once we get the purchase order in that entity, then it will be part of that order book. For this business, which is the manufacturing business, we will certainly speak with all the various, you know, winners of the various packages and look to maximize our share across cable, fiber, and connectivity.
Sure, sure. Lastly, on the debt part, what are the plans to reduce the debt?
Okay. See, if you see the last years, we have improved our leverage ratio significantly. As of now, our debt to EBITDA ratio as on 31 March 2025 stands at around 3. With the cash generation from the business, which we have demonstrated in the previous year as well, we expect to touch down to 2 by the end of this financial year. The major driver for this would be the cash generation, which we will earn from the business by increasing our EBITDA margins by the better utilization of the capacities.
Sure. Lastly, you know, is the management concerned about the shareholder share equity returns for the minority shareholders?
Because if you see you are being the leader in this segment, 8% global market share, but the equity returns for the minority shareholders have been pathetic. Any comments there?
Yeah, so see, what we believe is that there is a lot of value in this stock. Once we start improvising on our margins, it will definitely start reflecting. In order to generate that consistent shareholder value, what we are doing is that we are focusing to grow our optical business and build STL Digital. One target is to have an attractive leverage ratio. We have already planned and we are on the target to deliver net debt to EBITDA below two, which is going to work significantly well. I would also like to update you that in the last year, we have prepared ourselves for the better markets and better capacity utilization.
We have done a lot of things on our cost side. Now it's a time when the market starts picking up, our margins will automatically grow further, which will help us in creating a lot of stakeholder value.
Sure. Thank you and good luck.
Thank you, Arun.
Thank you.
We will take next question from Ranjay Popli. Ranjay, please. Thank you. Ranjay, you can ask your question. Ranjay? Yes.
Hi, thank you for the opportunity. I just wanted to ask a question regarding international peers, especially in the U.S. They have mentioned in their calls that the inventory digestion has taken place and they are seeing good demand, particularly in the U.S. Any comment on that?
Yeah, absolutely. Ranjay, it's exactly what I shared earlier as well that we have seen probably it's taken 18-21 months or so for the excess inventory to come out of the system. I think most of that is done probably, you know, this quarter or so is what's where we see this. We are already seeing in our pipeline of opportunities, you know, whether there are more opportunities coming for STL, both for supply from our U.S. facility as well as from India. That is definitely aligned with what we are seeing as well.
Okay, thank you.
Thank you, Ranjay. We would like to remind our participants that if you wish to ask a question, kindly click on the raise hand button and we shall take your questions.
Next, we will take a question from Sakit Kapoor.
Yeah, namaskar sir and thank you for the opportunity.
Welcome, Ajay Ji, your first interaction with the investing community and all the best to you.
Thank you, thank you.
Sir, firstly, sir, if you could just give us some understanding what goes currently into the consolidation earnings when we are reporting standalone and consolidation, if you could just provide to us which bits of businesses and the geographies go into consolidation. Secondly, as Interconnect part of the story was mentioned by Ankit Ji, that the pie has changed. What have been the revenue and the profitability contribution from Interconnect part? Third question is about the fiberization of the towers. What is the update on, since I think so all the telcos are speaking about 5G rollout and successful rollout all across the country, but we have not seen that kind of fiberization happening as earlier reported that our towers are under fiberized.
What is the current understanding and what is the way forward from players like us? These are my set of questions.
I'll take the third one.
Yeah,
I'll just start with the third question, Sakit Ji. I think, see, principally we definitely see both in India and globally that as you move from 4G to 5G, you need much higher tower fiberization, which means fiber directly from tower to this black hole. That continues to be a trend in India as well. We are seeing that all the operators, as they are increasing their 5G network, both coverage and capacity, that trend continues. What we are also seeing is that operators are looking at an end-to-end fiber network for all their requirements, whether it's fiber to home, fiber to enterprise, fiber to fixed wireless point, or fiber for 5G.
All of this is converging towards one fiber network. We continue to see, I would say, a reasonable amount of fiber getting deployed by the telcos. I think, as I said, the next big kicker will be the BharatNet phase III. What has been launched so far is by the central government. On top of that, we also expect a few more states to launch their own BharatNet phase III. I think there will be multiple opportunities which ultimately will take the fiber to every village in India. What we ourselves are taking responsibility for in Jammu Kashmir will be to take fiber to every village in Jammu Kashmir. I think this is a good opportunity for the country, great service to the country. I'll ask Ajay for the other two questions.
Yeah, on your first question regarding consolidation, I would like to make clear that we demerged on 31 March 2025. The financials, the P&L piece of service business, will be reported under the new entity, which is STL Networks Limited. We are going to schedule a board meeting for that as well, which is more likely to happen in the next two to three weeks. Therefore, the financials which you are seeing currently consist of optical networking business and our digital business. Hope it answers the question.
No, sir, my point, sorry, sir, sorry to interrupt you. My point was for the optical network business consolidation, we see revenue of INR 979 crore. When we look at the standalone numbers, they are lower than that. Even the losses, they are higher. I think these are carved out numbers only for the OBM business.
Yeah, because in our consolidation, there are multiple entities which operate outside India. We have our Olion subsidiary in Italy, which is Metallurgica. We are having our own plant in the U.S., which is STI U.S.. We are having our one plant of Draw in China as well. That is why you are seeing different numbers in consolidated numbers and standalone numbers. I would also like to remind you, like 70%-75% of our ONB revenue comes from the international market. Therefore, these factories are set up there.
Correct, sir. Going ahead, sir, if we could just provide that split also, so we can get the understanding how the other geographies are also performing, that would have been better.
What we do, Sakit, is actually give you a revenue split. We do not provide more information for competitive reasons.
Correct, sir. Next question on Interconnect, sir. Yeah, you were answering.
On Interconnect, like you must have seen, our attach rate, which was 13% in the last financial year, has increased to 22% in the current financial year. This Interconnect business, we are very optimistic upon. It has shown a decent growth in the last financial year, almost increased by 30%. This is a very profitable business with a better ROC. What we are doing right now is to expand it further in the other markets where we were not supplying it earlier. We are very optimistic on it. We are also in the process to evaluate whether we need to spend some amount on it on the R&D activities to grow this business further.
Thank you, Sakit Ji. We'll request all the participants to restrict the question to one, so everyone gets an opportunity.
Next, we'll take a question from Harshit Khadka.
Hello, am I audible? Yes. Yes. Thank you for the opportunity. What kind of revenues are we expecting from BharatNet in FY 2026 and 2027?
Harshit, again, this is just to clarify from STL perspective, we are looking at the manufacturing of the cables, the fiber supply of fiber to other cabling companies, as well as the connectivity products. I think it's still early for me to give a specific forecast in terms of the market, in terms of the demand, as well as then what share we can take. From my perspective, basically, as I said, this is a three-year deployment, you know, which will kick off soon. There are some packages which have been awarded already, some packages still to be awarded. I think that will take a little bit of time to clear all that out.
Once the people have been awarded the package, then we will be negotiating with the various winners. We have our own consortium partners, and we'll be negotiating with them to see how we can best serve them. Clearly, our intent would be to have a good market share across the packages, including the package that we have won in Jammu Kashmir. I think it's a bit early today to give you any forecast like this, but be rest assured we are putting our efforts to get a good share.
All right, sir, thank you.
Thank you, Harshit. We'll take the next question from Aditya Jhavar, requesting participants to mention their organization name as well.
Thanks for the opportunity. I'm from AK Investments.
Firstly, I would like to say to the management that as investors, we are going through a lot of pain, STL tech from last, I mean, five to six years. Now we have demerged as a company. Now I understand this will be a manufacturing part of STL, where we are having currently optical fiber and optical thing, which is at most commodity when we say because the price does not, it is a global thing, right? As an investor, how do you see we are shaping STL tech going forward? That is my broader question. We will be focusing on the manufacturing part, I mean, building hardware manufacturing, or because when you see Tata's or HFCLs, right? They are the late entrants in this market, and they are capturing the market share.
We being the pioneers from the last 20 years, and in the last 10 years, we have been burning cash, thousands of crores of write-offs, and we are going through this pain. How will you take up the responsibility? That is my first question.
Just to clarify, there was not any thousands of crores of write-offs. I just want to clarify. On a serious note, I can...
Yeah, okay.
Yeah, yeah, yeah. I just want to fully appreciate that, you know, we are all accountable as leadership and management to create value for our shareholders and be rest assured that is what we are fully committed to.
To just reflect a little bit on our journey, we've, over the last three to four years, actually shut down several businesses, including we had looked at wireless solutions, we had looked at OSS, BSS solutions, and many others, which we have exited. Some businesses we've also been able to sell and bring the cash in. As we saw our balance sheet also over last, in April last year, we did a QIP of close to INR 1,000 crore to make sure that our balance sheet was in the right shape. I think we have invested in our capacities. I think what I can definitely tell you with confidence is that we are very, very clear about our strategy and our focus of what to do and not to do. We are clear that our core business is the optical business.
We are going to be world leaders in this business. I would disagree with you when you say that this is a commodity business. This is a high-technology manufacturing business, and I would urge you and any of our shareholders to visit our facilities in India or globally. It is truly cutting-edge technologies that we create, and along with our optical connectivity and now our data center portfolio, which is coming up, our whole thought process is to compete and be the best solution provider for our customers. We truly believe that we will win on technology, and we will charge a premium for our solutions for the value they offer to our customers. That's really the thought process. We believe that this can help us drive better profitability, and also we will be very focused on generating cash and reducing our leverage going forward, as Ajay said.
That is the commitment from our side. That is where our focus is, and we are really looking forward as now that we see the market conditions also improving. How do we make sure that we get the right market share at the right pricing and also generate cash?
Okay, thank you. Great, great, Ankit. One, just follow up. Just one follow up.
I will request you to come back in the queue for the follow up. We will take the next question from Pratap Malliwal.
Hi, am I audible?
Yes.
Hello. Yeah, you hear me?
Yes. Pratap, ask the question.
Yeah, thank you. I am Pratap here from Mount Intra Finance. I just wanted a clarification regarding your statement on the Chinese market and the demand that maybe there is lower demand in China, and you see that is kind of stabilizing.
I just wanted some more color on that and how that affects our business in particular. Is it that because of lower demand, because China is a large producer, they are placed into, you know, dump more in the international market, and that kind of eats into our share, or what is the outlook here on the Chinese market? Please clarify.
I see, I was just, the question was on what is the supply, right? I think we must understand 50% of the world market demand. If you look at our past charts, historically, the demand and then the supply is 50% of the world market has been China, right? That is the sheer volume that the three telecom operators out there deploy, and they have been building out a massive network. On a given year, China deploys 12 times the amount of fiber that India deploys.
That's been the kind of build-out they've been having. What we now see is that a good portion of the network has been built out for 5G, as well as fiber to the home, to the major cities, which is where then I commented that we do see some decline in their own demand year on year now and probably going forward. As a result of which, also there's been a consolidation in suppliers in the China market. We do see that as a healthy sign, and we do see that the pricing also in China has bottomed out and should normalize going forward. That was the feedback. Impact to STL, I don't see the way the markets that we serve, particularly North America, Europe, and in India, which are our focus markets, we don't see a lot of competition, particularly on the cable side from Chinese.
But in some places, they do serve and they supply fiber at lower cost. Again, that was my point earlier that our whole thought process is to compete on technology and on solution. The more we are able to supply our customers with cable and connectivity together as a solution, that will be a big advantage for our company going forward.
Okay, that's it from my side. Thank you.
Thank you.
Thank you, Pratap. We'll take the next question from Rohan Patil.
Hello.
Y es, Ron, you're audible.
Yeah, yeah, yeah. Thanks for the opportunity. Sir, since last couple of quarters, you were talking about the inventory clearing out, and now you are firmly believing that inventory is mostly cleared out in America, and things are way better than it was, you know, for like 12 months before or 18 months before.
Considering that you are also investing in new products and spending money in R&D, how do we look at Sterlite Technologies from here on? Can you just give us a landscape for the next three to four years about how much you want to grow your top line as well as your bottom line? Because you have fairly talked about the balance sheet side. If you can give us, you know, a sense about how things will move on from here.
Yeah, thank you, Ron. We do not typically give a forecast, so I will not be able to give you any specific numbers. I think three, four things that we have shared, I will just reiterate that. One, directly, we have a vision to be world top three.
I think that clearly means fairly strong growth over the next three to five years for us overall, particularly in the optical business. Number one. Number two, we have fully invested into our capacities in terms of all the way from glass to fiber to cable and connectivity. We do feel that we have well invested. I do see that over the coming quarters, our utilization of the factories will go from, say, 50% to +70% . As that happens, we will move towards at least 20% EBITDA margin. These are two or three things that we have shared. As Ajay also shared just now, we are also looking at reducing our leverage ratio from about three times to about two times. As we start generating cash, utilizing that to reduce our debt, I think that is where we take the business going forward.
I think principally, the one other growth area we've talked about outside of the core telco segment is the data center segment. That's a fast-growing market and where the amount of fiber used inside a DC continues to grow. We are building out our portfolio, and going forward, that will be an important and profitable segment for STL to grow within.
Okay. Just to put it.
Can you come in the queue again?
I just have a last question. Considering that you were talking about fiber deployment in India and as well as in America, do you find there has been change in industry dynamics, or can there could be change in industry dynamics after the Starlink's entry in India?
No, we're at, and that's why I had that slide, particularly on literally every telecom operator and other players, hyperscalers talking about it. There's no question in my mind or in our industry parlance that fiber will remain the core. There will be applications for Starlink or other satellite operators on the fringe where they'll be able to, where there's absolutely, it's unviable for, you know, fiber to be deployed there from a cost perspective or otherwise. In those regions or applications, there will probably be use for satellite. Across the board, I think for, you know, majority, a vast majority of connectivity, the base will continue to be fiber going forward.
Okay, not a major impact on our business.
No, we don't see that. Okay, okay, okay.
Thank you for this opportunity and answering all the questions. Thank you.
Thank you, Rohan.
Ladies and gentlemen, with this, we now come to the end of our question and answer session. I hand over the call back to Ankit for the closing remarks.
Thank you all for joining our call today and for your continued interest in STL. Despite a challenging market environment, we have made meaningful progress on our strategic priorities. Our focus remains on what we can control, deepening our customer centricity, fostering a lean and agile organization, and driving growth through technology leadership. We continue to actively pursue opportunities in our key markets, leveraging our advanced manufacturing, innovation capabilities, and industry-leading product portfolio. As the market demand stabilizes, we are well-positioned to execute with discipline, deliver strong results, and create lasting shareholder value for everyone. We hope your questions and comments were addressed today.
For any further questions, please feel free to reach out to the investor relations team, including myself. We look forward to staying engaged and continuing this conversation in the near future.
Thank you.
Thank you.