Good day, welcome to Sterlite Technologies Limited Q1 FY 2027 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the management presentation concludes. Please note that this conference call is being recorded. I now hand the conference over to Mr. Rahul Darak, Head of Investor Relations. Over to you, sir.
Thank you. Good day, everyone, welcome to STL's Q1 FY 2027 earnings call. To take us through the results and answer your questions today, we have with us STL's senior management, represented by Mr. Ankit Agarwal, Managing Director, and Mr. Ajay Jhanjhari, Group CFO. Before we proceed with the call, let me remind you that the discussion today may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our business risks that could cause future results, performance, or achievements to differ significantly from what is expressed or implied in such forward-looking statements.
Please note that we have uploaded the results and earnings call presentation on STL's website, and the same is available on the stock exchanges. We'll start the call with a brief overview of the quarter gone past and then conduct the Q&A session. With that said, I will now hand over the call to our Managing Director, Mr. Ankit Agarwal.
Thank you, Rahul. Good day, everyone. Thank you for joining STL's Q1 FY 2027 earnings call. I'll begin by highlighting the key takeaways from our investor presentation and then Ajay will walk through the financials. STL is a global leader in digital connectivity infrastructure, serving data centers, telcos, citizen networks, and large enterprises. Our optical connectivity solutions spans fiber to fiber cables, specialty cables, and connectivity solutions. We're India's number one end-to-end optical manufacturer with 9% optical cable market share outside of China. With over 30 years of leadership, more than 785 patents, and 10+ zero waste manufacturing facilities worldwide, STL is leading the next wave of global digital infrastructure. At STL, we're amongst the very few companies in the world to have mastered the journey from glass to gigabit.
It starts with the purest grade of silicon, which we transform through advanced processes like silicon tetrachloride formation, chemical vapor deposition, and high-precision sintering to create ultra-pure glass preforms, which is the backbone of optical fiber. From there, we draw the highest grade fiber, design high-density cables, and develop reliable connectivity products that power data centers and telecom networks worldwide. This full stack integration, right from raw material to network deployment, gives STL a unique edge in quality, cost efficiency, and innovation across the connectivity value chain. This deep integration enables us to engineer next generation fiber, cable, and connectivity solutions that are redefining global connectivity. Our end-to-end innovation from material science to smart optical systems help global network builders create faster, denser, and more reliable networks for the AI era. As we step into FY 2027, our core strategic priorities have evolved and are delivering tangible results.
Beyond driving market share and attach rates in our core optical business, we are actively pivoting towards increasing our revenue share from integrated connectivity solutions in partnership with key customers. With data centers emerging as a critical growth engine for the entire industry, we're sharply focused on scaling this segment, underpinned with our continued technology leadership. This commercial momentum, paired with our disciplined focus on operational and cost efficiencies, will drive margin expansion as we head into the rest of the fiscal year. Moving on, we'll now speak about the industry tailwinds and the growing market opportunity. As you all know, we are at the intersection of three powerful multi-year investment cycles: FTTx, data centers, and 5G/6G networks, creating a strong structural tailwind for optical infrastructure. FTTx is accelerating globally, with deployments rising from 151 million fiber kilometers in 2025 to about 171 million fiber kilometers by 2030.
In the U.S. alone, more than 140 million homes will be served by fiber by 2030, supported by large government programs like BEAD in the U.S. and BharatNet in India. Data centers are the fastest growing driver of fiber demand. CRU projects a massive 63% global growth in optical cable demand from this segment in the year 2026 alone, driven by hyperscale expansion and AI workloads. North America installed DC capacity is expected to double from 63 GW in 2025 to 126 GW by 2030. Morgan Stanley Investment Bank has again upgraded their forecast on hyperscaler CapEx from $765 billion to $805 billion, increasing the TAM of our optical connectivity. Concurrently, the scaling of 5G and 6G networks demand deep network densification, with global 5G subscriptions expected to hit 6.4 billion by 2030.
India's 5G subscriptions expected to hit 1.1 billion by 2031, then the global 6G subscriptions forecasted to cross 180 million by the end of 2031, which is about four to five years away. Together, these three cycles are creating a structural multi-year tailwind for fiber and connectivity solutions, positioning STL at the center of the next global digital infrastructure build-out. On slide 10, you will see how some of the big global telecom and technology giants are aligned in backing optical fiber as the base of digital future across 6G broadband data centers and the AI infrastructure. The takeaway is simple: Fiber remains as the core backbone of all the digital infrastructure coming up. On slide 11, it shows how the AI revolution and rapid data center expansion are creating a once in a generation opportunity for optical connectivity.
As for McKinsey, a consulting firm, by 2030, 70% of data center demand will be AI-led, driving a sharp increase in CapEx and infrastructure intensity. GPU architectures are rapidly shifting from 400 GB to 800GB and going all the way to 1.6 Tb speeds where copper reaches a bandwidth threshold and fiber becomes even more essential, increasing TAM by INR 10 billion for optical connectivity. Simultaneously, AI workloads are creating dense fiber interconnections, significantly increasing fiber per rack, and every new data center added exponentially multiplies this demand. This is not just a matter of scale, it's a step change in fiber intensity. With STL's Neuralis end-to-end AI DC portfolio, STL is uniquely positioned to capture this multi-year structural growth opportunity. Coming to India data center environment. Data center expansion here in India is emerging as one of the most compelling structural tailwinds for optical fiber.
Installed capacity is set to grow almost sevenfold, expanding from 1.6 GW currently to almost 10 GW by 2031 as of Morgan Stanley. What makes this investment cycle particularly powerful is the breadth of commitment. Going from hyperscalers like Google, Meta, Microsoft, which are deploying $10s of billions on their side, we also have the Indian conglomerates like TCS, Adani, and Reliance laying out long-term capacity plans. Over the last quarter itself, we have seen new announcements coming from the likes of Meta and Reliance with their massive gigawatt deployment plans in India. We've also seen Australia's AirTrunk coming in with almost, again, a $ multi-billion commitment in Maharashtra and Andhra Pradesh to build close to 5 GW of data center capacity.
A supportive policy environment, state incentives, tax incentives, power availability, and the tax holidays that are extended up to 2047 are further de-risking and accelerating the build-out in India. Every dollar of data center CapEx has a direct multiplier on fiber intensity across DCI, metro, and long-haul networks. With optical cable demand projected to grow at 11% CAGR through 2030, this is not a cyclical uptick, but a durable, high visibility growth opportunity playing out in our home market in India. As for CRU, the global cable demand market for this year has strengthened significantly and is projected to accelerate to 8.2% year-on-year, led mainly by North America's data center build-out and improving execution in India. Importantly, demand now consistently outpacing domestic supply in North America and on the lead times are continuously getting tight.
Looking ahead, North America is set to be the main growth engine powered by AI-led data centers, data center interconnect builds, and continued FTTH expansion. CRU expects to deliver the strongest regional CAGR of 18.6% between now and 2030, a major upgrade against earlier forecasts of 15% CAGR. Overall, this points to sustained multi-upcycle and fiber demand with North America and APAC ex-China, which are all core focus areas for STL, which are driving growth. We are also seeing positive momentum in India, Southeast Asia, and parts of Europe, which are closely aligned with our strategy. We are successfully seizing new market opportunities, a trend that is clearly demonstrated by record-breaking order intake this quarter. In quarter one alone, we secured orders worth INR 13,100 crores, which is 1.7 times the total order wins of INR 7,687 crores recorded in the entire financial year last year.
The momentum is anchored by a landmark multi-year $1.1 billion deal with a global hyperscaler to supply optical connectivity products for next gen AI data centers through FY 2029. Furthermore, we secured multiple $100 million hyperscaler orders for our high fiber count IBR cable solutions. Alongside these hyperscaler wins, we also expanded our footprint in long haul applications by securing a strategic order with a major connectivity infrastructure provider. Importantly, our order book today is well diversified, reflecting a healthy mix of order intakes from all customer segments and product categories across regions. Innovation continues to be a key differentiator for STL, and this quarter we made significant technology strides to power the AI and hyperscale data center era, more of which you will see in the coming slides.
Building on the momentum of Neuralis, our flagship AI era data center portfolio, we achieved US Conec certification for delivering MMC pre-terminated solutions to hyperscale customers. Crucially, we're pleased to share that we have secured definitive victory in the European patent dispute with Fujikura, and this matter has now been conclusively resolved in STL's favor. This effectively brings the U.K. litigation related to our Celesta cable family to a close. This removes all legal uncertainty around these products and fully covers the path for our data center and telecom business. Our product development engine was also highly active this quarter. In optical connectivity, we launched CONCAT, a spliceless plug and play solution designed for dramatically lowering the FTTH installation costs. Our innovative engine is backed by a deep IP portfolio of more than 785 patents with nine new filings this quarter, and we've been recognized through multiple global awards.
Overall, these advancements reinforce our position as a technology leader, building future-ready capabilities and align closely with our AI cloud and high-performance network demands. Turning to our product portfolio, we're making tremendous progress with Neuralis, our purpose-built portfolio for the AI era of data centers, which addresses two mission-critical needs: AI whitespace connectivity and high-speed DCI, where fiber density, speed, and simplicity matter the most. A major milestone this quarter is that we have achieved the elite US Conec certification of four MMC pre-terminated solutions, delivering a massive three times increase in cable density over traditional layouts to support high-density AI workloads. With this certification, STL becomes the few global players offering certified MMC pre-terminated fiber trunks, array cords, and assemblies, significantly strengthening our portfolio and directly addressing cable congestion for hyperscalers scaling to 800 Gb and beyond.
By leveraging STL's fully integrated integration, Neuralis enables faster deployment and massive GPU clustering. It reduces deployment complexity and accelerates the time to service. Supported by our local manufacturing facility in South Carolina, this launch strengthens our position in the U.S. with both the hyperscalers as well as the upcoming new cloud providers. Slide 18 highlights STL's leadership in the next generation optical fiber portfolio. It directly addresses the optical physics demands of the AI DCI era through three flagship technologies. Firstly, our G.654.E fiber, now fully commercialized and delivers 30% lower signal loss. Second, Hollow Core Fibre, which cuts latency by up to 47% to accelerate AI data center interconnect. Finally, our award-winning Multi-Core Fibre, which expands our data capacity between four to seven times with the same footprint.
With the successful real-world deployments of Multi-Core Fibre already underway in India and the U.K., alongside partners like CDOT, IIT Madras, and Colt in the U.K., this firmly positions STL to power the high density, ultra-low latency infrastructure required for tomorrow's AI workloads. Moving to market-led innovation, CONCAT is redefining U.S. FTTH deployment economics for new builds, expansions, and over builds. By shifting fiber preparation to controlled factory environments, its true plug-and-play modular MPO to LC architecture enables completely spliceless installation. This slashes labor costs by up to 71% by eliminating the field splicing and reducing reliance on skilled labor. Already field validated with top-tier U.S. telecom operator and recognized by the Lightwave Innovation Reviews, CONCAT delivers faster time to revenue with significantly fewer truck rolls and lower operational risk.
Strategically scaling CONCAT allows us to drive higher attach rates for optical connectivity with our fiber cables, expanding our revenue and deepening our margin profile with key U.S. customers. On market position and attach rate trends, our global ex-China OFC market share increased to 9%, demonstrating a resilient execution and steady market expansion despite broader environmental challenges. On optical connectivity, we are pleased to share that our attach rates have increased to 16% on a much larger OFC revenue base compared to 15% last year.
The long-term opportunity in connectivity remains robust as our portfolio expands, and we continue to successfully pivot towards selling higher value integrated solutions rather than standalone products. Looking ahead, we are focused on further increasing our attach rate to above 20% from next quarter onwards and to 25% by the end of this financial year. Taken together, this shows that our core OFC business remains solid and our attach-led growth strategy gaining clear traction in coming quarters. Now I'll hand over to our CFO, Ajay, to take you through the financials.
Thank you, Ankit, and thanks to everyone for joining us today. I am happy to take you through our financial highlights for Q1 FY 2027. A truly historic quarter where STL delivered its highest ever performance across revenue, EBITDA, and PAT. Revenue reached INR 1,910 crore, representing an extraordinary 87% year-on-year growth. On profitability, having previously guided for a 20% EBITDA margin by the end of FY 2027, I am proud to share that we delivered on this right here in Q1, with INR 397 crore in EBITDA, which is up 184% year-on-year. We are now revising our EBITDA margin guidance upward to 23%. Finally, PAT came in at a record INR 197 crore, reaching 10% of revenue, our highest PAT margin ever, which represents a massive 3.5 times expansion over full year of FY 2026 PAT.
Overall, this performance reflects our unwavering focus on disciplined growth, margin expansion, and stronger bottom line outcomes as we enter the new financial year. On the segment side, while telecom and citizen networks continue to be a core pillar, our data center segment saw strong growth contributing 21% this quarter, up from 1% in FY 2026. Looking ahead, we expect the combined data center and enterprise segment to scale up to 50% of the revenues in the current fiscal, well above the 30% guidance provided in our previous earnings call. From a geographic standpoint, our revenue mix continues to reflect strong global momentum. North America share expanded significantly to 54% in the current quarter, up from 39% in FY 2026, driven by robust demand. Europe contributed 25%, while the rest of the world held steady at 22%.
This balanced regional footprint reduces concentration risk and positions us well to capture growth across key global markets. Moving to the open order book, we have seen strong momentum this fiscal. Our open order book stands at a record high of INR 18,618 crore, up 2.4 times from the last quarter, reflecting healthy order inflows and a strong market confidence. Of this, INR 2,228 crore are slated for execution in Q2 of FY 2027, while the remaining INR 16,390 crore is scheduled for execution over Q3 FY 2027 and beyond. This robust order pipeline provides strong revenue visibility and reinforces our growth outlook for the year. On slide 26, we have shared an abridged snapshot of our reported numbers for your reference. On balance sheet, the net cash balance stands at INR 483 crore, achieving the status of net debt-free company.
Additionally, I'm glad to share that STL's balance sheet position is now reflected through CRISIL's revised rating outlook to stable, and ICRA upgraded the rating to AA stable. Moving on to our capital structure, STL successfully completed a landmark QIP of INR 1,500 crore to fund our next phase of growth. The issue received strong market reception, with the book being subscribed more than 2.5 times, strengthening our institutional holdings to a fresh historic high of 33%.
We witnessed robust participation from leading domestic and global institutional investors, including marquee names such as Nomura, HSBC, Motilal Oswal and Bank of India, among others. We are allocating 75% of proceeds towards reduction of debt, while the rest of it going towards general corporate purposes. This successful capital raise significantly strengthens our financial foundation as we execute our long-term roadmap. With this, now I hand it over back to Ankit for updates on our social responsibility initiatives and closing remarks.
Thanks, Ajay. STL CSR initiatives continue to create deep, lasting and measurable impact across healthcare, education, women empowerment and environmental sustainability. In education, the Indian CSR award winner, RoboEdge program, has scaled to over 12 schools and 10,000 students, equipping them in next-gen robotic skills. In women empowerment, our Jeevan Jyoti initiative has trained over 6,500 women in vocational skills. We remain firmly committed to driving sustainable growth and building future-ready communities. Our flagship healthcare program, Swasthya Suraksha, has now impacted 27 lakh lives across Maharashtra and expanded its footprint into Silvassa. At STL, sustainability is central to our purpose. We are proud to hold a Synergy SA rating and are committed to achieving net zero emissions by 2030. Our strategy is built on three pillars. Environmental sustainability.
Since FY 2019, we have diverted 286 lakh metric tons of waste, recycled almost 11.6 million cubic meters of water, and reduced over 45,600 metric tons of carbon dioxide equivalent through energy efficiency. Over 32% of our procurement is local, and our partnership with Hygenco for advanced green hydrogen and oxygen plant has been commissioned and successfully starts supply. We are also actively looking at enabling all our operating footprints to be sourcing green energy. In terms of social responsibility, we are aligned with the 16 United Nations SDGs, and we positively impacted more than 920,000 lives through education, women empowerment, and healthcare, alongside installing 4,500 kW power of solar capacity. Strong governance. With the two big four auditors and robust governance committees, we have won 100 + ESG awards since FY 2019.
Notably, STL is the world's first optical fiber manufacturer certified for zero liquid discharge and zero waste to landfill, setting a true industry benchmark globally. Let me close with our focus areas. Our goal is to keep driving technology and cost leadership, drive sales of integrated connectivity solutions in partnership with key customers, and scale our data center business to strengthen our role as a key enabler of global digital infrastructure. With this, I will close my opening remarks and hand over to the operator to open the floor for questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mr. Achal from Nuvama. Please proceed.
Yeah. Good afternoon. Thank you for the opportunity. Congratulations for excellent earnings. My first question is, if you could talk about what was the capacity utilization in first quarter. In terms of the order inflow, if you could talk about the ordering, whether it is U.S. or Europe. Are we at the back end of the ordering or it's still work in progress? How do you see that, given the big numbers, what we hear about the Air India, the data center CapEx. Are those ordering behind us or it's still yet to happen in a meaningful fashion?
Yeah. Thank you, Achal . I think both parts, when we look at the capacity utilizations, we don't share, we don't disclose actual numbers. As we've been sharing over past few quarters, we continue to see that our capacity utilization is improving quarter on quarter. That's a positive development, and we continue to see that going forward as well. In terms of our order inflow, yes, we're proud and happy with the orders that we've received, the connections with our customers. We continue to feel positive about future orders as well, both on the telecom sector as well as on the data center and enterprise segment.
Ankit, the question was, in terms of the ordering, while you have given a very qualitative answer, I'm just curious to know, typically the cables are required during the execution of that data center. Is the ordering been through? Or it's probably not even midway through? At the industry level, I mean.
From a data center, CapEx, if you just look at the hyperscalers as well as the neoclouds, many of them are basically talking about multi-year investment in the data center capacity build-out. If you take U.S. itself, probably 8 GW to 10 GW will happen this year and further. There's in fact a backlog of data center capacities that need to get built out. We do continue to see that this CapEx will continue from the hyperscalers, and on the back of that, the demand for our portfolio will continue to increase.
Got it. Another question I had with respect to the sourcing of raw material, particularly the rare earth materials. If you could talk a little bit, where are we in that journey? Have we got the visibility for next few years, few quarters? If you could clarify on that as well.
I think there are three or four elements out here. One is germanium, which is used in our glass process. We have helium, which is required as parts of some of our fiber manufacturing. We have other elements, like polyethylene and others, which are linked to oil prices, et cetera. From the areas we've been speaking about, I would say germanium, we continue to put consistent towards both of looking at areas of sourcing, and we continue to believe that that will improve quarter on quarter. At the same time, we're also looking at new technologies where our consumption of germanium itself could reduce over time. That's something that's work in progress over the next few quarters. We'll update on that. When it comes to helium as well, we are watching that very closely with the developments in Middle East.
We have worked on some technologies. We're able to recycle some of our requirements. From that perspective, we are well-positioned. From a polyethylene perspective, yes, the prices have been fluctuating. Largely, that ultimately is a cost for us at the cable level, and we feel fairly confident that up to a certain level that we are able to pass that on to our customers. Overall, I would say work in progress, and we do feel confident quarter on quarter it will improve.
Got it. Just the last question on the CapEx, if you could-
Sorry to interrupt, Mr. Achal. Can we request you to join the question queue again for a follow-up question as t here are other several participants. Thanks.
Thank you.
The next question is from the line of. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Devavrat from Seven Rivers Holding. Please proceed.
Hi, Ankit. Congratulations on great set of numbers. You haven't shared the capacity utilization numbers, I'm just curious to know that given the quantum of CapEx in AI data centers, do you think we would have the capacity to take on a couple of more large orders if given the opportunity? If not, are we looking at any capacity additions over the next couple of quarters? That would be all from my side. Thank you.
Hi, Dev. As I said, I think we're in several conversations in terms of conversations with telecom operators, in India, in Europe, as well as globally. At the same time, we are looking very closely at both upgrades of our equipment and machines, and we're also looking at de-bottlenecking from our current operations. All of that is progressing as we would like. Both things are happening in parallel, Dev. We are in the conversation as well, as well as we feel confident that with some of the upgrades as well as de-bottlenecking, we can look at further orders from here.
Perfect. Thank you so much. Thank you.
Thank you. The next question is from the line of Sunil Jain from Nirmal Bang Securities. Please proceed.
Yeah. Congratulations on good number, thanks for taking my questions. My question relate to the executions which you had said will be done in the Q2. We see last quarter, you said you will be doing something around 1,500, but the execution has happened much larger. Similar trend can happen in the coming period also, and the execution for the whole year, if you can indicate anything on that. You had given guidance for the margin. If anything, you can indicate on the revenue.
Hi. Broadly, we don't give any guidance on the revenue. The numbers which you are talking about is the order book, which was supposed to be executed in Q1 when we talked previously. Since then, there has been drastic improvement in the order intake, which is clearly visible on the revenue growth which you have been seeing. On the Q2 numbers, similarly, we are reporting that the executable order book is INR 2,228 crore. That does not give any guidance on the revenue number.
Okay. Sir, second thing, if you can talk about order pipeline, if you can indicate anything in negotiations and all.
Sure. As I said, historically, we've always been focused on having key accounts globally, both on telecom side and data center. That's our strategy. We're not focused on the spot market, whether it is fiber or cable. We have very strong partnerships with customers in India. We have BharatNet projects and others which are very important to us. We continue to have very good discussions with our customers. We continue to work on our product development for their future requirements. As well as particularly with telecom customers and data center customers, we are looking and in discussions for their orders and their requirements for the coming years. That's all happening in parallel.
Okay, great sir. Thank you very much.
Thank you. The next question is from the line of Tej Patel from Niveshaay. Please proceed.
Thank you so much for the opportunity, and congratulations on a very great set of numbers. A couple of questions, sir. First question, just wanted to understand your view on, if I look at the gross margins, they have somewhat stayed same, right? Despite our mix from DC going, let's say, up compared to the last quarter. Just wanted to get your view on this. Considering, let's say, DC would be having a higher margin even at the gross level. Is it because of cost pressures at the raw material that could probably lead to a same margin, otherwise probably would the margins have been higher? And given we are targeting a higher proportion of share in DC to up to 30% on a yearly basis. I just wanted to get your view on gross margins moving forward as the mix towards DC shifts.
Tej, here on the gross margin, yes, there is some sort of pressure which is coming from the input cost. Broadly with all the war situations, the prices of key raw material getting increased to significant multiples. We do see the improvement going forward, which will obviously be accounted in the EBITDA margins, which we are talking about.
Got it. Perfect. Sir, second question is, of course, there's been a record inflow of orders this quarter, but let's say if I remove our long-term order of $1 billion, we have a decent order intake. Just wanted to understand, if I remove that order, the inflow will be about, let's say, INR 3,000 crores, which was, let's say, last quarter around INR 7,000 to INR 8,000 crores is the regular business. Was it a conscious decision or not, let's say, taking incremental business because of, let's say, capacity constraint and probably we'll start looking to take more orders, the regular orders, once there's some debottlenecking. Is it a conscious choice or was it a regular order intake?
Tej, broadly, in fact, even if we exclude this long order, there has been a sufficient order intake. Obviously, now we are in a situation wherein we have to pick and choose the orders based on the capacity availability. That will play a role, but in this quarter, there are much orders beyond this significant order rate.
Got it.
Going forward, we'll keep on evaluating on the basis of our capabilities to execute.
Got it. Sir, on germanium, just wanted to understand, are we currently buying whole of the inventory on spot, or we have some tied-up contracts which are, let's say, at a lower fixed price?
We can't comment a lot on the germanium for competitive reasons. As I've been sharing, we're clearly focused on looking at our sources and diversifying our sources. We feel confident about improving our availability quarter- on- quarter.
Got it. Sir, last question on, after this debottlenecking, and you were saying that there's continuous CapEx which is happening, just wanted to get your view on, are we still looking for, let's say, once we have a decent capacity on board, are we still looking for, let's say, in negotiations for a long-term order of this size, but let's say, a sizable order with some telco or data centers going forward in this financial year?
I can't comment on any specific size. As I said, this is all happening in parallel. We are doing the debottlenecking and upgrades of our capabilities across glass fiber, cable, and connectivity. All of that's happening in parallel. At the same time, we are in conversations with our current customers as well as some new customers in terms of their requirements.
Great, sir. If you could help us with the CapEx number for this.
Sorry to interrupt, Mr. Tej. May we request you to join the question queue for your follow-up question?
No problem. Thank you so much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Krish Mehta from Enam Holdings. Please proceed.
Hi. Thank you for taking my question. Ankit, my question was mainly, it is more of a strategic question on how you view this entire AI versus telecom mix for the business. Given the excitement around AI, there is obvious supply crunch in the industry, right? From a more long-term capacity standpoint, how do you think of the order book kind of from filling it more towards the traditional telecom customers, where maybe the margin is low initially, but it gives us more long-term stability on the book versus your AI capacity, right, in terms of your capacity and order book? If you could provide some clarity on how you are thinking about this long term.
Yeah, absolutely . I think that is absolutely spot on. I would almost add one more element to that is, effectively rural connectivity projects. We have three or four parallel demand centers. One has been historical telecom requirements, which also are continuing to grow in certain pockets, and certainly in the U.S. You have got the data center part, which we are all aware of, and that is continuing to grow both from the hyperscalers as well as neoclouds. In fact, there is a middle ground between the two, where the telecom operators or neutral fiber companies are also deploying long-haul fiber networks to ultimately serve or lease to the data center. They are interconnected in some way. You have got this third element of rural projects like BEAD, which is starting to kick off now in the U.S., which is a five to seven-year build-out.
You have got BharatNet in India, which is also a large three to four-year build-out at least. We are very conscious of we are in this business to be long-term. We stated our ambitions to be top three in the world. With that, we are very clear that we want to have this balance of our customer base and our portfolio base. We are very conscious of that. What we broadly see is that our data center and enterprise segment will go towards 50% overall. Probably we will have telecom and the rural connectivity projects like BharatNet and others as a balance.
Sorry, just a follow-up on that. Say over the next three to five years, do you see this mix of 50% remaining constant, or do you think that as the size kind of goes up, it will automatically adjust back down?
I think strategically this is where we want to go. Of course, it can vary quarter to quarter, but directionally this is where we think is a good mix. I think we also need to be mindful that we are also looking to scale up our connectivity part in this. Both on the telecom side as well as on the data center side. We are continuously launching new products like the CONCAT and others that I spoke about, where we can improve our attach rate, and we're talking about by quarter four of this year getting to about 25%. Whether it's on the cable capacity or on the connectivity, we are planning and doing our product development to serve all these markets.
Thank you. The next question is from the line of Balasubramanian from Arihant Capital. Please proceed.
Good evening, sir. Thank you so much for the opportunity. On the data center side, what is our current revenue share in Q1? Secondly, I looked at page number 11 on the PPT. Earlier we had developed a Celesta up to 6,912 fibers per rack, but it's mentioned 12,000 fiber stacks, which are around 72 GPU AI node that is having developed or it's under development, and we are targeting 16,000 fibers also. If you could share on the realization point of view or not at the company level, but at the industry level, how that price have been moved out. I think earlier it's between $18-$30 range. I'm trying to understand, based on the complexities and based on the applications, how that realization have moved up on the industry level.
Thank you. Firstly, I think on the realization, we do not comment on a realization. Broadly, we do have a healthy mix of good realization from data center as well as the telecom side. That's something that we continue to have a mix of both types of customers. On the question that you mentioned on the. I just want to clarify from a technical perspective, this is not reflective of the fiber, the cable itself, the fiber per switch. It's just kind of trying to help you understand that as you move towards different GPU architecture, what is the amount of fibers per switch required. As you see that scale up, it's more just to help you understand that as the density increases, by nature of the work happening with NVIDIA and others, the amount of fiber per data center will continue to increase.
That's more just from an information perspective. Similarly, on the left side, when you look at fiber explosion in DCI, which is a data center interconnect, as you see more and more buildings or data center buildings per campus increase, you will see an exponential increase in the fiber for the data center interconnect. That's just the messaging of both of these that we wanted to share.
Thank you. The next question is from the line of Akshat Mehta from Seven Rivers Holdings. Please proceed.
Hello. Congratulations on a fantastic set of results, and thank you for the opportunity. I have a couple of questions. This better one, performance that you're seeing there, INR 1900 crores and almost INR 100 crores EBITDA-
No, you cannot audible properly, Akshat.
Should be much better now.
Yeah.
My question was that the Q1 performance that we've seen in terms of revenue and profitability, is it sustainable over the course of the rest of the year?
Look, yeah. We don't guide any numbers for the full year or longer-term. I can only reiterate what we've been guiding is that we do expect that our utilization levels will continue to improve. We are in conversations and active discussions with customers to secure more orders. We're continuing to invest in both our capacities through de-bottlenecking as well as through some of our product development. From our perspective, I think we're well-placed to grow. We cannot give any specific guidance in terms of how much we'll grow from here.
Okay. I just want to understand what is the kind of CapEx that we're going to do this year and probably next year.
Yeah. Broadly, what we see is that as a combination of our investments to upgrade all our equipment that I spoke about across glass fiber, cable, and connectivity, as well as for our de-bottlenecking across our sites to improve our yields and output, we expect about INR 500 crores of investment per year for the next three years. Cumulatively, around INR 1,500 crores is what we see over the three years.
Can you also share the breakup of revenue and EBITDA that you used to for the optical connectivity and cable business?
No, we don't break that out.
Okay. No problem. Thank you.
Thank you.
Thank you. The next question is from the line of Tushar from Sanghvi Family Office. Please proceed.
Yeah. Hi, team. Actually, congratulations on a great execution. My first question was on optical connectivity products. I just wanted to understand, are we into the manufacturing of the optical transceivers? If not, whether we plan to enter into that space, and how do you assess the product offering that we have under optical connectivity versus the optical transceivers? A quick primer or explanation on this would be very helpful. My second question was on the margins. I see we have actually upgraded our margins. Is it on the back of the increase in the pricing that we are seeing, or because we have guided for the increased optical connectivity attach rate, that's why an upgrade to the margins? Thank you. That will be all from my side.
I think there is some history here. We actually used to be in multiple businesses, including active components and many other things. We've consciously chosen to exit, sell-off, or shut down many businesses. We've also de-merged our system integration business into a separate entity. It's a very conscious choice to be very focused on the optical fiber cable connectivity side. That's where we are making sure that we're building the right product portfolio. That's really our focus. We're not looking at the transceiver side or any other technologies. Anything that's linked to our fiber optics, things like hollow-core, multi-core, any of those elements or new types of fibers, those are all within our domain. New products like transceivers is not something that we're looking at currently.
In terms of the upgrade or to the margins, I think it's a combination of two, three things. I think it is certainly some amount of improvement in our capacity utilization, a good product mix and customer mix, as well as, from a product side, a good, healthy ratio of cable and connectivity together.
Thank you. The next question is from the line of Anshul Saigal from Saigal Capital Advisors. Please proceed.
Hi, Ankit. Thanks for taking my call. Great set of numbers. Congratulations on that. Two questions. One, do we have a play in the semiconductor value chain at all, whether now or in the future? The second is, you've spoken a lot about the American data center opportunity. Can you speak a little bit about the Chinese opportunity or rather the investment in data centers in China? Why I ask that question is because we hear that the cost of tokens, et cetera, is being reduced materially by Chinese players. Does that mean that it deflates this whole CapEx environment or that really is not the case at the moment?
Hi, Anshul. Thank you for the inputs. I think, in terms of the investments, yes, clearly data center growth is the strongest in the U.S. We are also seeing some very large investment announcements by the government and by the private sector in China that I think you touched on as well. From our perspective, I think definitely we see two or three areas that we are looking at. Our first focus continues to be the data center demand in the U.S. I think India, as we also touched on in our slides, is just at a starting point and will start to grow. We're excited about how we can really enable this AI infrastructure in India, both on long-haul fiber, metro fiber, as well as fiber optics within the data center. I think that's the area we're focusing. I think Europe does need to step up.
There are some initial investments that are starting to happen and some announcements. I think the progress and speed on the ground is still slow. I think Europe will probably be a dark horse and will start scaling up in a year or two. In terms of your point on overall the tokens, I think that is something that's really on everyday basis. That's something worth watching out for. Our macro thesis continues to be that the sheer demand, when you look at the cloud revenues of all the hyperscalers, that continues to accelerate quite strongly. Even some of the new players like Meta and Oracle are talking about increasing and preparing their data centers for third-party sales. It does seem to be that the demand is outstripping supply currently.
I agree with you that the price points will have to become more efficient, and this large delta in cost of tokens between the U.S. cloud providers and China, there has to be something that has to give at some level. From a sheer CapEx spend in the U.S., we continue to be optimistic about that, and we continue to build our product portfolio to help serve them and help them build this out faster than ever before. That's what we're working on.
On your question on the semiconductor, again, as I said, that's not really our top priority right now. We're very focused on the opportunities that we see within the telecom and data center space. We do have very strong glass capability, and we'll continue to evaluate whether we can utilize some of that glass capability for some of the semiconductor requirements. That's not immediately our priority right now.
Okay, great. Thanks very much. Thank you.
Thank you. The next question is on the line of Pratiti Khara from Param Capital. Please proceed.
Hi. Am I audible?
Yes.
Yeah. I just wanted to check on the $100 million CapEx that was announced for the U.S. plant in May. What's the CapEx phasing like and expected commission timeline?
Yes. Hi, thank you. What we announced was a $100 million investment over a five-year period. This was as part of our strategy, both to ensure that we have a good balance of cable and connectivity onshore in the U.S., primarily to help certain customers and be able to serve them with a quicker turnaround. The second reason we're doing that is to be more closely aligned and customize our products for their requirements, and to also be able to serve them for their future requirements. This is something that we continue to have conversations with our customers, particularly on the data center side. As we progress and as we get more clarity from our customers in terms of the requirements, we'll probably update you by next quarter in terms of progress on that.
Do we have any capacity number in mind for what we plan to do there?
This will mainly be for the connectivity side, so it doesn't really translate into a capacity per se. As I said, this will be a connectivity facility that we are planning, both for the telecom segment and the data center segment. Once we're able to finalize and detail out the investment and the scale-out of that investment, then we'll be able to share that.
Sure. Thank you.
Thank you. The next question is from the line of Noah from Noah Financial. Please proceed.
Hello.
Yes.
My question was about, you mentioned germanium and helium content. If it continues through FY 2027, it will affect your order book or on any margin? Do you have any other suppliers or technology to overcome this? Hello?
Yes. I think what I shared earlier as well, that we are actively working to diversify our suppliers across our raw materials, whether it's germanium, helium, or others. There have been cost increases that Ajay spoke about in terms of our input costs. We are very mindful and looking at improving our supply quarter-on-quarter. As I shared, we feel confident about that. At the same time, we are taking in orders from our customers, both on telecom and data center side, on BharatNet side, keeping in mind the availability of our raw materials.
Thank you. The next question is on the line of Naman Parmar from Niveshaay Investment. Please proceed.
Good evening, sir. Thank you so much for opportunity. Firstly, I wanted to understand what will be your debt level and the working capital for the end of the FY 2027 after this QIP?
We have disclosed that we broadly believe that we'll be net debt-free even during the financial year. The raise of QIP will definitely help, along with the internal accrual. At the same time, there has been consistent focus on reducing the net working capital by engaging into dialogues with the customers on reducing the payment terms, that should definitely help us.
Okay, got it. Secondly, if you can help us in the understanding on the margin perspective, like you mentioned that you are working very aggressively on reducing the consumption of the germanium, which will help you in increasing in the gross margin going forward if the germanium cost reduces or remains stable at this price. If you can explain how maximum the margin can help you in the gross level, and also on the EBITDA, if you can bifurcate between telecom versus data center, what is the margin difference?
We don't normally call out the margin difference. What we have shared in the past is that, yes, the margins broadly for the solutions we sell to data center are higher margins than the telecom segment. I think from a cost input perspective, I do want to call out that while the costs are higher right now, I think for us, our focus is to ensure that we are able to utilize our facilities. Just through utilization of our factories, we'll be able to have better EBITDA margins being realized. Then on top of that, as we increase our connectivity attach rate, which we shared, going up to 25% by quarter four, that will further enable our EBITDA margin to increase. These are the two, three things why we feel confident that the margins will move towards the 23% that Ajay spoke about.
Thank you. With this, we conclude our call. I would now like to hand the conference over to Mr. Rahul for his closing comments. Over to you, sir.
Thank you. Thank you everyone for taking time to hear us out today. We truly believe Sterlite is well-positioned to play a pivotal role in building the digital infrastructure of the future, and we remain available to take any of your follow-up questions. You may reach out to us at official email ID, investor@stl.tech. Once again, thank you, and we remain grateful for your continued support. Thank you.