High valuation expected for Sterlite Optical

NetScribes/Rajiv Banerjee

A growing demand in the optical fibre market has prompted Sterlite Industries to hive off its optical fibre division as a separate entity - Sterlite Optical Technologies Ltd.

On September 14, the Sterlite scrip gained by Rs 49.20 or 4.45 per cent from the previous close of Rs 1,106.85 on the BSE. It finally closed at Rs 1,156.05. A total of 2.76 million shares were traded in, in the course of the day.

As per a Bombay High Court ruling, the new company came into effect on September 4. The company will be listed on the BSE in October, say company sources.

Analysts say that on listing the new company will get a high valuation. "The optical fibre division of Sterlite Industries has shown tremendous growth during last year. This will benefit the new company," said an analyst.

"Its huge capacity and order books will help the company list at around Rs 1,500-2,000 and result in a P/E multiple of around 30," said Sanjay Sathpati, a senior analyst with First Global, a research outfit.

The new entity, which has been positioned as an international telecommunications concern, will provide solutions, services and products to global customers.

Anand Agarwal, chief operating officer-optical fibre business of Sterlite Industries, said that on the global front, the new company would focus more on the US and Western Europe for its customer base.

"These markets form 60 per cent of the global market. We will establish ourselves there first, which will then lead on to other markets," he said.

There is a boom in telecom and the optic fibre cables (OFC) segment. Sterlite too has benefited. "Our stress on technology upgradation has helped us benchmark globally. This, in turn, has enabled us to show better bottomline growth," said a senior Sterlite official.

In the fibre business, the new company is expected to increase its output from its current 1.5 million kms to 5 million kms by 2000-01 and 10 million kms by 2002-03.

The global fibre market is expected to grow from the present 62 million kms to 181 million kms in 2004. Exports too have increased substantially, from Rs 670.02 million last year to Rs 1,807.5 million for the year ended June 30, 2000.

The company already has overseas orders worth $ 75 million, with OFC accounting for $ 60 million and the fibre business $ 15 million, according to a senior official at Sterlite.

Though Sterlite's main growth driver has been the jelly filled cable business, the official said that henceforth fibre and OFC will bring in the big bucks.

"Last year, jelly filled cables accounted for 60 per cent of sales while OFC accounted for the rest. This year, the former will account for 30-35 per cent the rest being accounted by OFC and cable," he said.

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