Optical and digital solutions company Sterlite Technologies (STL) is hopeful of a strong revenue growth in the coming years owing to increase in optical connections and fiber requirements for AI data centres.
The company expects the digital business, which houses its data centres suite of products, to contribute about 25% to its overall revenues in the next 3-5 years.
The same assumes significance as the shift to graphic processing units (GPUs) and increase in AI data centres will require higher fiber content and data storage capacities for interconnectivity.
“We believe that reasonably as more and more of these data centres move to GPU-based, which we call as AI enabled data centres, the quantum of fiber optics within the data centre will be about five to six times more,” Ankit Agarwal, managing director of STL told FE.
According to Agarwal, factors such as demand for data sovereignty, which is storage of data within the country, increasing data centres capacity, and enterprises looking to source solutions from Indian companies, are working well for STL.
“In our conversation with the customers, one thing is definitely coming out that they are looking for Indian companies to provide the end-to-end connectivity solution not only within the data centre but connecting data centres as well,” Agarwal said, adding that STL is well suited for the same.
At the recently concluded India Mobile Congress, STL showcased its AI-data centre portfolio, which includes intelligently bonded ribbon (IBR) cable technology that is crucial for fibre densification in AI data centres, high-density optiic fiber cables, and high-density connectivity solutions, which includes floor-mount racks.
Currently, the digital business contributes about 5% to STL’s yearly revenue of Rs 5,478 crore (FY24). At the Ebitda level, the business is currently making losses. In the April-June quarter, STL incurred an Ebitda loss of Rs 17 crore, while the revenue from the business stood at Rs 71 crore.
“I think the first priority for that (digital) business is to get to a breakeven level…which will take a quarter or two, and then we will scale it,” Agarwal said.
With its AI data centre solutions, the company is looking to tap organisations such as Google, Amazon, Yotta, telecom operators, among others who are looking to increase their data centres capacities.
For example, global companies are adding data centres and increasing their campus sizes. So, they will have to ensure the network uptime and high capacity. To make that happen they need these kinds of solutions from companies like STL for all the new data centres coming.
On the fiber optics business, Agarwal expects the inventory levels to normalise soon and demand coming back especially in the US markets.
“We have the mega government projects such as the BEAD project in the US, BharatNet project in India and other such programmes in Europe, Australia and other geographies, which will also overall increase the demand for optical connectivity products,” Agarwal said.
As of June end, STL’s order book was at Rs 9,883 crore, out of which 50% is of optical networking solutions.
Going forward, the company tends to benefit from a replacement demand of fiber networks, especially those which have been there from the past 20-25 years. Besides, with driverless cars taxis coming in, the same will require increased processing of data and more fiber, Agarwal said.
In the April-June quarter, the company’s revenue fell 20% YoY to Rs 1,218 crore. On a quarter on quarter basis, the revenue rose 7%. The company incurred a net loss of Rs 48 crore, as against Rs 52 crore profit in the year ago period.
