Sterlite Technologies Limited (STLTECH) Q2 2027 Earnings Call Transcript

Good day, and welcome to the Starlight Technologies Limited Q2FI27 Earnings Conference Call. As a reminder, all participant lines will be in the lesson-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the contents over to Mr. Rawal Tara, Head of Investor Relations. Thank you, and over to you, sir.

Thank you, Steve. Good day, everyone, and welcome to STL's Q2 and H1 F527 earnings call. To take us through the results and answer your questions today, we have with STL's Senior Management, represented by Mr. Ankit Adarwan, our Managing Director, and Mr. Ajay Janjali, Chief Financial Officer. 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 achievement to differ significantly from what is expressed or implied in such forward-looking statements. Please note this also applies to the luxury targets that will be discussed on today's call. And we have also uploaded results and earnings call presentation on ASCO's website and same is also available on the stock exchanges. We will begin today's call with a brief overview of our performance for the quarter and the first half of the financial year, followed by a brief Q&A session. And with that said, I now hand over the call to our Managing Director, Mr. Ankit Agarwal.

Thank you, Rahul. Good day, everyone. I'll begin by highlighting a few key takeaways from my investor presentation. And Ajay, our CFO, will then walk you through the financials. Asia is a global leader in digital connectivity infrastructure, serving data centers, telcos, citizen networks, and large enterprises. Our optical connectivity portfolio stands fiber-to-fiber cables, sociality cables, connectivity solutions. We are also India's number one end-to-end optical manufacturer with about 9% global optical fiber cable market share outside China. With 35-plus years of leadership and more than 805 global patents filed and granted, and 10-plus advanced manufacturing facilities with zero waste to landfill and zero liquid discharge, STL is leading the next wave of global digital infrastructure build-out. We are amongst the few companies in the world with presence across the value chain, from glass to gigabit, starting with the purest grade of silicon, which we transform through Advanced processes like silicon tetra chloride formation, chemical vapor deposition, and high precision sintering, we 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 the raw material to network deployment gives STL a unique edge in quality, cost efficiency, and innovation across the connectivity value chain. This deep integration also gives us one of the most complete portfolios across the industry, from specialty and next-generation fibers to high-density cables to plug-and-play connectivity for fiber-to-the-home and AI data center architecture. Back in September, we laid out Luxshare, a growth roadmap through FY29 with the ambition of becoming the top five global connectivity players and leased 20,000 crores in revenue. In FY27, the first year of Luxshare, We are putting this plan into motion across five clear execution priorities. On the market side, we are actively shifting our revenue mix towards high-value-added integrated connectivity solutions while rapidly scaling our footprint in data center segment. To maintain our product edge, we are committing 2% of our annual revenue into R&D for next-generation optical platforms. At the same time, we are driving margin expansion by staying relentlessly focused on cost efficiencies and delivering stronger value to our customers. Finally, to power this entire growth cycle, we are expanding our pre-pump fiber and cable capacities by 50% and building a new greenfield facility for pre-terminated solutions. All of this is backed by an annual TAMPEX commitment of around 1000 crores per year through FY29. As you all know, currently we are at the intersection of three powerful multi-year investment cycles, data centers, 5G and 6G, networks, and fiber to the X. Over the last few quarters, each of these cycles has only become stronger. Data centers remain the fastest growing driver for optical fiber demand. CRU recently upgraded its 2026 demand projections for this segment to 89% year-on-year, up sharply from 63% last quarter. This is underscored by acceleration of investments by hyperscalers and neoclouds, with Morgan Stanley revising its 2026 forecast upward from $805 billion to $978 billion and projecting $1.5 trillion of investment in 2027. On mobile networks, 5G adoption continues to scale rapidly with global 5G subscriptions projected to reach 6.4 billion by 2031 and India alone accounting of 1 billion in the same time frame. On top of this 5G expansion, global 6G subscriptions are forecast to cross 180 million by the end of 2031. Looking at FTTX, deployments are accelerating worldwide, expanding from 157 million fiber kilometers in 2025 to roughly 166 million fiber kilometers by 2030. In the U.S. alone, more than 140 million new homes will be connected with fiber by 2030, backed by massive government initiatives like BED in the U.S. and BharatNet in India. Together, these three converging cycles create a structured long-term demand tailwind for optical fiber and connectivity, positioning STL right at the center of the world's next digital infrastructure build-out. Moving on, slide 10 delves into how the AI revolution and rapid data center expansion are creating a once-in-a-generation opportunity for optical connectivity. Global data center capacity is expected to grow from about 82 gigawatts to about 219 gigawatts by 2030, With over 70% of the total demand coming from AI-specific infrastructure. AI is driving a fundamental step change in fiber intensity across three core dimensions. First is scale-out, which appears between the racks. Fiber per switch rack is created from 500 fibers in the cloud era to 12,000 in today's 72 GPU AI nodes, heading towards 16,000 fibers in the upcoming architectures. Next is Scale Across, which connects multiple AI clusters, buildings, and data centers, so they can operate as one unified AI infrastructure. Every new site multiplies the interconnects. Two data centers need one link, but six data centers need as many as 15 or more. And finally, scale-up, which takes place at the GPU rack level. As speed transitions from 400 gig to 800 gig and onwards to 1.6 terabits, copper hits its physical performance limits and making optical fiber simply non-negotiable. Together, these three dynamics present a structural step change in fiber intensity. With our Neuralis end-to-end AI DC portfolio, STL is uniquely positioned to capture its multi-year structural growth opportunity across the stack. Looking at slide 11, let's look at India's infrastructure landscape, which is rapidly emerging as one of our most compelling long-term structural tailwinds. Looking at the capacity rollout, India's live DC capacity has reached approximately 1.8 gigawatts following a record 258 megawatt addition in the first half of FY27 alone. Over the next years, this installed capacity is set to increase nearly six-fold to almost 10.5 gigawatts by 2031. What makes this investment cycle particularly powerful is the breadth of commitment across the board. Hyperscalers like Google, Meta, Microsoft, Amazon are deploying tens of billions of dollars. On the other side, we have Indian conglomates like Tata, Adani, and Reliance laying out massive long-term capacity plans this way. Over the last few quarters itself, we've seen massive new announcements coming from Meta and Reliance pushing forward with almost 3 gigawatts of development plans To Australia-based air trunk, which is committing almost $30 billion across Maharashtra and Andhra Pradesh for overall 5 gigawatts of data center capacity. Adding to this momentum are landmark commitments like Adani talking about over $100 billion to build out 5 gigawatts of green AI data centers by 2035. This includes Adani Connect X partnering with CoreWeave to build a 240 megawatt campus in Navi, Mumbai, which is powered by NVIDIA's Veera Rubin platform. Overall, a supportive policy environment with state incentives such as time duty waivers and 10 to 20-year electricity duty exemptions, power availability, and very importantly, the tax holidays extending into 2047, is further de-risking and accelerating this data center build-out. Every dollar of this data center capex has a direct multiplier on fiber intensity across DCI, metro, and long-haul networks. The next slide reinforces how big telecom operators and the big tech companies from AT&T, British Telecom, and Airtel to NVIDIA and AWS continue to back Optical Fibre as the base of digital future across 6G broadband data centers and AI. The takeaway is simple. Fibre remains the core backbone of all digital infrastructures globally. Now, let's take a look at the global market context. We see a clear multi-year upcycle in global Fibre demand taking shape. According to CRU, global optical cable demand has been upgraded again and is now expected to reach 851 million fabricometers by 2031, reflecting a strong 7.5% CAGR through 2031. Looking ahead, growth will be increasingly concentrated in North America and APAC-X China. North America continues to be powered by AI-led data centers, DCI builds, and broadband rollouts. While India and Southeast Asia drive incremental growth across APAC ex-China. In fact, CRU expects AI data centers to capture one-third of total volume share by 2030 in markets outside of China. Overall, this points a sustained multi-upcycle in fiber demand, with the STS-focused market expected to lead demand growth, with CRU projecting 15.7% CHGR in 2030. We are seeing a strong momentum in winning new business, and it shows clearly in our order intake. In the first half of FY27, we secured orders worth 32,000 crores. This is roughly four times the orders we won in the whole of FY26. The largest win this quarter is a new five-year agreement with a potential value of $1.2 billion. It is with another global hyperscaler for AI-ready optical solutions. This builds on the 1.11 billion dollar product award letter for optical connectives that we announced last quarter from another hyperscaler. Together, these give us multi-year demand visibility with some of the world's largest air infrastructure players. We are also winning across our other core segments. We have signed multi-year supply agreements with major global telecom operators for high-density optical connectives in assemblies. In India, we have secured a significant optical cable supply contract, the leading telecom operator. As a result, our order book today is well spread across customer segments, product categories, and geographies. More importantly, it gives us a much stronger visibility on our FY29 Luxia targets than what we had even when we announced it. On market position and attach rate trends, our global ex-China OFC market share increased to 9% in H1 FY27, up from 7% in H in first half of FY26. Turning to optical connectivity, last quarter, we shared that we aimed to take our attach rate above 20% from this quarter onwards. I am pleased to report that our tax rate has reached an all-time high of 24% in H1 FY27, up from 20% in H1 FY26, and this was achieved on a much larger OFC revenue. We remain fully focused on driving this 25% and beyond for the current financial year. This performance clearly demonstrates a strategic pivot towards selling higher value-added integrated solutions than standalone products, which is gaining strong extraction in the market. Innovation continues to be a key differentiator for HGL, and this quarter delivered strong momentum across all these fronts. On key product developments, we strengthened our Neuralis portfolio with high-density pre-terminated fiber trunks, launched a plenum-rated portfolio for inside data hall connectivity, and transitioned a hollow fiber cable into the first commercial pilot phase. On sustainability and next-generation technology leadership, our Chhatrapati Shambhaji Nagar plants transitioned to 100% green power, slashing our fiber-carbon footprint by over 80%. We are very proud of this. A standout achievement this quarter was STL's recognition at the IAM's Asia IP Elite 2026 list. IAM is the global benchmark of IP strategy, and this elite recognition confirms that our deep patent portfolio across glass chemistry, fiber geometry, and connectivity design directly positions STL as an indispensable technology leader in the global AI ecosystem. Our innovation engine is backed by a deep IP portfolio of over 805 patents with 49 new filings this quarter and has been recognized through multiple global awards. These advancements reinforce our position as a true technology leader, building future-ready capabilities for AI and cloud networks. Turning to our product portfolio, we are making tremendous progress with our neuralists, our purpose-built portfolio in the AI era of data centers, which addresses two machine-critical needs, AI-whitespace connectivity and high-speed data center interconnect, where fiber density, speed, and simplicity matter the most. The highlight this quarter is the launch of our pre-dominated trunk assemblies in September. For our customers, this means faster deployment, fewer issues on site, and data centers that come online sooner. Put simply, they are factory-built plug-and-play installations. Every assembly is 100% factory-tested and arrives ready to install with the latest high-density connector technology. Neuralis is emerging as a central nervous system of the modern data centers, built for AI and ready to serve what's coming next. While leveraging STL's full vertical integration, Neuralis enables faster deployment and massive GPU clustering. It reduces deployment complexity and accelerates time to service. Supported by local manufacturing in South Carolina, this launch tends in the position with the U.S. hyperscalers and NeoCloud providers. Slide 19 highlights STA's leadership in the next generation optical fiber portfolio. It directly addresses the optical physics demands of the AIDC era through three flagship technologies. Firstly, our G654E fiber is now fully commercialized and develops 30% lower signal loss. Secondly, hollow core fiber, our HCF cable that offers between 30 to 47% lower latency had transitioned into first commercial pilot phase. And finally, award-winning multi-core fiber, expanding data capacity between four to seven times within the same footprint. With successful real-world deployments of multi-core already underway in India and the UK, alongside partners like CDOT, IIT Madras, and Korn. This portfolio firmly positions STL to power the high-density, ultra-low-latency infrastructure required for tomorrow's AI workloads. Now I'll hand over to Ajay to take you through the financials.

Thank you, Ankit, and thanks, everyone, for joining us today. I am happy to take you through our financial highlights for Q2 and H1 FY27. If Q1 was historic, Q2 has raised the bar again. For the second consecutive quarter, STLS delivered its highest ever performance across revenue, EBITDA, and PACT. This quarter revenue reached INR 2,529 crore, representing growth of 145% year-on-year basis and 32% quarter-on-quarter basis. On an H1 basis, revenue grew to INR 4,439 crore, up 115% compared to H1 FY26. Moving to EBITDA and margins, our operational EBITDA for Q2 FY27 came in at INR 685 crore, delivering 27.1% margin, a significant quarter-on-quarter expansion of 624 basis points. On an H1 basis, operational EBITDA reached INR 1082 crore at a 24.4% margin, reflecting strong profitability across the first half. Note that reported EBITDA for Q2FI27 was INR 846 crore, which includes a one-time net gain of INR 161 crore from a U.S. tariff refund. Excluding this one-off item or 27% operational margin reflects strong underlying fundamentals driven by higher capacity utilization, a richer product and customer mix, and an increasing share of high-value optical connectivity. Turning to profitability, PACT for Q2FI27 reached a record INR 517 crore, driven by strong revenue growth, margin expansion. For the first half, PACT reached INR 714 crore, up from INR 14 crore in H1FI26, reflecting the strong operating leverage in our business. In summary, these results demonstrate strong revenue momentum, expanding margins, and bottom-line execution, setting us up remarkably well for the remainder of FY27. On the segment side, while telecom and citizen networks continue to be a core pillar, our data center segment shows strong momentum, contributing 33% in H1 F527, keeping us firmly on track towards scaling this segment to 50% of revenues in the current fiscal. From a geographic standpoint, our revenue mix continues to reflect strong global momentum. North America's shares stood at 61% in S1 and S527, driven by robust demand across AI and cloud infrastructure, while Europe contributed 21% and rest of the world represented 18%. While North America remains our key growth engine driven by hyperscaler demand, our presence Our open order book stands at 35,274 crores, up 4.6 times from 7,687 crores at the start of this financial year. This reflects strong order inflows and the confidence our customers are placing on us through long-term commitments. Of this, about 3,021 crore is scheduled for execution in Q3 F527 and the rest over Q4 F527 and beyond. I want to highlight a structural change in how our revenue is built. Historically, a meaningful share of each quarter's revenue came from spot orders won and delivered within the same quarter. As our multi-year agreements with hyperscalers and telecom operators scale up, more of our revenue now comes from the scheduled backlog and spot business makes up a negligible share. This is deliberate part of our luxury strategy. It gives us more predictable revenue, better capacity planning, and more stable realizations through the cycle. On slide 25, we have shared an abreast snapshot of our reported numbers for your reference. On the balance sheet, our net cash balance has improved to INR 703 crores from 483 crores reported last quarter, and we continue to be a net debt-free company. I am also glad to share that our extended financial profile is now reflected in our credit ratings. CRYSIL has further upgraded our long-term rating to AA stable from AA- and reaffirmed our short-term ratings at A1+. With this, both CRYSIL and ICRA now rate STL at AA stable. Our disciplined capital allocation entails a mix of brownfield expansion, preformed fiber and cable capacity by 50%, And a greenfield facility for pre-term solutions with a total capex of 1,000 crores per year from 2027 to 2029. Finally, on slide 26, a Luxury Growth Roadmap. When we unveiled Luxury, we targeted revenue of INR 20,000 crores in FY29, about 4x our FY26 revenue, with an EBITDA margin of over 27%. The strong margin expansion we are delivering today, combined with the multi-year visibility from our record order book, gives us stronger confidence to raise the bar of visibility. Accordingly, we are upgrading our F529 EBITDA margin target

to about 30%, up from 27% earlier,

while maintaining our F529 revenue target at 20,000%.

This performance underscores that

we are not just growing, we are building a higher margin, highly scalable business for a long term. With that, I will hand it back to Ankit for an update on our social impact initiatives and closing remarks.

Thank you, Vijay. Our CSR and sustainability initiatives continue to create deep lasting and measurable impact across healthcare, education, women empowerment, and the environment. And you will find the details in the presentation. We remain committed to achieve net zero by 2030. And this quarter, our factories in Satrapati, Sambhaji, Nagar transition to 100% green power. Together with our commissioned green hydrogen and oxygen plants, we have reduced the carbon footprint of our core optical fiber by over 80% while maintaining zero waste to landfill and zero liquid discharge standards. This disciplined approach to governance and sustainability continues to be recognized and backed by Synergy A rating and over 100 ESG awards to date. Now, before we open the floor for Q&A, I'd like to step back for a moment. When we announced Lakshya in September, we set out an ambitious goal to become another top five optical connectivity players in the world. Two months into this journey, the goal is starting to show our results. We have delivered back-to-back record quarters, our order book has nearly doubled, and our tax rate has reached an all-time high. The confidence comes from this performance and has allowed us to raise our FY29 margin ambitions to above 30%. The world is building infrastructure for the AI era, and the infrastructure runs on optical fiber. With our full glass-to-gigabit integration, deep technology portfolio, and long-standing customer partnerships, Thank you, sir.

We will now begin the question and answer session. Anyone who wishes to ask a question You may press star and 1 on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Achal Hade with Nuama Institutional Equities. Please go ahead.

Yeah, hi team. First of all, congratulations on a great set of numbers. So, three questions actually. First, you know, with respect to the target, you know, 20,000 crore revenue remained unchanged while the margin got upgraded. Okay. If you could help us understand, you know, what is driven this upgrade in the margin? Is it largely driven by the, you know, the connectivity and aspect of the business or something else? And secondly, you know, is there any further scope for even revenue target upgrade?

Thank you for your question. So I think what we've done for now is basically looked at the order book that we have and the improvements in our order book that we've showcased going to our 35,000 crores. So that's given us a source of confidence of how we see our performance going forward. And, you know, as we've shared, we've clearly been able to move our mix strongly towards the data center portfolio, which has higher margins. And we've also improved our attach rate. So, combined these things and looking at how these are expected to grow going forward, this gave us confidence to improve our visibility from 27% to 30%. So, right now, that's the visibility that we have. And we continue to target the 20,000 crores. And we continue to evaluate how our order book and, you know, execution is moving on our capacities. And then we can update on anything else in the future.

Got it.

The second question is with respect to the order book, you know, are there more orders in the pipeline, the sizable orders, etc., how the order pipeline is looking like, if you could give some more color on that aspect, especially, you know, from the North America?

So, I mean, I would first put a caveat that we continue to work both with the telecom operators, you know, neutral fiber providers, as well as data center companies. And as we shared in our readout, you know, we're broadly looking at really focusing on long-term partnerships and more and more technology partnerships with these customers. So, that's the majority of our conversations that We clearly want to also have a nice diverse set of customers, both from, you know, types of customers, but also geography of customers, and that's also what we've been working on. So, yeah, as we stand today, we feel confident we continue to have conversations with other data center companies and tech home operators, and we're definitely looking at, as we get a good sense of their requirements, as some of our capacities come up in the coming two to three years, How we can maximize further partnership, that's something we're working on.

Got it. And lastly, if you could provide some color in terms of how the pricing scenario playing out, you know, on the table and also on the pre-form and the fiber prices, you know, ideally in last couple of quarters, how it is trended and what is the expectation one would have at this stage?

So, we don't comment on prices specifically. Broadly, you know, from our side, our focus has been more and more of the, you know, very high-end cables, very high-end designs that we've been focusing on, and you would have seen we've launched some of these designs in the last few months as well. So, as we move forward, more and more of our sales will be these high-end products, which all come under our Neuralis portfolio. And equally, our focus will be to some of our high-end connectivity products that we launched, like CONCAT, like MMC Connectivity, which are really at the cutting edge. More and more of our focus will be to supply those products into the market.

Got it. You know, with respect to the raw material availability, there have been...

I'm sorry to interrupt, Mr. Hachal. I'll follow up with you. No problem. Thank you. Ladies and gentlemen, in order to ensure that our management is able to address questions from all participants, please limit your questions to two per participant. The next question comes from the line of Rabindranath Nayak with Enmalbank Securities. Please go ahead. Rabindranath, your line has been unmuted. Please go ahead with your question.

Yeah.

Am I audible?

Yes, sir.

Yeah, thank you for the opportunity and congratulations for a good set of numbers, two to three questions from my side, so first of all the we got a refund of 161 crores and then if there is is there any further refund is expected that is one question regarding that and there is an impairment of 49 crores and there is a additional depreciation related to that you know 22 crores, what is that pertaining to? And why despite the reduction in date, the borrowing and also the borrowing, reduction in borrowing, why the interest cost has gone up by 15% YOY in this quarter, the receivables has also gone up. So is it a big worry so for us? And the final question regarding, if you know, if you can share something on the, what is the DC fiber contribution, you know, in this total revenue, and And what is the contribution of attached rate revenue on the DC side in the contribution. So total if I am talking about 500 cores of attached revenue in this what is the contribution of DC attached 5 revenue in this attached rate. So if you can answer those questions.

Okay. Thank you. So firstly on the refund, so there is a process through which we get all these refunds. Broadly, we have got refund of almost everything. There is a phase 3, which is going on currently, and there is a small amount which we have already applied for. So that depends on getting that refund. In relation to the impairment and the increase which you are seeing in depreciation, that is broadly related to one of our subsidiaries, which is Spiron Networks. There, we have taken the impairment to square it off in full. On your question related to finance costs, so broadly, in order to reduce our gross debt also, we have prepaid few of the loans which were due at a later stage, and there were some penalties related to the prepayments which we have squared off. Going forward, we will look forward to reduce the net finance cost subsequently, and that will be available from country onwards.

Okay, and about DC contribution, the data center contribution, fiber, and also attach it. Can you please comment on this, please?

Yeah, we don't call that out specifically for competitive reasons. What we have called out is of our total sales, how much is coming from the DC segment, and as we also shared from our order book as well, you can get a good sense that a good portion of our order book also, So, as we stand today, it's from the DC segment, given the two deals we've announced. So, hopefully, that gives you some sense of where the value and the margins are coming from.

Okay. And this attach, is the attach rate a part of the order book or it is not a part of the order book? Attach revenue?

So, to summarize, we call attach rate related to our accessories business, and that also forms part of the order book which we are reporting on a quarterly basis.

Thank you, sir. The next question comes from the line of Dev Chathia with Seven Rivers. Please go ahead.

Hi, Ankit. Congratulations to you and your team on a stellar set of numbers. You know, my question is more, you know, macro in nature. There's a key debate in the U.S. whether the very high level of AI capex can be sustained if bond yields continue to spike, Raising the cost for hyperscalers to continue funding this build-out through debt. Now, I appreciate our industry forecasts on fiber demand, but my question is more specific about what happens beyond FY29. What level of annual global fiber demand growth or AI-KPEX growth would be required for us to continue growing at a strong rate beyond FY29?

Yeah, hi, Dave. Thank you. Thank you. Look, I mean, you know, if we just break it up broadly, so far where our conversations with the data center companies, I think broadly there continues to be strong investments from the balance sheet. Even Meta announced its results yesterday and continues to be quite strong around $140 billion in capex as an example. So, I think your point in terms of longer term, say, 29, 20, 30 onwards, one of the things that we are seeing, interestingly, from the power side, for example, as a benchmark, is that there are contracts going out on the power side easily into 31, 32, and beyond. So, clearly, there is a macro commitment and focus on the hyperscalers to continue to build this out at least for 7 to 10 years with fair level of clarity. And so, equally, that gives us comfort as well, and also in our conversations, that these investments, certainly by the larger hyperscalers, will continue well beyond 2030.

Got it. Thank you.

Thank you. The next question comes from the line of Abhay Joshi with Baroda PNP Paribas Mutual Fund. Please go ahead.

Hey, hi. Congratulations to the team from the great sets of number. My first question is on the margin guidance. Of course, you have raised the margin guidance from 27 to 30 for FY29, but if I look at the margin guidance earlier for FY27, it was 23% when you delivered 20% margin. Now, you are already at 27%. How we should look about the margins for the FY27, if you can give the color? Because, you know, from past two quarters, we have been raising the guidance of FY27. So, just in terms of how we should look FY27 as a margin per se.

So, we would definitely like to perform or better what we have reported in Q2 of this financial year. So, the target of Luxia aligns with the target of what we plan to or try to achieve from Q3 onwards. The reason for increase in margin consecutively is because you know there is a change in our business mix. A lot of revenue is coming from the data sender segment which

If I look at your H1 margin, it is already at 24, which is higher than your earlier stated margins. Do we expect to deliver better than that? That is my question.

Yes, this is what I am saying. We plan to deliver results which are in alignment with our project luxury, wherein we have already announced to increase it to 30%.

Sure, fair enough. And my next question is on the order book. If I look at your net new orders for this quarter, X of the, you know, the 1.2 billion contract we had, which is also very strong, 7,000 crore plus number. So, any breakup in terms of what will be the mix here? It is still the higher predominant data center or it is the mix of poor DC plus telco?

So, outside of what we have said, then we continue to secure long-term contracts with the telecom operators and also neutral fiber companies. These neutral fiber companies are effectively providing long-term leases and capacities either to the telcos or to the data centers. So, these could be, you know, large players in Europe or U.S. as well. And we also announced one large telecom deal in India as well, which is in the public domain. So outside of what we've announced, then we continue to have strong partnerships on the non-DC side as well.

Just lastly, from my side, what would be their, any guidance in terms of how much your attached rate would look at for these, for to reach FF29 guidance, like currently 24, how much, any targets for attached rate?

No, I mean, I think, look, we've reached a good level now, and clearly, you know, we want to keep growing this top line quarter on quarter. So I think we're looking at that closely, and more and more as a guided, we want to sell more and more of our portfolio and evolution, the cable and connectivity, or the cable and termination. So that's what we're working on. We're also building a new greenfield site as part of our CapEx to increase our termination capability. So there's work going on in the background, but at a macro level, I think we've reached a good stage now, and we continue to work with our customers on new products and new solutions to see how we can grow the attach rate from here.

Thank you, sir. Our next question comes from the line of Aritra Panerjee with Nomura. Please go ahead.

Yes, thanks for the opportunity and congrats for a very good set of numbers. So my first question was regarding this hollow core and multiple fibers. So by when do you think these can be fully commercialized? And on the industry side, by when do you think the industry applications for the hollow core and multiple fibers will become mainstream, at least in the US going forward? If you could provide some color on that, please?

Yeah, so I think, look, firstly, I'm quite proud, you know, as an Indian company, we built the hollow core and multi-core. We've also done some trials in the UK for multi-core. Most recently, we did a trial for the hollow core as well in, you know, in India. So that's something that we are also working on. I think one thing to understand also is not only are Are there challenges in the manufacturing of it? Are there significant challenges for the entire industry around the installation and maintenance of these networks? So, I think those are some of the areas that as an industry we're all working in partnership to solve for. The performance on the network is very real, very tangible. The latency improvement is anywhere between 30 to 40 percent. And on the case of multi-core, for effectively the same diameter, you're almost getting four to seven times more capacity. So it's clearly very, very valuable in various network scenarios. So we definitely are bullish about the growth of these technologies, but I would say that probably it'll be in the time frame of another one and a half to two years where the scale of these starts improving. And we are also actively working both internally to improve our production capabilities, but equally with installers and customers to make sure that these can be deployed successfully and ultimately be scaled up in the field.

Understood. So my second question is regarding the payable days. So that has seen a very sharp fall over the past few courses. So just wanted to understand, is this a level that this will stabilize or can we expect For the reduction going forward, and what was the reasons for the drop in the first place in the payability?

So, see, broadly, you need to link it to our net working capital days, which while has increased slightly in Q2, broadly, we aim to remain in the range of 45 to 50 days of net working capital cycle. Currently, this is a supply constant market, so a lot of materials which we have to buy, the payment terms have changed. We broadly expect it to remain stable going forward. Equally, at the same time, we are working a lot on improving our debtors and inventory levels, which will be reflected from next quarter.

Thank you, sir. Our next question comes from the line of Dhru Sitalani with Yamura Capital. Please go ahead.

Sir, thank you for the opportunity to interact with the management today. Firstly, congratulations on a stellar set of numbers and commendable executions. I have a couple of questions I would like to touch upon.

My first question is what was your average utilization for the quarter, and by when do we expect to get full utilization for the current capacity?

Yeah, so thank you for your question. You know, we have been, we have not been sharing specific numbers, you know, at least recently. Broadly, what we have been talking about are some of our constraints around some of our raw materials. We have talked about things like germanium, helium, etc. I am happy to share that we have seen an improvement in our ability to procure our raw materials. We have also seen an improvement in being able to diversify in some of our key raw materials. So overall, as a result of this, our utilization continues to improve quarter and quarter. And clearly, we are in this important period where we are improving our utilization, at And at the same time, we want to start executing some of our capacity projects and bringing those online in the next few quarters.

Okay, thank you. That was really helpful. My second question is that our company seems to be at AIDC cloud share of 40 to 42% in quarter two, and our peers seem to already be at 65%. When do we expect to get at those levels?

So, you know, I would put it slightly differently. For us, what we're very, very focused on is securing long-term contracts and making sure whatever we sell is through long-term partnerships. The second part is rather than anything that is sold on a, you know, anything that is commoditized, low-end fiber or cable, that we're reducing that significantly. So more and more of what we sell into the market will really be at the high end of the specs, whether it's in India, Europe, or the US. So that's really what we're focused on. I think, you know, I think broadly we've guided that we feel confident that our DC share will be closely close to around 50%. And then I think by design, that's something that we're driving that it should be in this 50 to 60% share because, you know, we also want to You have a good mix of customers, both from a geography perspective as well as, you know, customer base.

Thank you. Ladies and gentlemen, you are requested to limit a questions to one per participant. If you have any follow-up questions, please rejoin the queue. The next question comes from the line of Rahul Agrawal with Everflow Partners. Please go ahead.

Thanks, Ankit, and congratulations on a spectacular set of numbers. My question pertains to the attach rate for the business with connectivity solutions. Some of the global peers are north of 100% on attach rate. From a longer term perspective, where do you see the trajectory on the attach rate possibility for us?

Yeah, good question. I think, you know, we've been talking about this connectivity portfolio for several years. If you just reflect on how our journey has been, we even acquired a company called, you know, OptoTech in Italy. We scaled up from there. Then we launched some products, particularly for the U.S. market, like OnCat and others recently. And most recently, then we started working with the hyperscalers and data center companies to increase our terminations of the cable and provide the full neural stack. So this has been the journey. Very proud of, you know, what we've achieved in a, you know, fairly short span. I think some of our global peers have been in this industry, you know, for very, very long time. They are well-established, you know, manufacturing, they are well-established, technology, IP, and even the installers and others are really well familiar with their portfolio. So, this is a work that, you know, we are doing. It's not just about capacity. A lot of it is innovation and co-development with the customer, building things that are customized for their future requirements, not necessarily for today. So, this is something we are very proud of. This progress that we've made is truly remarkable in a fairly short period of time. And clearly, we see and understand, you know, and respect the benchmark of our global peers. And certainly, we would also like to improve our attach rate, you know, I hope quarter on quarter, but as you can appreciate, a lot of this takes time because it involves a lot of product development and co-development, and at some level, we have to bet on some future technologies, and that's where, you know, we talked about 2% of our R&D, you know, which you can, as you can imagine, year-on-year will start becoming quite meaningful. So that's how we are focused and look forward to scaling this up with really next-generation technologies coming up.

Thank you, sir. The next question comes from the line of Gopal Krishna with Motila Loswal. Please go ahead.

Hi, sir. Congratulations on the strong results and referral group. My question here is, given the recent delays in years in global EIA and data center project, do we see any reach to the delivery timelines of our 35,274 order book?

Thank you. I mean, look, there's three, four things, right? Like, one is broadly, I think we're obviously watching the interest rates. We're looking at the balance sheets and, you know, what is the cash position of some of the hyperscalers. But also, we have to be mindful that there are some local execution challenges around, you know, land, power, water. And, you know, other local opposition. So I think at a macro level, the investment plans, you know, continue to grow and scale up. But there will be, you know, execution challenges from time to time. The customers, hyperscalers are also looking to diversify both across the U.S., but also in geographies like, you know, the Nordics. Of course, in India, we're seeing an expansion, Australia, Mongolia. So I think data center companies are also looking to diversify, again, with that same ambition of being able to rapidly scale up. I think the macros continue to be the same. There is genuinely a race for adding capacity, and with our customers, a good portion of our conversations are around how can we help them and innovate with them to help them speed the installation, make it error free and first time right. So we haven't seen any changes in our conversations. But really, it's a unique opportunity for us. And again, as an Indian company to be out there working with them and solving some of their execution timelines.

Thank you, sir. The next question comes from the line of Sunny Gosar with MK Ventures.

Please I start taking my question and congratulations on a strong performance. My question is more on the short medium to longer term and in continuation with one question asked by the other participants as well. So historically, we have seen optic fiber go through cycles and it like there are like lots of variations in pricing environment, demand supply. And this cycle seems to be, at least for now, slightly longer with better visibility, but how are we thinking about our business from more FI29 and beyond perspective? Are we looking at new areas to diversify the business into something like lots of global peers are doing different things with glass technology? So how are we generally thinking about diversification, or is there anything on the horizon broadly?

So look, I mean, Sanit, at a simple level, first in the near term, we're doing everything to, you know, secure and make sure that we're, you know, stable in terms of our performance, which is looking at long-term contracts with, you know, TAO and customers on the telecom and data center side. And that's something we'll continue to focus on. Second is, I would say, a pretty significant focus on R&D. And this is a big, you know, focus for us, building the right team and product portfolio, making some strong bets of where the connectivity will move, you know, along with, you know, the latest stacks of where NVIDIA and everything is going. And then I think the third part is really making sure that our balance sheet is healthy. We have a strong, you know, net cash position to make sure that, you know, we're able to sustain the future. And I think, you know, coming to a question of more longer term, you know, we have, as you can imagine, over the last three, four years, been through a certain phase where we've actually significantly reduced our focus from non-core areas, Where we were looking at wireless and, you know, various other things. I'm very happy that from, you know, focus that we brought into, you know, the cable and connectivity and now into data centers. It's been a very focused effort of our team and our technology efforts to get to here. Having said that, certainly, you know, we do see that there seems to be strong tailwinds into the future. We have very, very strong technology, glass technology, I would say, amongst the best in the world. So we'll continue to evaluate over a longer period how we can utilize these glass technologies. But I would still say that in the kind of short term to medium term, we're very much, we want to be damn good at what we do. And the mission to be, you know, top five in the world and where we are requires a lot of focus, just being very, very close to the customers Thank you, sir.

Ladies and gentlemen, that was the last question for the day. I now have the contract to go to the management for closing comments.

Thank you, everyone, for taking time to hear us today. We fully believe SPL is well positioned to play a pivotal role in building digital infrastructure for the future. And we remain available to take any of your follow-up questions. You may reach out to us at our officially made ID, investors at stl.tech. And once again, thank you. We remain grateful for your continued support.

Thank you. Thank you.

Thank you, sir. On behalf of Sterlite Technologies Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.