Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis - II - Question Paper

Raw materials

Company is the only fiber manufacturer in South Asia, who manufactures all its glass in house, as it is the basic raw material for optical fiber. Company controls the entire value chain from basic commodity raw materials (like silicon tetrachloride, hydrogen etc) to optical fiber cables. Sterlite Optical Technologies has an inherent strength in constantly challenging theoretical limits in baseline manufacturing costs, making them today, 1 of the most cost effective Optical Fibers and Fiber Optic Cable manufacturers in the world, giving it that competitive edge to effectively address sales to its chosen focus markets. Sterlite Optical Technologies produces its Core Preform Rods and Vapor Deposited Cladding through an efficient ‘External Vapor Deposition’ Technology, which Sterlite developed through in-house Research and Development. Manufacture of Optical Fibers through this process provide Sterlite Optical Technologies an unmatched advantage in cost and technology.



Description
Unit
Current Year
Previous Year



volume
Value

(Rs. in Million)
volume
Value

(Rs. in Million)

Copper Rods
MT
4,224
682.42
-
-

Polythene Compounds
MT
5,058
253.91
701
29.70

Galvanised Steel Wires / Steel Tape
MT
3,661
106.13
-
-

Resin
KG
104,266
93.25
53,386
69.01

Silica Tubes
KG
9,374
42.79
9,123
63.72

Insulated Wires and Semi Finished Cable
CKM
747,121
397.27
-
-

Others


689.96

269.45

Total


2265.73

431.88




Sterlite's Sales Approach

Over the past two years, Sterlite has consciously realigned its sales efforts to focus on judicious mix of products, mix of sustained growth markets and future potential markets. In India, Sterlite will continue on to serve the traditional buyers of Fiber Optic Cables and Copper Telecom Cables such as BSNL, MTNL, Railways, Oil & Gas Sector and the Private Telecom Players like Reliance, Tata and Bharti. There has also been a concerted focus on development of supplementary markets for Sterlite's range of products. In FY 2004-05, Sterlite's export sales amounted to approximately Rs.342.71 Million as against Rs. 277.41 Million of the last year of Fiber Optic Products. However, with enhanced overseas regional focus, Sterlite's sales to different global markets has been targeted substantially higher in FY 2005-06.This confidence has been enhanced with the success in receiving initial trial orders, followed by repeat orders from several prestigious global manufacturers of Optical Fiber Cables. Additionally, activities have been initiated to address the demand for Optical Fiber, Fiber Optic Cables and Copper Telecom Cables to future potential growth markets in Africa and Eastern & Central Europe. Over the past two years, there has been consolidation and rationalization of supply capacity for manufacture of Optical Fiber and Fiber Optic Cables by global majors. However, a large number of their plants that are still in operation are located in regions that have traditionally higher overheads than encountered in plants located in India and other South East Asian countries. Based on Customer inputs, Sterlite strives to develop products & integrated solutions to meet telecommunication / broadband network requirements. Being a pioneer in the Indian Fiber Optic space, SOTL is able to give unique and cost effective technology solutions to its customers. Hence SOTL has been chosen as a supplier of Fiber Optic Cables to the e-governance pilot project like the 1 being rolled out in Assam and other projects as well. Although 2004-05 has been a landmark year where the Government’s stand on broadband has been in the positive direction. In addition, 2004-05 has seen the certain mergers of leading players. 2005-06 should see further consolidation of the industry and normalization of capacity utilization. Sterlite has an inherent strength in constantly challenging theoretical limits in baseline manufacturing costs, making it today, 1 of the most cost effective Optical Fiber and Fiber Optic Cable manufacturers in the world, giving the competitive edge to effectively address sales to our chosen focus markets.

Earning:   Approval pending.