Ladies and gentlemen, good day and welcome to the Sterlite Technologies Quarter Two FY 2023 Earnings Conference Call. I'm Pankaj Dhawan, Head Investor Relations at Sterlite Technologies. To take us through the quarter two results and to answer your questions, we have Ankit Agarwal, MD, Sterlite Technologies, and Lakshmi Iyer, Head M&A and Corporate Development at Sterlite Technologies. Please note that all participant lines are in the listen-only mode as of now. There will be an opportunity for you to ask questions after the presentation concludes. Please note that this call is being recorded. You can also download a copy of the presentation from our website at www.stl.tech. Before we proceed with this call, I would like to add that some elements of today's presentation may be forward-looking in nature, and hence must be viewed in relation to the risks pertaining to the business. The safe harbor clause indicated in the presentation also applies to this conference call. For opening remarks, I now hand over the call to Ankit Agarwal. Over to you, Ankit. Thank you, Pankaj. Good day to everyone. Thank you for joining us for our quarter two FY 2023 earnings conference call. The telco CapEx was estimated at close to $330 billion for the period of 12 months ending June 2022. I think this is a very interesting chart which really you know demonstrates the growing CapEx intensity you know of the telecom operators. I think as you can see on the chart, almost at about 17.8% close to 18% is actually the highest in the last 10 years. Really, I think a lot of the demand that was pent up because of lack of deployment during COVID, obviously 5G picking up steam around the world and then also Fiber to the Home. Combination of multiple factors, I think, is where we see the CapEx growing. Also in our conversations with some of our key customers globally, we continue to see a strong demand scenario from them, and it's. We believe quite comfortably that it will continue despite some of the current economic headwinds. In line with our expectations, strong investment momentum is continuing across these four levers. 5G, Fiber to the Home, really fiber to the X, data centers as well as citizen networks. 5G is becoming clearly the fastest growing technology in the world today. Operators are expected to invest more than $500 billion in 5G between 2022 and 2025. One interesting data point is as per Ericsson, more than 210 service providers around the world have launched 5G services globally. The number of subscribers, 5G subscribers, are expected to go from about 700 million currently to almost 4.5 billion by 2027. Massive jump clearly in number of subscribers. Really leading the charge in terms of 5G deployment is China, which also plans to invest significantly in 5G and fiber, and increases 5G base stations from about 2 million today to almost doubling it to about 3.7 million by 2025. In addition to that, FTTX really is becoming all pervasive. By that, you know, you look at fiber to the home, fiber to enterprise, fiber to small cells, fiber for smart city applications. Just one example, you know, about $125 billion will be earmarked for fiber to the home, just in North America over the next five years. When you look at large telecom operators in the US like AT&T for example, their plan is to almost double its fiber coverage to about 30 million locations by 2025. Another example, like Frontier is targeting about 10 million homes, and so many other cases like that with British Telecom, Orange, also operators in India as well as when you look at Australia. Similarly, data center deployment is also increasing. The data center CapEx is expected to grow by almost 10% CAGR over the next five years to a massive $350 billion by 2026. Again, as an example, Google has announced about $9.5 billion in building office and data centers just in the U.S. in 2022. Equally in India as well, we're starting to see pretty strong push towards data center build-out, not only by some of the global players but also by Indian players like Jio and Adani. Lastly, on the citizen network side, the U.S. is implementing close to $65 billion project to connect particularly rural parts of America, connecting the unconnected essentially. Similarly, the United Kingdom has a program to connect nationwide by 2030. Of course, we're all familiar with BharatNet in India, which is to connect the 600,000 villages in India over the next three years. This is some interesting data points from CRU. As you can see, we've forecasted according to CRU between 2021-2024, both in terms of the optical fiber cable demand globally. We also shared what is the CAGR expected across the regions. Also very importantly looking at ex-China, the optical interconnect demand, which is a very important area for our growth and development. As you can see in the CRU, the optical cable demand is expected to close to about 606 million fiber kilometers by 2024, which is quite a significant increase from about 500 million in 2021. Equally, I think, very importantly, the optical interconnect market is expected to grow from about $7.5 billion to about $9.8 billion. As we have been sharing as well, cumulatively this creates an addressable market for us across cable and interconnect of close to about $20 billion. Of course, we are all very proud and very excited with the launch of 5G in India by Honorable Prime Minister at the India Mobile Congress. It was truly an incredible moment, I think, in the history of our country and will create a tremendous impact, not just with the telecom. With the retail user, but I think even more so probably with the enterprises, as we start providing these services to large corporations, to airports, and also of course, the public sector units. In terms of the operators, we did hear a very, I would say, strong and aggressive announcements, particularly by Airtel and Jio. As you would know, Bharti Airtel plans to launch, you know, across eight cities immediately and also Jio in four cities. Of course, they have all laid out their plans broadly. Jio looks to cover India by about December 2023 and Airtel plans to cover India by about March 2024. Those are, I would say, very aggressive plans by global standards. Clearly a massive network build-out would need to happen to enable that kind of 5G services and coverage. Our own expectations are that between $1.5 billion-$2.5 billion will get invested on fiber build-out. This will be a positive driver both for our cable and interconnect, but equally for our services business. In terms of cable kilometers, probably around 200,000 cable kilometers are expected to be deployed over this period as well. With favorable industry tailwinds, you know, we deployed a very focused strategy to propel us forward. In the following section, we'll talk about in detail around what are really our core areas of focus, what is our right to win, and also how we're looking to exit some of our non-core areas. Essentially our strategy is fairly simple and it's focused on two levers. Firstly, we wanna grow the optical business. Secondly, we looking to consolidate our services business. Essentially we are allocating capital to tap into the strategic growth opportunities offered by these two levers, and we shall talk about our progress in each of these in detail in the subsequent slides. If you look at the optical business, particularly optical fiber cable business, you can see from the chart that we're consistently gaining market share. In H1 of FY 2023, we're very proud that now as an Indian multinational, we've gained 11% share globally, if you exclude the China market, which was just 5%, in FY 2020. Equally, something that we're proud of is that in Americas, we have now reached 14% market share for H1 FY 2023. If you really see even just a couple of years ago, that was. We were almost non-existent. It's been a very, very impressive growth, I think, in that market. All of this really caters toward our ambition to becoming a world top-tier player in the optical domain. We're very proud of the team that we've now built to enable this growth. Also pleased to announce that we've secured a multi-year, multi-million-dollar contract with a leading North American broadband connectivity company. Our intent is to increase our long-term contracts and order books as we move forward in this direction. In line with what we've been sharing in our previous calls as well, again, very proud of this facility, especially the one in the U.S. that has come up now, which will really be a world-class optical fiber cable facility. Similarly in China, we are actually restarting the operations, and we plan to scale these up within this quarter. We do believe that they will reach full capacity utilization by quarter one of FY 2024. Something that's clearly very important and strategic to us is to increase the optical interconnect attach rate. Just for people for whom this might be new, the attach rate is essentially for every dollar of cable that we sell, how many cents or dollars do we sell of the optical interconnect. As we've seen currently, at FY 2022, we've got 11%. In H1, even with a growing base on the cable, we are currently at about 9%. This is on the back of a couple of customers that pushed out some of the orders and the revenues to H2 FY 2023. We are confident of these orders coming through and this attach rate growing in the near and medium term. We're very pleased to announce that we've also done a breakthrough innovation in the optical fiber by developing India's first multi-core fiber in cable. Developed at STL Centre of Excellence in India, we launched this product at India Mobile Congress in 2022. Essentially, a simple way to think about this is that the multi-core fiber has four times the transmission capacity than a normal fiber with essentially the same diameter and other parameters. This is the greenest ever optical fiber, which reduces cable surface area by 75% in plastic, and the plastic in the ground by around 10%. Apart from this, we launched some very interesting solutions such as the 5G Cosmos as well as the Gram Galaxy solutions at the India Mobile Congress. The 5G Cosmos is a tower fiberization and small cell solution for 5G networks, and Gram Galaxy, in India, is focused on solutions for rural fiberization. We continue to invest in R&D. As of quarter two FY 2020, the number of patents including granted and applied stands at 742. Coming to the services business. We are building profitable order book by picking up projects in our focus segments. In India, our India business margin is inching up to the targeted range of profitability. Our revenue is also much more sustainable with increasing share from O&M contracts. As the industry really kicks off its 5G rollout, we expect the revenue to ramp up in the near future. As stated earlier, that we have secured a good order book in the U.K. and increasing the execution pace in the U.K. We plan to be profitable in the U.K. services by H1 of FY 2024. Overall, our project execution is on track. Among the India public projects, our BharatNet project in the state of Telangana is 57% complete, including all packages, and the network modernization project for the Indian PSU is 57% complete. On the India private side, fiber rollout for large Indian telco is 100% completed for the first phase and 62% completed for the second phase. The third phase is yet to start. In addition, the fiber rollout for a modern optical network for yet another private customer in India is 15% complete. Coming to the U.K., Fiber to the Home rollout in the U.K. for all our projects combined is 4% complete. In line with our strategy to focus on selective segments, we have now divested the IDS business in Q2 FY 2023 and sold our stake to the Hexatronic Group. IDS operates in a niche segment of inside data center connectivity and containment solutions. The initial consideration for 80% stake is about GBP 9 million. The earn-out consideration is based on actual EBITDA achieved for the year ending December 2022. We have recognized a gain of INR 25 crore over INR 117 crore of book value. As you would recall, we had entered network software business in FY 2016 through acquisition of Elitecore. We continue to remain a niche player in the business. Moving forward, we are working to pivot from our network software business to a digital business. The strategy is in the works, and we shall come back to you in quarter three with our detailed plans. We also want to share with you that we have ramped down the wireless business with no additional investments in capital and manpower from quarter four of FY 2023. This is in line with what we have been sharing over the last couple of quarters. We envision a disruption in the RAN market to open disaggregated and programmable solutions, and in that regard, we have developed products and validated it through PoC trials. With both of these checks, we expect STL operating profit to go up by INR 40-50 CR per quarter from quarter four of FY 2023 onwards. In terms of capital allocation, our clear priority is investments in the optical business. We are investing in OFC capacity expansion, optical interconnect expansion and new product development. With improved margins and working capital cycle in the optical business, we have ramped down investments in the wireless business, which shall help in improving the cash flow from the operation. We have also continued to divest non-core assets. We have just divested IDS in the current year. As you would recall, in FY 2022, we also sold our interest in Metis Eduventures as well as IDS. Our financials continue to improve. We shall discuss this in detail in the current section. Our open order book at the end of quarter two FY 2023 has gone up to INR 11,697 crores. In quarter two, we secured a new order book of close to INR 3,200 crores, the highest order intake in the last three and a half years. This is a reflection of strong demand in our industry and our dominant position and focus, particularly in the optical business. We have also short closed an order book of INR 941 crores, majority in services and wireless business. This is completely in line with our focus of executing projects at desired level of profitability. The orders were closed after discussion agreement with the respective customers. Our order book is well diversified across customer segments and also across our businesses. We also have a significant O&M order book, which is already yielding revenue from this year. Our revenue mix is shifting to customer segments and geographies of our choice. We're increasing our share in telco and cloud segment in particular. In terms of geography, it's very visible that we are now increasing our share in North America and European markets. What is heartening to note is that in line with our strategy in the last three years, we have increased our revenue share of HCL in the North America market, the most premium market in the world, from almost being negligible to almost 33% currently. Again, this is a reflection of our product innovation and a reward for the significant R&D over the years. In terms of notable wins in the quarter, apart from the multi-million-dollar contract of cables in North America and for optical interconnect in Europe, we have also secured multiple other new orders. In the European market, we've secured new orders for optical interconnect solutions from an Altnet player. We are very pleased to announce that we are collaborating with Vocus Group in Australia to provide optical fiber cables. On the services side, we continue to win orders from long distance rollout from a leading telecom operator in India. We've also secured new orders for fiber rollout from another leading Indian telecom operator. In line with our estimates, quarterly revenue grew 12% quarter-over-quarter to INR 1,768 crores. EBITDA went up by 70% quarter-over-quarter to INR 202 crores. I'd like to note that this includes a INR 25 crore gain in the, which is the IDS stake sale. The revenue growth was driven by strong growth in the optical business. We also grew in the services business in our focus segments. Margin improvement is mostly on the back of improvements in margins in the optical business. In terms of net profit, we delivered INR 44 crore for quarter two FY 2023. In order to increase transparency and really by popular demand, we have started to report segmental financials. Starting with our optical business, we have delivered revenue of INR 1,313 crore, which is 15% higher quarter-on-quarter. This is due to an increase both in volume as well as realization. The OFC realization has gone up due to the price increase and better product mix in favor of the North American market. We delivered EBITDA of 20% for quarter two FY 2023, one quarter before that was promised. Key drivers for margin improvement are product mix shift to higher margin products, price increase flowing through and some reduction in logistics costs. In terms of capacity utilization, OFC our cable was at 88% utilization based on production volume and capacity of about 37 million fiber km. In global services, we delivered revenue of INR 463 crore, which is 11% higher quarter-on-quarter. This is due to the increase in execution of our projects in India. The India business is inching towards desired profitability. Losses in the U.K. has lowered the overall segment profitability. As we have said earlier, that we are working to ramp up UK revenue to be profitable by first half of FY 2024. We also expect the India business to increase revenue quarter-on-quarter due to 5G rollout in the upcoming quarters. Coming to the digital and technology solutions, revenue was flat around INR 40 crores. The combined operating loss for this segment was INR 102 crores for quarter two FY 2023. The losses have gone up quarter-on-quarter due to higher initial manpower costs in the digital business. We expect operating profit to improve by INR 40-50 crores in quarter four of FY 2023 in this segment. We have already spoken about ramp down of all investments in capital and manpower in the wireless business from quarter four onwards. Also, as we pivot from network software to digital business, we aim to be profitable in FY 2024. In terms of cash flow, as you can see, our net debt has gone up by about INR 457 crores, mostly due to increase in contract assets of our ongoing projects in the services business. The cash generated from operations and net investment inflow helped with payment of CapEx and dividends. Optical business has funded its growth itself by improving margins and working capital use. As we move forward, we shall work to release cash from working capital, particularly from services. With the completion of large existing public projects like T-Fiber and collection of completed projects coming through, this can be achieved. Our target is to reduce net debt to EBITDA by quarter four of FY 2023. As we ramp up in U.S. and China production, we don't see any significant debt increase from these levels. In terms of credit rating, we have a stable credit rating at AA. We have placed an updated version of our quarterly reported numbers for your perusal. STL's endeavor to be a responsible leader in ensuring a connected, inclusive world. This focus reflects in the way we have designed and implemented our ESG agenda. We have diverted more than 175,000 metric tons of waste away from landfills in FY 2019 to FY 2022. I'm also proud that we have reduced emissions of 15,000 tons of carbon dioxide equivalent through various initiatives in the plant from FY 2021 to Q2 FY 2023. We have also announced a commitment to become carbon-neutral company by FY 2030. I think we'll be one of the first in the industry to achieve this. We have recycled 500,000 cubic meters of water from FY 2019, Q2 FY 2023. We're also very happy to announce that we've become the world's first optical fiber manufacturer to be zero liquid discharge certified. Through our various initiatives in education women empowerment, over 765,000 lives have been positively impacted from FY 2019 to Q2 FY 2023. We have also positively impacted 2.1 million lives through our various initiatives on healthcare from FY 2019 to Q2 FY 2023. For our work, we have won 80 ESG awards from FY 2020 to Q2 FY 2022. In summary, I would like to say that we have a multi. We see a multi-year network build cycle, which is in full swing, especially in our focus markets of North America, Europe and India. Our global OFC volume is also expected to grow sustainably. We are aiming for global leadership in the optical business. We continue to gain strong market share in North America and Europe, increase our attach rate in optical interconnect and develop industry-leading new products and solutions. We are focusing on strategic segments in the service business. We are working to build profitable order book in India and ramping up execution in the U.K. In terms of capital allocation, we are allocating capital to the optical business and actioning to release capital from the services business. Simultaneously, as we shared, we're divesting from non-core businesses. With this, we come to the end of our opening commentary, and we shall now move to Q&A. Thanks, Ankit. Ladies and gentlemen, please note that if you want to ask a question, you can click on Raise Hand and we shall take your questions one by one. Alternatively, you can send us your questions in chat also. We'll take the first question from the line of Mr. Pranav Kshatriya. Pranav, you can go ahead and ask your question, please. Yeah. Thanks for the opportunity. I have three questions. Sure. My first question is regarding the cost. I mean, you know, optical fiber business has been sort of hit by cost inflation, especially the helium gas prices and the oil related prices. Can you please give some color on how those costs are trending? I understand that logistics costs have sort of come down, but what about the other raw material prices? That's my first question. Secondly, on a macroeconomic environment, if you look at, you know, we are seeing the interest rate rising. Typically fiber optic is a product, you know, which has a very long period usage, and to that extent, it is reasonably sensitive to interest rate. How do you see this panning out? Because even some of the customers which you mentioned, for example, Google, is also sort of looking to cut costs and so are a lot of other big giants. How do you see this in the medium to long term impacting the optical fiber business? My last question is on the ramp down of the wireless business. It is good to know that it will save around INR 40 crore-INR 50 crore cost. If you can just elaborate what exactly is the reason behind taking this step? Because I remember you being fairly optimistic on expanding the addressable market and basically addressing the wider need of the telcos. Just want to understand that. Thank you so much. Yeah, absolutely. Good question, Pranav. Thank you. So I think first question on the cost inflation. I think you're right. We continue to still see cost pressures, particularly with some gases like helium. There are still challenges with supply chain on that globally. We work a lot on creating alternate suppliers, et cetera. That's still a cost increase for us and a supply chain risk for us. The other one is still, you know, polyethylene and et cetera, which are linked to the oil prices. That's still something that continues to stay high and impacts our costs. Logistics has come down probably in the range of 15%-20%, say over some period of time now. That's something that you know has benefited us and will continue to benefit us as we continue to you know shift from say India to Europe and US and other parts. I think the part that's been positive for us is that we've been able to pass on some of the cost increases to customers in quarter two, and we continue to see some of that further come through in quarter three and quarter four. That you would have seen also then a link to our EBITDA for this optical business now where we've been able to showcase 20% EBITDA. We're quite happy with that we've been able to pull that off probably about a quarter earlier than what we had earlier communicated. In terms of the macroeconomic, I think I touched a little bit on that through my presentation. I think what's been interesting in our conversations with the customers is that they really see fiber as very central and core to their strategy. If you look at some of the comments of operators like AT&T, Verizon, operators in Europe, China, across the board and even really in India, you really see that the CapEx investment simply has to continue or even grow to have a meaningful 5G experience for the customers. On top of that, most of the operators are doubling down in terms of Fiber to the Home network build-outs. We shared the example of AT&T and others. Where we are seeing is that they're looking at other means to probably reduce their CapEx. There is really a doubling down of fiber that we're seeing and probably various operators having other plans on how to reduce some investments on other parts of the network. To your third question in terms of ramp down of the wireless business, I think there's two parts to it. One, I think at a very fundamental level, what we've been sharing is that we really wanna focus the company into a few areas and become world-class at that. We clearly see an opportunity here, given what I've just shared on global demand for fiber. That itself is a $20 billion opportunity and where we are hardly, you know, $500-$600 million. There's a huge opportunity for us to grow there. Also take a world top three position, which is what we stated. I think that's one really at the core of it. The second part is, I think, probably from where we started out, we had certain assumptions that we had also shared of where we believe some of the wireless solutions, particularly on Open RAN, and how that uptake will happen. Probably what we are seeing is that that's getting pushed out to some extent. We felt that given the capital, you know, capital allocation we want to do between our core optical versus other places, we felt it's probably better to reduce the costs for STL, find an alternate partner for this business and bring our focus back to the core. Sure. That's very clear. Thank you so much for your answers. Wish you all the very best. Thank you. Thanks. Pranav Kshatriya. We'll take the next question from the line of Mukul Garg. Mukul, you can ask your question now. Thank you. Hi, Ankit. I hope my voice is audible. Yes. Ankit, I just wanted to focus a bit on the North American market. You guys have grown quite astoundingly there. The revenue this quarter were equal to what you generated there in the full FY 2022. How should we see the growth, you know, in the market? Was there something, you know, which kind of scaled up revenue this quarter and is not sustainable? Or do you expect the North American market to continue to scale up and be your largest market in a few quarters? The specific thing here is how to look at the profitability of this market. The prices are usually a bit higher, but at the same time, you know, you need to do transportation of the you know, preform and everything while your factory is coming on board. How should we see the respective profitability of the North American market versus your optical business profitability? Yeah. Sure. Yeah, good questions. Thanks, Mukul. A couple of things. I think we're obviously quite excited about our growth in the North America market. It is probably one of the fastest, if not the fastest growing market globally, both for cables as well as interconnect. There's been a real strategy for us. It's not happened overnight. We've been focusing on the R&D and product development probably over the last three to four years. We've been in continuous communication with our customers and potential customers in that region at that time. We've really worked a lot on the product development. Ensured that, you know, we are just not one more supplier in the market, but really creating very proprietary innovative solutions for the market there, both on the cable and we believe over the next few quarters on the interconnect as well, where we should start seeing some success. That's really, you know, our view of the market. We continue to see strong interest from Tier 1, Tier 2 telecom operators. In line with our overall global key account strategy, we're also focusing on certain large accounts. One of them we were able to conclude in North America, and we shared that, which is a multi-year contract. Similarly, with other customers in the U.S., we are working towards multi-year contracts. That's part of our strategy also has been then to further cement our presence in the market and continue to be there for long term. We have also invested in a factory there. It's really a world-class factory for the cable as well as some R&D that we will do there. Again, the whole intent is not just to, you know, supply out of a brochure, but work in a very collaborative way with our customers there. Build solutions for them locally and then be able to supply there. In terms of the one correction I'd like to make, Mukul, is that we'll not be supplying preforms to that market, because it's a cable factory. So we'll actually be making the fiber in India or China or other locations and making. Well, India and China, and then making sure that we supply the fiber to the U.S. factory, cable factory, which is of course very easy to transport and fairly low cost. And really from the profitability of the market, definitely it is a good market. It's a strong market. But again, I would reiterate that the key lies in creating those solutions and innovative products, rather than something that is standard. And as long as you can keep doing that for a select group of focused customers, we believe that the nature of the market is that you can enjoy long-term relationships. Sure. The other question was on, you know, the investment ramp down which you're doing. You know, how much of a revenue impact will this wireless ramp down have for you? You know, are there any other areas where you are looking to optimize, you know, to kind of refocus on relatively higher profitable businesses? Yeah, absolutely, Mukul. A good question. I think currently wireless for us was largely, I would say, on R&D mode. That's where we were incurring the losses that we had on the P&L. By and large, there will be, you know, practically no impact on the top line. In terms of other areas, I would say I would break it in two parts. One is services. As we said structurally, we're looking to focus on few projects which have the right margins, both in India and the U.K. That's the structural part that will continue, you know, quarter on quarter. Then I think the second part is what we shared. We have a telecom software business, so that we're looking at how do we pivot that towards, you know, digital. Give us probably a quarter, we'll share more update on that. Sure. You know, that's good. Just one, again, clarification, on the path to, you know, kind of profitability which you used to enjoy earlier, you are still far away from that, with about, you know, 8% EBITDA margin this quarter. Excluding that one-off gain. You know, how do you see the path moving back to that 17%-20% type of an EBITDA margin? And is that something which will take a few years or, you know, is that something which can be, you know, in sight? Yeah. I'll answer it in slightly differently. One is, you know, I think it's one part we should recognize is that we've largely been in the range of about, you know, INR 5,000 crore at top line for the last three years. Now we are seeing a meaningful shift towards INR 7,200 crore range that we've been sharing for this year, right? I think that itself is one good shift that we're finally making. And then at the same time we are very consciously exiting or ramping down non-core businesses, which should further help the bottom line. I think both of those are something that we're confident of. Particularly I would say very strong focus on the optical business, where we really believe we have a right to win and we see strong market growth. That is something that we're really clear that we will scale up. As you're aware, we are already scaling up our cable capacity, going from 33 million- 42 million cable. We've also talked about our OI attach rate, which we are targeting to go towards 40% by 2025. These are probably some metrics that I can share. We're not really guiding in terms of two to three years out, but we're very clear in which areas we will invest, which areas we will grow. I think one overarching theme will be we will continue to invest in R&D, but that will be focused largely on the optical part. That sounds great. Thanks for answering my question and best of luck for rest of the year. Yeah, thanks Mukul. We take the next question from the line of Sunny Gosar. Sunny, you can go ahead and ask your question. Yeah, thanks for taking my question. I have multiple questions. First, on the margins, on the optical segment, your margins have come back to about 20% in the quarter. What's the outlook here in terms of, is this the peak that you have achieved or there is still further scope to improve margins here in terms of price hike, operating leverage, and how should we look at that for the coming quarters? Okay. I guess we'll just answer them one by one. I think broadly, what we feel is that there are two, three levers here. One is absolute, you know, volume itself that we're sharing. You know, we are adding the capacities, US factory coming up, China factory coming, scaling up. As all of these happen, I think one of course in short term there might be some, you know, scale up or say startup costs. Beyond that, as these start operating, that will give you, at the very least, the volume gain. On top of that, what we are really looking at is rather than just increasing more and more volume over time, we're looking at increasing our optical interconnect attach rates. That we have shared historically also is a better margin profile than the cable. So I think it, we will not be able to guide where we will end up at, but really, as we are able to execute on this optical interconnect attach rate going, that will lead to improvement in margins. Got it. If I can read what you are saying correctly, the near term, this could be your range in terms of 20% odd margins, but as your optical attach rate increases and both your U.S. and China facilities improve utilization to higher levels, we could see margins trending upwards, say over the next few, like beyond three to four quarters. Yeah. I would say, yeah, the bigger trigger for the margin will really be the optical interconnect, right? Because we're already selling a good portion of cable today. That's how I would split what you have said. Got it. In terms of the China factory, if you can help us understand, like what's the status there? How much utilization are we operating at, and what's the scope to take the utilization up at that plant? Just to give you some context, it's a facility where we had a 10-year joint venture with Tongguang. This is in Haimen. Basically at the end of 10 years, that period actually coincided with COVID and shutdown and other challenges during that period. But we also used that period to renegotiate with that JV partner to buy the 25% balance. Now it's a 100% owned entity of STL with the fiber draw operation. Essentially the glass gets manufactured in India. We draw the fiber in China, and then we use that for our global cable operations. That's something that has just ticked off because we had to get certain permissions and close some elements of this transaction. That's, I would say, an early stage. We largely believe the capacities will come on stream or full stream between quarter one and quarter two of next year. How much is the capacity, drawing capacity in China? We don't typically give a breakup, but out of, say, about INR 50 million, that would contribute to about, say, INR 7 million-INR 9 million. Okay. Got it. Fair enough. My next question is on the wireless segment. The company in the last two years would have invested a few 100 INR crores in terms of R&D and IP generation. Although we going forward have decided to scale this down in terms of further investment, but there would be some value of the IP and whatever work has already gone into it. What's the thought process or strategy in terms of monetizing that? Does this mean that wireless becomes completely defocused or we look for alternative strategies there? Yes, good question. I'd say that, yes, definitely, we have invested a significant amount. We actually built a fantastic team. We also launched, I think, between eight to nine products that were available. So I think there's been a good momentum there. There's been some good IP that we have also already been awarded or has been filed. That's something that we are very mindful of. The way we are looking at it is that clearly this, as we've decided, is non-core. We're looking at ramping it down. We're also looking at discussions with partners, whether which parts of the business may be useful to other players in the industry. Those are the conversations that are going on. We'll probably update you in about a quarter's time. Either way, what we are clear is, from an impact to P&L, we will not have these losses in Q4. Got it. Basically there is potential to monetize this IP in some form, whether through a strategic partner or some other way. Yeah. I mean, putting it very simply, there are other players who continue to be focused on and scaling up, say, on the Open RAN space or broadly on the wireless space. Those are the players we are in conversations with. I think it's a bit early to say if or how much value could be ascribed to the IP. That's probably what we'll be able to share with you in a quarter's time. Got it. If I may, I have one last question. Basically in the last two quarters, you've sold some smaller businesses, including IDS. Are there any similar identified pieces of business which would be non-core, and there is further potential to monetize any of those businesses? Broadly, I think we're sticking to what we shared in terms of what is core and what's non-core, right? At a very macro level, we've talked about optical being core, the main driver in the core. We've talked about services business, where we're focused on certain markets and certain profitability. Then we've talked about this conversion from the network software business to digital. I would say these are the three that our team and management bandwidth is going. Everything else that is in the company is what we have described as non-core. I would say the wireless is where some of our work is there for the current quarter. Apart from that, there would be maybe very, very small items that we would continue to look at, but nothing that would be as meaningful as probably IDS or of that size. Got it. Thanks for the detailed answers and all the best for the coming quarters. Thank you. Yeah. Thanks, Sunny. We'll take the next question from the line of Pratik Singhania. Pratik, you can ask your question. Yes. Thank you for allowing me. Firstly, what will be the breakup between the margin between the cable business versus the interconnect business of this blended margin of 20%? Margin of cable versus what? Yeah. Pratik, there was some noise, but if you understand it correctly, you're trying to understand that, what's the cable margin and what's the optical interconnect margin. Is that correct? Right. Yeah. Pratik, we don't typically break it out for you know, competitive reasons. At a macro level, you know, we have largely you know, we've given our say, 90/10 ratio on cable OI right now. Largely you can take that guidance about 20% margins on the cable. The interconnect is higher than that, and that's where we are focusing on growing that part. Basically, the point was to determine that how much has been the improvement in terms of the fiber cable business in this quarter. Basically, are you trying to ask that, where did the margin improvement come from in this quarter versus the previous quarter in the optical business? Yes. That largely came from both volume increase as well as price increases largely linked to the cable, as well as some amount of product mix improvement on the cable. Both portion of what you're asking has a large portion of it has come from the cable part. Okay. In terms of attach rate, basically just wanted to understand that when you say attach rate, so if you are saying if you are selling, say, a fiber cable worth $100 million, right? In that scenario, if you are talking about a 10% attach rate, does that means you're talking about $10 million worth of sales in optical interconnect? That's right. That's right. Okay. Based on the guidance, like, if 40% is your attach rate, then we would be talking about almost $800 million worth of sales in the product business by FY 2025. May I assume that? Okay. I was doing my own. When you say product business, you are saying the optical business as a whole? Yes. The fiber cable plus interconnect. I assume the way to look at this is that we've not given any guidance in terms of revenue in the segment, right? One is obviously as the cable capacity comes up, the revenues would grow, yeah, to the full utilization of that. Every quarter we'll update you on as the optical interconnect attach rate is growing. As you would see in the last two, three years, it has already grown from 3% to now close to 9%. The idea is that can we take it up to 40%. Right. Can you throw some light on how do you plan to increase this attach rate from 10% to 40% in like 10 quarters? Yeah, sure. Basically, I think there's two parts to it. One is, you know, we've had a successful acquisition and capability build through Optotec, which we had acquired in Italy. That actually serves as a very strong platform in terms of the product portfolio they have, particularly for the Europe market. In addition to that, we have started building out the product portfolio, particularly again now for U.S. as well as Australia kind of markets and Middle East. I think where we are at is that, again, given we are at a very small share of global market, which is, say, close to $8 billion-$10 billion, there is a tremendous opportunity. Where the value lies is two parts. If you see, we already have great relationships with telecom operators globally, but probably only selling cable today. Part of where we are, we see positive momentum is going back to the customers and being able to sell OI to them. Where the real value lies, or say the key to the success will be to ensure that for these customers, we're able to create some unique solution for them and able to create value to them compared to the incumbents that they're buying from. That's something in terms of design capability and knowledge we've been able to bring on board through Optotec, as well as now build a pretty strong base in India as well. This gives me the confidence on top of our conversations with existing customers that we'll be able to scale this up both in Europe as well as in U.S. Okay. In terms of the wireless business, after ramping down, like, what kind of quarterly losses would be there, like, after, like, reducing this loss by INR 40-50 crores? Sorry, you're talking about the quarterly losses that because of the wireless business. What improvement we'll see or what further losses will continue? Yes. What further losses that will continue in the business? That would be minimal, just to answer your question, because significantly the other businesses will ramp up. This will be like not more than, you know, INR 20-30 crore. Okay. You know, with the cutting down on all of the losses. Is there anything which is lying in the balance sheet which would require any write down from our end with respect to this business? Wireless. Only on the wireless you're talking about? Yes. Yeah. To the extent we've been doing that on a quarter-on-quarter basis, but that we keep evaluating, but nothing significant because we're also looking at in terms of as Ankit is explaining in terms of how do we monetize the IP as well. That's something that we are evaluating. One other part, we have also shared that we have written off close to INR 950 crores in our order book. Part of that, or some part of that was also and some orders on the wireless side. We've been able to discuss with the customers and close those dynamically as well. Great. Thank you so much, Ankit. Like, really a pleasure to see such a good disclosure in today's investor presentation this time around. Thank you so much. Thanks to all your inputs. Thanks, Pratik. Ankit, we take some questions from the chat which has come. Mihir wants to understand that our working capital continues to increase, despite a decline in India business. He wants to understand going forward, does this mean that the working capital requirements will go up versus historical levels? Yeah. I I think the one part to remember is that, especially coming to the services business, the T-Fiber project which we have been sharing, that's really at its peak. As we continue to execute on that, purely the working capital requirements will come down and cash will get released. Also, there is a certain amount of projects that we shared have been completed. Again, as we are able to successfully get the collection on those projects, that will also lead to an improvement in the working capital. Currently we have about 270 days of Net Working Capital in services, which we want to bring down to around 180 days. That's something that we're very focused on. Again, probably another quarter, you know, four to five months from now, we should be able to get some of these developments to showcase. Thanks, Ankit. The second question is that CapEx for the first half was INR 247 crores. Yeah. Can you give us the CapEx for the rest of the year? That's actually quite in line with what we've been sharing. You know, for the year, we talked about INR 500 crore CapEx. We're about half of that right now. That still continues our visibility on the spending growth. Again, the key part is that it's very much focused on the optical part, largely, you know, scaling up our cable and maybe to some smaller extent the interconnect. Thank you so much. I think Darshil really wants to understand what's the sustainable EBITDA margin that a company can expect, and are we doing any more divestments that we are planning going forward? I think we touched on it. Really, I think one is the optical today, you know, as we said, we're quite proud to have reached probably industry-leading, you know, at 20% EBITDA. That's something that as we continue to grow on the interconnect in particular, from a percentage basis that should improve. That will take, you know, a few quarters. Really on the services part, you know, we are really at that 70% EBITDA margin that we're very clear has to move towards, you know, 10%-12% range with the kind of projects we're now taking. You know, the ratio that we are broadly at is about say 70% of revenue, you know, coming from the optical and 30% services. As we improve profitability of these two business units in particular, that should improve the overall EBITDA margin. Sure. Thanks. Pritesh wants to understand the pricing trend in fiber and cable as we move forward. Yeah. You know, one, I think just to reiterate, a big part of the STL strategy has been very consciously to move away from sale of commoditized fiber or bare fiber to more and more cable and interconnect solutions. That's something that we've really moved very aggressively on. Even a few years ago, we would have probably been 50% of our sales was bare fiber, 50% was cable. Now almost 90%+ of our fiber that we manufacture is supplied to our own cable units, which then provide unique solutions to our customers, as well as the interconnect, which is almost always bespoke for our telecom operators along with our cable. To that extent, I truly believe on the back of all of this, back of our key account engagement and increasing, you know, customers signing long-term contracts with us, we're probably less susceptible than before, to, you know, ups and downs of the bare fiber market and particularly dependence on, say, China and those factors. Having said that, market continues to be stable. And obviously with the demand growing, particularly in U.S., and some pockets in Europe, we continue to see stable fiber prices. On China itself, the demand continues to be strong. We are expecting some tender results from China Mobile, where the general consensus is the demand should actually increase. That's something that we are watching. We do continue to see, at least in the short term, the prices continue to be stable. Thanks, Ankit. We'll take the last question from the line of Saket Kapoor. Saket, you can ask your question now. Namaskar, sir. Thank you for this opportunity. Sir, if you could explain the reasons for increase in the employee cost on a Q-on-Q basis also and on a yearly basis also, that has gone up from INR 204 million- INR 282 million. Yeah. Namaskar. I think one of the critical parts has been actually the employees that we've added as part of our you know network services business as well as over last few quarters on the wireless business. As you can imagine, these are largely software-centric kind of businesses where people is the majority cost. And having said that, we're very conscious that at least some of these now businesses will not be core for us going forward. We do expect these costs to start coming down as well as wherever we see some of these businesses, like I spoke of network business, that we will repivot to digital business. Very conscious of our employee costs having increased, and we're also now taking active steps to make sure that employee cost as a percentage of revenue and also relative to our profitability comes in better control. Looking forward, what it should be? Today's percentage is significantly higher. What are we looking forward when we have when we are taking, maybe now, recruitment for new employees and the cost being significantly higher? What is the percentage you are looking going forward? Then I'll cover my next question. Yeah. See, directionally today we are at about 15%-16% of our employee cost as percentage of revenue. One way to look at it is if we were a pure play manufacturing, then probably the global benchmark is somewhere 9%-10%. If you look at services business, we would have a slightly different ratio. I think, if we largely focus on the businesses that will remain as core for STL, certainly it should come down from 16%. I won't be able to give a specific number right now, but give us probably another quarter. We are working actively to improve this percentage. Thank you. Sir, can you put forward a number how much CapEx you have done for China and USA, since the capacity will be operational and will start contributing? What would be their likely contribution, revenue terms, when they will work at optimum level? Maybe let's share the CapEx part. If what we spent on the JV acquisition as well. Thanks. Essentially just to clarify, like now in terms of the China JV operations that we've restarted operations, that's just the initial operating cost. What we spent mainly on the China was in terms of the acquisition cost of the 25% share that we bought from the JV partner. That's around, it was around INR 79 crore is what we have spent. I was looking at the total figure. Yeah. That, that's the thing. The INR 7 million for the balance 25%, and there's very, minimal operating costs. As we are ramping, as Ankit was saying, we'll be in a better position. We've just started operations in the China factory. As we ramp up operations, we during the course, by the end of November, we'll get some kind of data in terms of what further costs that we need to incur to reach that, desired level of production. U.S. also. Yeah. Also just to add, the US essentially is around INR 60 crores, which you can consider for the US plant. These were also some of the costs which you were seeing in terms of CapEx. US will come more in terms of as we go into H2. What you see is some of the expansions that we've already undertaken. That is the cost that you're reflecting or you're seeing in terms of the CapEx that we have so far absorbed in terms of H1. Saket, due to paucity of time, we may have to, you know, end it here. We can connect offline and we'll answer your queries. Okay, sir. If I may squeeze in last question or is it offline better? Yeah, please go ahead with the last question. Yeah. The last question is, you gave us an understanding that post the first half you would be guiding us how the second H2 would be looking like in terms of our revenue guidance and how likely the business is going to shape up. Just to conclude, sir, is the worst over for the organization in terms of the grief that we have gone through, and now it is only really building on what we have reported for this quarter. What should we expect for H2 in terms of revenue and profitability? That's my question. Firstly, I would say that, Saket, there's no grief. There's only a learning and experience. I think in any business you have to take calculated risk, and I think there's been a lot of learning, for us. I think what we have stated stays very much on the same. We are guiding towards the INR 7,100 crore revenue for the year. I think we are quite confident of reaching those levels. We've talked about our focus on the optical business in terms of investments and profitability, that we are confident. We've already demonstrated in Q2 itself about the 20% margin. As we said, as we continue to grow, in the coming quarters on the optical interconnect, we'll see how to improve the margin. Services as well, we are really focusing on few profitable projects as well as whatever projects we have completed to ensure we do the cash collection. This is what I can guide for H2. We are very focused, lot of learning. Wherever things are non-core, we are exiting that, bringing the cash, and to that extent we'll look to reduce the debt. Thank you, sir. Thank you. Thanks, Saket. With this we come to an end of Q&A session. I now hand it over back to Ankit Agarwal for closing remarks. I'd like to thank everyone for attending this call, and for showing interest in our company. I hope we were able to address and clarify all your queries and comments. For any further questions and discussions, please feel free to contact the investor relations team, which includes myself. We really look forward to continuing the conversation with you in the future. Thank you. Thanks, Ankit. Thank you, everyone. Raj, you can stop the recording, please.