Can you tell us a bit about the factors that triggered a turnaround in the sector last year?
2004-05 was an year of turnaround and growth for the industry as far as the domestic optical fiber industry is concerned. After being hugely depressed 2003-04, demand picked up to about 2 million-km of cabled fiber in 2004-05. This represents a CAGR (compounded annual growth rate) of about 7 per cent from 2003 through 2005.
Public sector companies like BSNL, MTNL and RailTel continued to be the largest buyers of OFCs, followed by private telecom firms. The government constituted about 60 per cent of the total fiber optic cable purchases in FY04-05.
The government purchased about 150 lckm (lac-conductor-km) of copper telecom cables. BSNL and MTNL were the predominant buyers for these cables. The value of the domestic market for OFCs was Rs 300 crore and that for copper telecom cables (JFTCs) was Rs 950 crore.
How do you envisage growth in OFC and JFTC segments? Which of these segments will drive future growth?
The main challenge that the Indian Industry has been faced with over the past few years is the decrease in demand from traditional buyers of cables - mainly from the government sectors - as they chose to either optimise the bandwidth capacity utilisation of their existing network or to experiment with wireless technologies to achieve subscriber targets in the shortest time.
The rate of growth in demand for copper telecom cables has stabilised at 7-9 per cent globally and we expect this trend to continue for India as well.
Over the medium term, we expect the demand for OFCs in India to grow at a CAGR of 17 per cent. The higher off-take of OFCs will be dependent on the success of pilot broadband services in several cities. We expect the OFC division to drive future growth with the onset of broadband in the country.
Is the pick up in demand for JFTC expected to sustain?
Our revenues from JFTC are expected to remain at current levels and we do not envisage growth in that division.
What is your product capacity? Are you planning to expand capacity?
Our optical fibre plant at Aurangabad is India's only integrated manufacturing facility. This facility is among the largest in South East Asia, with an annual manufacturing capacity of about 4 million-km of fiber.
Our OFC and copper telecom cable units in the Union Territory of Dadra and Nagar Haveli have manufacturing capacities of over 2 million-km of cabled fiber and 12 million-km of conductors respectively.
The manufacturing capacities for all our product lines have been optimised to meet the current demand from market, and hence we do not have any capacity expansion plans. However, we may consider expansion in our optic fibre division by the end of FY06.
What is your outlook for the company?
We expect our revenues to grow at about 40 per cent in FY06, primarily driven by the optical fibre division. The revenue mix will tilted towards the OFC segment - two-thirds from this division and the rest from the JFTC segment.
Margins should see a gain this year and settle at about 7-8 per cent. Lower net margins in FY05 were reflective of lower capacity utilisation which should get corrected going forward.
Our order-book position, too, is healthy at Rs 230 crore which should sustain us through the next four-five months.
