Sterlite Technologies shares rally 11% over PM Modi’s announcement on internet connectivity
The share price of Sterlite Technologies rallied up to 11 percent on Monday after Prime Minister Narendra Modi promised that every village in India will get optical fiber internet in the next 1,000 days.
The stock rose 11 percent to Rs 144.40 on the NSE. However, the shares pared some gains, trading 7.56 percent higher at Rs 140.10, at 11:50 am.
In his Independence Day speech, PM Modi said, “In the last five years, 1.5 lakh gram panchayats in the country have been connected with optical fiber cables. Before 2014, only 5 dozen panchayats in the country were connected with optical fiber. Now, our aim is to connect every village with high-speed internet. This goal will be met in the coming thousand days. In the coming 1,000 days, every village in the country will be connected with optical fiber.”
The company’s Group CEO Anand Agarwal in a media interview said that by FY23, Sterlite’s revenue will double up to over Rs 10,000 crore. In fact, the company also said that it is strengthening its technology for the 5G ecosystem and will focus on wireless connectivity.
CLSA in its research note raised its target price on the stock to Rs 185 from the current market price of Rs 130. It said, “In India, currently only an estimated 30 percent of towers are connected with fiber v/s 70-80 percent for developed countries.”
Sterlite has scaled up capacities from 20 kms of fibre to 50 kms and is also increasing cable capacity from 8 metres to 18 metres of cables. It has transitioned from manufacturing to digital network services. The order book is strong at about Rs 10,000 crore, added the report.
In its Q1FY21 earnings, Sterlite Technologies reported a 96 percent plunge in consolidated net profit to Rs 5.96 crore in the quarter ended June 30, 2020. Last year, the net profit stood at Rs 143 crore.
“Production and delivery were hurt due to logistics challenges. optical fibre contracted by 9 percent in the first half of 2020, but is expected to grow by 6 percent in the second half of the year,” said the company in its earnings filing.
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