We Won't Be Listing Our Power Business Anytime Soon: Anand Agarwal Of Sterlite Tech
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Sterlite Technologies is looking to grow its business through smart cities and National Fiber Scheme. It has also de-merged its Power business from its Telecom vertical to provide more value to its retail investors as the company sees huge opportunity in the proposed Smart Cities in the country that would require technology at every door step.
In an interview with BW|Businessworld, Anand Agarwal, CEO, Sterlite Technologies, discussed his company’s plants for the future and the way forward post de-merger.
Excerpts from the interview.
You are into the telecom fibre business. What opportunity does a mega project like National Fiber Scheme provide you?
Currently, the scheme is becoming larger and larger. The government has set an aim of connecting 2.5 lakh gram panchayats with fast internet connection. Earlier, the national fiber scheme was to be implemented with the help of PSU companies. However, looking at the scale and the speed of the project, now the government has decided to involve the private sector as well. The scheme is a very big opportunity for us and we already have got the order for supplying products. However, the bids for laying down fiber will open in a couple of months and we will be participating in that.
How does a private company like yours, with limited scale of operations in the power transmission sector, leverage against a behemoth like Power Grid Corporation to win projects?
The power transmission sector has a huge opportunity in terms of growth. And PGCIL (Power Grid Corporation) itself has its hands full at the moment. Its order book would be around Rs one lakh crore. So a lot of projects in the country require to be done by the private sector. So we are looking for those projects in the sector.
You have decided to de-merge your telecom and power business, with power sector being de-listed. Is there no growth in sight for the power sector that you have decided to quit the market?
Well, power and telecom are two different types of businesses. While in telecom we provide products and solutions, the power business is more of an infrastructure development. Globally, we see that power transmission business is like an annuity business. It requires the company to take huge debt on its books and then execute the projects. The business has three cycles. So we have realized that this business is not good for general public because there are short term gains in the sector. So what we have done is that we have asked private equity players to stay invested in our company because they can make long term gains in the sector.
But recently, your parent company Vedanta Ltd merged Cairn India into it. The management gave an argument that it is good to have diversified portfolios in a company to ward off any cyclic pressures of a particular business on the stock price.
See, for the last 7-8 years, we have been a diversified company. But then we realised that if we were addressing the same value chain, then it would have been justified. But in the power sector we have to invest a lot. So the business models become very different from each other. Whereas, the Vedanta and Cairn India are in the same business. Both the companies extract natural resources and sell. But in Sterlite Technologies’ case while we sell product in the telecom sector, we have to invest our own money to set up transmission lines in the power business. So the two businesses do not go together to reap any benefits of a diversified stock. So we have demerged two different business models because the investors for the two businesses are very different from each other in terms of expectations from the rate of return as well as gestation period. Moreover, we went for the demerger after getting feedback from our investors.
When do you think you would list your power business?
At the moment, we don’t think we would be listing our power business anytime soon. Because the investors who are interested in the power transmission business are not the general public. These are institutional investors like pension funds who come directly into the company.
You recently announced your tie-up with Ericsson to provide solutions in the Smart cities. Could you please elaborate on the kind of opportunity you are looking at in the smart cities?
Essentially, Ericsson and we are working on many projects. Ericsson has many great products to offer for a smart city whereas we have an expertise in system integration.So both the companies will complement each other in providing infrastructure in the upcoming smart cities in the country.