Aksh Optifibre Ltd Management Discussions.

GLOBAL INDUSTRY SCENARIO

According to the World Bank forecasts global economic growth is expected to edge up to 3.1 percent in 2018 after a much stronger-than-expected 2017, as the recovery in investment, manufacturing, and trade continues, and as commodity-exporting developing economies benefit from firming commodity prices. Growth in advanced economies is expected to moderate slightly to 2.2 percent in 2018, as central banks gradually remove their post-crisis accommodation and as an upturn in investment levels off. Growth in emerging market and developing economies as a whole is projected to strengthen to 4.5 percent in 2018, as activity in commodity exporters continues to recover.

Considering the global trend of increasing fiber consumption to cater to strong data growth will continue benefitting optic fiber cable manufacturers and optical networking products companies. Fiber being the most suitable medium for carrying high amount of data over long distances, making it indispensable for future data networks. Global data traffic is set to triple over next five years on higher number of connected devices, increasing video consumption, and surging data consumption per unit led by higher data speeds. Consequently, telecom operators are upgrading their networks by deploying more fiber.

THE INDIA STORY

As per the World Economic Situation and Prospects 2018 report of the United Nations, the Indian economy is projected to grow at 7.2 per cent in 2018-19 and 7.4 per cent in 2019-20. The report indicates that the outlook for India remains largely positive, underpinned by robust private consumption and public investment as well as ongoing structural reforms.

Disruptions caused by the two structural changes — demonetisation and the GST — are wearing off and optimism in domestic demand is soaring because of which

Indian economy is poised to grow faster than expected in the year 2018 against the backdrop of rising trade protectionism, increasing crude oil prices and volatile market conditions. While India in 2017 seen its GDP growth slumping to a three-year-low mainly due to destocking ahead of the GST implementation, the second half of the year picked up at a growth rate of 7.2%. Multiple macroeconomic factors show a turn-around of the Indian economy in the year 2018. three pillars that will help Indian economy to grow at a faster rate in 2018 will be

• Improved domestic conditions- Indias jump on World Banks Ease of Doing Business Index is helping build optimism in Indias story and is consequently attracting more investors to the country. The GST is also taking Indian economy slowly and steadily towards greater formalisation.

• Increased infrastructure spending initiatives- The government in the Budget 2018 allocated a massive Rs 5.97 lakh crore to infrastructural development. With this the country aims to pave more than 80,000 kms of roads by March 2022, making Indias infrastructural development laudable.

• Recovery in global demand to boost Indias growth-

The global economy has turned a corner, with demand rising robustly since late-2016 and it is likely to accelerate further. More than 75% of the world economy is now enjoying an upswing, with forecasts anticipating global growth to rise to 3.6% in 2017 and 3.7% in 2018, from 3.2% in 2016. Growth in advanced economies is at its fastest in three years

As far as fiberization is considered India is at the cusp of strong fiber growth as the Government continues to invest in building networks to bridge the digital divide and strengthen the countrys defence networks, while the telecom operators are deploying fiber to improve backhaul to cater to burgeoning data demand. It can safely be understood that fiber optic cable manufacturer and optical networking products company are well poised to benefit from impending growth in fiber optic networks.

With annual volumes of around 21.2 million fiber km in CY 17, the OFC market in India has grown at a Compounded Annual Growth Rate (CAGR) of 12.8% during the period CY 07-17.Further, the growth of OFC market in the recent past has been faster driven by the growth of telecom and introduction of new technologies in the sector. OFC market reported more than 5x growth in volume terms between CY 11-17, growing at a CAGR of 35.9% as shown in Figure 1.

Todays Indias share in the Global OF and OFC demand stands at 5.6% and 4.5% as of CY 17 with the global demands for OF and OFC reported at 534 and 493 million fibre kilometres, respectively. In value terms, the Indian OF and OFC market can be estimated to be close to USD 166 million and USD 369 million as of CY17.

Opportunity Roadmap for Fiber Optics in India: India is expected to be amongst the fastest growing OF, OFC market in the world. This is because of its low fiber-to-population ratio despite having the second largest internet user base, as reported in Figure 3.Thus, the countrys low fiberization levels provide various investment avenues for OFC manufacturers.

Further, the Indian Internet of Things (loT) market is estimated to rise by about 28% during CY 15-20, driven by key initiatives of the government like Digital India, Smart Cities, and Make in India. Around 1.9 billion devices are likely to be connected in India by 2023, further increasing the demand of data consumption across these connected devices. Moreover, growing technological advancements and rise in the number of data centers is expected to positively influence Indian OFC market over the next few years.

In line with this reported rise in requirement for fiber connectivity, the Indian OFC volumes are expected to reach 35.93 million fiber kilometres by CY 21 growing at a CAGR of over 13% during CY 16-21. In tandem with this, the OF demand is also expected to grow supported by a historic 5-year growth of 36.3% (between CY 16-21) and a projected double- digit OFC growth.

In value terms, the domestic OFC market is expected to reach USD 424 million by 2020 growing at CAGR of 3.5% during CY 16-20. In line with this, the the outlook for OF and FRP markets in India is also expected to be positive supporting the rising domestic OFC market.

H Smart Cities:

Smart Cities Mission is an urban renewal programme by Government of India with a mission to develop around 100 smart cities by 2022in the country and invest over USD 15 billion. Advanced use of information and communication are a basic requirement to leverage new technologies and deliver smart solutions for energy, transportation and waste management. Also, various communities in urban planning of public parks and recreation areas, museums, restaurants, business space, multiplex, etc. require strong and reliable communication network which need OFCs. Further, development of Surveillance and Intelligent Traffic

Management Systems, vehicle number plate reading, traffic signal violation detection, information kiosks, etc. will also require high speed data connectivity. Therefore, making optic fibre essential in this breakthrough initiative by the government.

Your company has successfully designed & implemented Jaipur smart city project. The project is supposed to get completed within the planned timelines. The entire network will be delivered soon and is expected to go live by second quarter of FY19.

Zd FRP Rods

North America and EU are major export markets for FRP rods for India followed by Asia, South America and Middle East region.USA is the single largest market for Indian FRP exports. Belgium, Spain, Germany, France and Italy are the major markets in EU region, whereas Russia, Japan, Brazil and Turkey are trading partners for Indian players in other markets. Further, UAE and Saudi Arabia are potential markets in Middle East region.

Germany, USA, Japan and China are the major exporters of FRP rods across the world covering almost 55% of total exports of FRP rods. Indias share stands close to 1%and has potential to grow in double digits in the future.

Having all our FRP manufacturing facilities which are ISO 9001 and ISO 14001 certified, Aksh has emerged as one of

the largest global FRP rod producer with a sizable market share, supplying its FRP rods to most of the major Optcal Fibre Cable manufacturers across the globe. The biggest revenue generating market for FRP in sales in 2016-2017 has been North America, standing at 38% of the revenue mix, closely followed by Europe and Middle East.

The two key raw materials, optical fibre and FRP rod, constituting 70% of cost of optical fibre cables are manufactured in house. All our FRP manufacturing facilities are ISO 9001 and ISO 14001 certified.

Company planned expansion in FRP manufacturing facilities and diverse sales network in more than 40 countries across 6 continents is expected to increase substantially, whereby undertaking ongoing capacity expansion by more than 2 times of existing capacity. Company currently has FRP manufacturing facilities in Reengus (Rajasthan), Dubai at JAFZA and Silvassa. Company has successfully setup an FRP production facility in Jiangsu (China), which will be commissioned for commercial production very shortly.

Opportunities and Threats.

• Globally Recognized Key Player in Optical Fiber Cable market

• Higher business growth rate and revenue

• State-of-the-art Manufacturing Facilities

• Quality product line

• Formidable e-Governance Presence

• Leading Turnkey Service Provider

• Global Logistics & Freight Challenges

• Risk involved in entering EPC space for Mega Projects

• Indian Telecom sector has one of the fastest growing user base in the world

• Government initiatives such as "Make in India" and "

• Digital India"

• Nationwide connectivity projects and Large Smart Cities Project

• GST enhancing business efficiency

• The entry of global Large Scale EPC service providers in the Indian landscape

• Political and Economic instability in EU and South East Asia

Mobile data access has been the key driver of internet penetration and data consumption, especially in emerging countries like India and China. As telecom operators upgrade networks to increase data speeds and capacity, they will require higher proportion of the network to be connected via fiber. For the primarily voice focused 2G networks, only 2-4% towers are required to be fiberised as bulk of the voice traffic can be carried on low-cost microwave backhaul.

Indian operators have relied primarily on microwave backhaul as getting Right of Way (RoW) in India has been difficult and economics for fiber network for voice is unfavourable. But, 3G network requires 15-18% of the sites to be fiberised, while 4G requires 65-75% of the network to be fiberised. Advent of 5G will require not only 100% of the network to be fiberised, but also significant densification of the network and fiberised fronthaul investments to support the Cloud Radio Access Network (C-RAN) architecture. Thereon, we expect telecom operators to increase investments towards fiberisation of networks to augment data capacity to meet future demand. In comparison, China has been deploying 13.7x more OFC per annum due to higher penetration of broadband subscribers. However, we expect Indias fiber rollout to increase significantly as The government continues to invest in building networks to bridge the digital divide and strengthen the countrys defence networks. Mobile operators are investing in improving backhaul to cater to burgeoning data demand. Broadband service providers aggressively expand fiber installations to cater to high speed data by using FTTH/FTTB.