Sterlite Technologies Ltd Management Discussions

Optical Fibre as the Cornerstone of Al-Led Digital Infrastructure

We are at the crossroads of change seldom observed in our worlds technological history, with digital infrastructure becoming the backbone of society, industry, and economy. Digital infrastructure is connecting content to consumers, cloud-to-edge devices, and Al Agents to human users. The macro trends driving Digital Infrastructure are the application of Artificial Intelligence, the development of Data Centres, and the proliferation of FTTx networks.

The foundation of digital infrastructure is Optical connectivity. Its the singular, technological solution that addresses 3 very important aspects of digital networks:

Al applications are the bedrock of Humanity 2.0

Everyone is very familiar with GenerativeAl and Large Language Models (LLMs). But the Al-led changes in society stretch far beyond and are rapidly accelerating:

Lower latency and higher processing requirements have spurred the need for greater server density and the adoption of GPUs:

• Server density is expected to increase by 30% to 50%

• Al-led data centres will demand, ~70% higher fibre density

• Newer GPUs like NVIDIAs Blackwell GPU require 18X more fibre than CPUs

Optical connectivity is key for 5G mobile networks. With over 600 global 5G mobile operators as of the end of 2024, global 5G subscriptions are expected to reach 6.3 billion by 2030. This tremendous growth will be possible due to accelerated fibreization of mobile sites, and roll out of backhaul, and access fibre networks.

Projected 11% CAGR for fibreization of mobile sites globally

FY25 for us

The year was tumultuous for the Optical industry from a geopolitical perspective leading to a lot of uncertainty in supply chains, raw material costs, and global trade regimes.

Our focus was to ensure great customer experience through differentiated offerings and execution excellence, and to ensure a healthy financial performance through cost optimization and cash generation.

We had a strong year in terms of new business acquisition, with key wins in North America, Europe, India and the Middle East.

Optical Networking Business

In our Optical Networking Business, in order to have cost leadership, we have consciously reduced our fixed costs by around 10%.

Across key markets globally, we secured partnerships with marquee customers

The global demand for Optical cable for cloud data centres is also expected to cross 29 million Fkm in 2025, representing 5.4% of the global optical cable demand. By 2029, this share will double to 11% of the global optical cable demand, making cloud data centre connectivity among the fast growing applications for optical cable.

We had significant wins in our Optical Connectivity offering, hitting record revenue and a strong attach rate of 22% (optical connectivity revenue as a percentage of optical fibre cable revenue).

We also strengthened our presence in the USA by

onboarding new customers and ramping up operations at our manufacturing unit in South Carolina.

Global Services Business

In our Global Services Business (demerged from STL at the end of FY25), we won a solid share of BharatNet Phase III tenders, in partnership with our EPC partner.

We continued winning Data Centre execution projects, demonstrating our system integration capabilities in the Data Centre and Cloud computing space.

STL Digital

In FY25, STL Digital, our IT engineering and services business, onboarded multiple, prestigious customers across industry verticals. A strong focus on agile and cost-efficient execution, paired with increased revenue, helped us achieve positive EBITDA in H2 of FY25.

We led a major digital transformation at Vedanta and implemented unique, Al-led solutions at an industry-leading financial services firm.

Persistent efforts on collections and disciplined approach on cost management, helped us improve cash generation.

On a quarterly basis, Optical Networking Business and STL Digital, have returned to profitability in Q4 FY25.

Our decision to de-merge the Global Services Business into a separate entity has also de-levered us, and improved our debt-to-equity ratio to 0.68 at end of FY25, from 1.39 at end of FY24.

Way

Forward

We continue to be focussed on Customer, Cost and Cash, as the pillars of our profitable, long-term, sustainable growth.

Our Key Account Management approach is contingent on scaling up a set of high volume, high margin customers where we deliver exceptional solutions and services, at a high customer satisfaction level, in line with their long term growth plans. Our latest innovations in optical fibre cable and connectivity designs, and in Al-enabled solutions have come through close collaboration between our key accounts and our technology teams.

Our approach to cost management is linked to eliminating redundancies, reducing fixed costs and overheads, and focussing on engineering and supply chain efficiencies.

We are maximising cash generation by optimising our cash cycle, reducing our inventory days, and prioritizing expenditure activities. CapEx and OpEx is carefully assessed through strict governance - to ensure alignment to business goals and shareholder returns.

The foundation for these three pillars is our investment in our team members - from nurturing young leaders, to attracting top talent globally. Our L&D and Global mobility programs are focussed on developing skills, unlocking growth, and creating synergies across teams.

Optical Networking Business:

Aiming to be a Top 3 Optical player, globally

The rollout of Optical fibre networks continues to be central to digital infrastructure. The global Optical Fibre Cable demand (excl. China) is expected to grow at an impressive 5-year CAGR of 8.2%, as per CRU.

Tapping the FTTx market

The market-side indicators show a healthy demand, driven by the need for further fiberization in the access network and last-mile. Strong public-private partnerships funding and deploying fiber optical fiber in FTTX applications include:

US market for Optical cable to grow at a high pace Optical fibre Cable demand in the US

The demand for Optical fibre cable is expected to grow at 14% CAGR from 2024 to 2029 in the USA. This strong demand underscores our strategy to aggressively gain topline growth in the region.

Solidifying our gains in Optical Connectivity

We achieved a 22% attach rate in Optical Connectivity in FY25, up 9% from FY24.

Our customer base is increasingly choosing our Optical connectivity solutions, helping us solidify our wallet share and margin improvement.

Improvement in Optical Connectivity attach rate, y-o-y

Leading via Innovation

The industrys need for fibre densification, high bandwidth, low latency, and cost-efficient optical solutions has been addressed by our latest innovation in multicore fibre technology, and breakthroughs in hollowcore fibre technology.

Introducing cutting-edge Data Centre solutions

Our foray into designing and developing solutions for optical connectivity within data centre infrastructure

has generated strong interest among customers.

There is also a strong demand for copper connectivity, especially in enterprise data centres and in-building solutions, which is perfectly addressed by our copper cables and interconnect solutions.

We are capitalizing on the 23% growth rate being seen in Data Centre CAPEX.

STL Digital:

Engineering for Experience

Enhancing our capabilities to address customer needs

Our investment in a Centre of Excellence for Cybersecurity is setting us apart as a bonafide, differentiated solutions provider. Our focus on talent development and execution capabilities has set us up strongly to win more, larger deals among the largest, diversified firms globally.

Global Services:

Crafting an independent path

Our Global Services business demerged at the end of FY25 into a separate entity - STL Networks Limited (SNL), under the brand name "Invenia", to unlock domain-specific growth opportunities.

Forging ahead with a customer-first mindset

Our strategy is centered on our customers, differentiated solutions, and strong governance. In our Optical Networking Business, we are geared to provide connectivity solutions for digital infrastructure, while maintaining focus on customers, cost and cash. The market is buoyed by strong demand in markets like the USA and Europe, and in emerging sectors like Al-led Data Centres. Our experience and innovative solutions for FTTX and 5G mobile networks will play a key role in our success. In STL Digital, we are addressing the biggest opportunities in digital solutions, especially in Ai and Cybersecurity, while strengthening profitability and cash generation. Agile execution, along with innovation from our cutting-edge Centre of Excellence, will drive our profitable growth. Our strategy is underpinned by investment into world class talent and a culture of responsible, accountable and ethical leadership.

Enhancing and Delivering Value to Customers with

Technology Enabled Next Generation Solution

Enterprise Risk Management (ERM) is a structured, organization-wide approach to identifying, assessing, managing, and monitoring the key risks that could impact the achievement of a companys strategic, financial, operational, and compliance objectives. At STL, ERM is a critical enabler in protecting and enhancing value for all stakeholders. Through a proactive and integrated risk management process, STL continuously monitors emerging and existing risks, aiming to reduce both their likelihood and potential impact. By embedding risk thinking into decision-making, ERM supports resilient growth, drives performance, and strengthens the organizations ability to navigate uncertainty with confidence.

Geo-political and macroeconomic risks

STL operates in a dynamic global environment and is inherently exposed to various macroeconomic and geopolitical risks. These include general economic conditions, political uncertainties such as wars and conflicts, and local business risks across the countries where the Company operates. Regulatory factors — including changes in laws, trade regulations, protectionist measures (such as reciprocal tariffs and anti-dumping duties) — can affect the demand for STLs offerings and impact overall competitiveness. In addition, volatility in commodity prices may directly or indirectly influence STLs operational and financial performance. The Company maintains a vigilant approach by continuously monitoring global developments and proactively implementing measures to mitigate potential adverse impacts.

Strategic risks

Strategic risks are those risks which are inherent to the industry in which the Company operates. Strategic risks are analysed and mitigated through strategic actions on markets and customer offerings, investment in R&D and product innovation, among others. STL periodically assesses strategic risks to the successful execution of its strategy, its impact on financial performance, the effectiveness of organisation structure and processes, and retention and development of high-performing talent and leadership. Some of the risks under this category include:

Operational risks

Operations risks are the risks which can negatively impact the operations of the Company. These risks are related to people, policies, procedures and IT systems impacting the product and service delivery to its customers. The Company has a strong mechanism in place to review the operations, including business processes and procedures to minimise the risk relating to product and service delivery to customers. Some of the potential risks in this category are:

Talent management risk

STLs ability to successfully implement its strategy and deliver value and growth is highly dependent on its organisational structure and its ability to attract, develop, engage and retain best professional talent with a focus on diversity. We prioritise nurturing talent over simply hiring it, with our Employee Value Proposition (EVP) based on three core pillars: "Unlocking Potential," "Building a Global Brand," and "Everyone in Everyone wins". These pillars drive our commitment to employee growth, organisational reputation, and shared success.

Cyber security risk

Cyber security is a major risk due to the increasing sophistication of cyber threats. Incidents can involve data theft, ransomware (resulting in monetary or reputational losses), business interruptions from malware, phishing attacks, data privacy breaches, and IT system availability issues. STL has adopted an in-depth defense strategy to manage and mitigate these risks. The company continues to evaluate these risks and is investing in evolving its security architecture to strengthen its cyber security capabilities further.

Financial and

reporting risks

Financial risks encompass exposure to currency fluctuations, interest rates, credit, liquidity, tax issues, and the ability to manage financial costs and optimise investment returns. Additionally, there is a risk of errors in the companys financial reporting, such as incorrect application of accounting principles, which could misrepresent the companys financial position.

Compliance risks

Compliance risks arise from violations or non-compliance with applicable laws, regulations, the code of business conduct and ethics, ail of which can significantly impact the Companys financial, organizational, and reputational standing. Adhering to laws and regulations is a fundamental aspect of STLs code of business conduct.

The Company has a strong compliance management framework, which also includes mandatory e-learnings on the code of conduct, prevention of sexual harassment at the workplace (POSH), among others. Further, a strong whistle-blower mechanism facilitates reporting on instances of non-compliance. In addition, external independent and internal auditors review the compliance management framework, including its operating effectiveness, and submit their findings to the Audit Committee.

Risk Mitigation

This involves identifying and evaluating possible responses to risks, which include evaluating options in relation to risk appetite (accept, mitigate, or transfer the risks), cost vs. benefit of potential risk responses, and the degrees to which a response will reduce the impact and/or likelihood. Once mitigation plans are

finalised, owners are identified and assigned tasks to implement the plans.

Risk monitoring and reporting

The Risk Committee reviews the adequacy and effectiveness of the risk response plans and reports to the Board. The Committee also monitors and reports the factors affecting identified risks, such as changes in business processes, operating and regulatory environments, and future trends. These reviews aim to improve

the organisations risk management culture continuously.

Our Focus

At STL, were driven by a commitment to sustainable outcomes, minimising our environmental footprint, and generating financial benefits. Our focus includes:

• Environmental stewardship: Eco-friendly practices and products, responsible resource management.

• Diversity, inclusion, and social responsibility: Promoting diversity, equality, and continuous learning.

• Ethical standards and transparency: Upholding integrity and accountability.

• Strategic approach: Developing holistic solutions for environmental impact reduction and sustainable economic returns, including eco-friendly product innovation and value chain collaboration.

Understanding Risks We aim to achieve Net-Zero emissions by 2030, proactively addressing , _ environmental and climate risks through meticulous risk assessments

and Opportunities and mmgatlon strategies (like water-saving technologies). We pursue

sustainable growth opportunities, such as partnering with renewable energy providers. We have joined the Science-Based Targets Initiative and are working across our value chain to increase sustainability.

Environmental

Stewardship

Striving for Water Positivity

We are making progress toward water positivity through responsible stewardship and leading industry practices. Our rainwater harvesting and water recycling initiatives are key. We aim for water positivity across all manufacturing locations by 2030.

• 15,263 Cubic metres (m3) ofrainwater harvested in FY25

• 1,36,796 Cubic metres (m3) ofwater recycled in FY25

Prioritising Sustainable Sourcing

Our sustainable sourcing policy, in place since FY22, prioritises conflict-free raw materials and avoids high-risk materials. We consider ESG parameters like fair wages and empower local partners through training. We aim to further reduce reliance on non-local materials.

Championing Circularity

We are committed to a circular economy by reducing waste. Our Indian and Italian manufacturing units have a high waste diversion rate. We repurpose byproducts as input materials for other industries.

• 16,826 Tonnes (T) of waste diverted from landfills.

Crafting a Sustainable Product Portfolio

Sustainability is integrated into our product development. We use Life Cycle Assessments (LCA) and aim for 100% LCA coverage for our product families by 2030.

• 17 Number of LCA reports completed to date.

Empowering People, Transforming Communities

Our social strategy focuses on creating a meaningful impact for employees and underserved communities. Our policies align with the SDGs. We champion diversity and inclusion and empower women I through partnerships focused on education, healthcare, and environmental initiatives.

Recognising Organisational

Values and Mitigating Risks

•

Employee engagement is crucial. We promote diversity and inclusion through training and employee resource groups. We collaborate with local communities and authorities to build goodwill and mitigate risks. Our CSR focuses on rural communities, promoting<environmental protection, health, education, and womens empowerment.

Promoting Gender Equality

Our Jeewan Jyoti Women Empowerment Initiative, launched in 2014, aims to uplift rural Women through skilling, entrepreneurship, and economic self-reliance. The program provides skill development and vocational training in trades like tailoring, beauty culture, and computer education. Trained women are integrated into a production unit, and the program facilitates market linkages, self-help groups, and a supportive ecosystem. This initiative empowers women to become confident earners and change agents, driving lasting socio-economic change.

• 30k+ Lives benefited

• 10lakh gross revenues generated

Ensuring Healthcare Access for All

Our Swasthya Suraksha Program, a flagship healthcare initiative, is dedicated to delivering primary healthcare, preventive awareness, and behavioural change interventions to Indias most underserved regions. The program addresses critical healthcare gaps, particularly in tribal and rural areas, through a community-led, technology-enabled approach. It is designed to reach and uplift marginalised communities with a strong focus on tribal women and children. The initiative aims to improve access, equity, and quality in healthcare, fostering healthier, more resilient, and empowered ‘health-conscious communities. The initiative has shown a 29% reduction in the morbidity ratio in the project area.

• 1.15lakh+ Lives benefited

• 39k+ teleconsultations

Empowering Students for the Future

Our RoboEdge Program empowers students, particularly those from underserved and marginalised communities, with crucial digital literacy and future-ready skills in Al and robotics. This initiative goes beyond traditional education, fostering innovation and problem-solving abilities that are essential for success in the Fourth Industrial Revolution and helps to bridge the digital diuide.12 students from government schools from the RoboEdge program in Chhatrapati Sambhajinagar & Dadra & Nagar Haveli represented India at the Robotex International Championship 2024 in Estonia.

Fostering Climate Resilience

Our Environment Program is a core pillar of our ESG and CSR vision, focused on promoting sustainability, climate resilience, and ecological restoration. The initiative aims to reduce environmental impact and restore biodiversity, with a particular focus on how these efforts benefit marginalised communities. We undertake large-scale tree plantation initiatives in partnership with local communities, schools, and forest departments, improving green cover and promoting carbon sequestration. These initiatives not only combat climate change but also provide vital resources and economic opportunities for vulnerable populations who depend on forest resources.

D.riving Impact Through People Power: Our Employee Volunteering Program

Our Employee Volunteering Program is a dynamic platform that encourages employees to contribute their time, skills, and passion toward social and environmental causes. Aligned with our CSR and ESG values, the program fosters a culture of empathy, collaboration, and community engagement, making employees active partners in nation-building. Employees participate in purpose-driven events across healthcare, environmental sustainability, women empowerment, education, and disaster relief. We also encourage employees to offertheir professional skills—mentoring youth, supporting self-help groups, and training in digital literacy.