KRC BUY - STERLITE

Market Update	KRC Investment Ideas
MARKET OVER VIEW   ·         Sensex closed at 17,243.16 up 12.98 points, after touching a high of 17,293.34 and a low of 17,041.63. Nifty closed at 5,117.65 up 12.70 points, after touching a high of 5,135.55 and a low of 5,048.70.   ·         Nifty May Futures ended 6.25 points premium at 5,123.90 to the spot Nifty of 5,117.65. Total turnover in NSE's derivatives segment was Rs. 394.81 billion as against Rs. 332.90 billion on Tuesday.    Market Dynamics          Indices Close % Change Market cap 1 Week 1 Month 1Year In Rs. Cr. Sensex 17,243.16 1.56 3.01 19.59 2,384,068 Nifty 5,117.65 1.83 3.27 21.73 2,982,791 BSE 100 9,159.07 2.14 3.05 24.03 3,805,672 BSE 500 6,872.60 2.34 2.98 23.14 5,414,377 BSE MidCap 7,148.05 2.26 2.36 16.61 821,901 BSE Small Cap 8,788.98 4.20 0.41 20.49 255,440              FII & Mutual Fund Activity (In Rs.Cr.)         Date FII MF 21/05/2008     20/05/2008 57.00   16/05/2008 729.90 227.80 15/05/2008 258.10 309.90 14/05/2008 186.30 133.10             Significant Bulk Deals (21/05/2008) Scrip Buy/Sell Buyer/Seller Quantity NAKODA TEXT Buy CREDIT CAPITAL ASSET MANAGEMENT CO. LTD ACC DISCOVERY STOCK FUND 100000 ELPRO INTERN Buy JUPITER ASSET MANG AC JUPITER PAF INVESTMENT LTD 25000                     Currency v/s Re.(21/05/2008) INR / USD INR / GBP INR / EUR INR / JPY 100 42.72 (+0.12%) 83.96 (+0.66%) 66.90 (+0.77) 41.36 (0.76%)         Commodity - In US$ (21/05/2008) Crude Oil Aluminum Copper Lead Zinc Gold 126  2997 (+2) 8325 (+10) 2170 (-61) 2275 (-13) 919	Sterlite Technologies Ltd (BSE CODE: 532374) CMP 6 Months Target Recommendation Rs. 236 Rs. 295 Buy     Sterlite Technologies Limited (SOTL), formerly Sterlite Optical Technologies Limited, is primarily engaged in manufacturing of Jelly Filled Telephone Cables (JFTC) and Optical Fiber cables (OFTC). It is also engaged in drawing, drawing and insulating, and insulating wire and cable of nonferrous metals from purchased wire bars, rods, or wire. A global provider of optical fibers, telecom cables and power transmission conductors, SOTL supplies 4% of the global demand for Optical Fibers to over 60 countries. The Company has launched two products for access networks and Sterlite ADSL 2, a product for broadband applications. Subsequent to its acquisition of Power Transmission Conductors from Sterlite Industries (India) Limited, the companies revenues have been substantially diversified and the revenue contribution of the Power business is now 56.77%.   SOTL is willing double its Optical Fiber capacity to 12 Million-km from 6 mn fKm resulting in a CapEx of INR 140 Crores and production is expected to begin in June 2009. In addition, it received a contract from BSNL for manufacture and supply 20 to 2000 pair Copper Telecom Cables to enhance BSNL's Pan-India network to provide basic telephony and broadband services. The contract is valued at INR 1.43 Billion and would be completed within FY 2007-08. These factors will enable the company to drive revenue growth and expand profit margins.   The demand for jelly-filled cables (JFTC) and optical fibre cables (OFC) is largely driven by telecom companies for their requirement to provide network connectivity. The two largest contributors to OFC demand have been BSNL and MTNL in the past.  However, in the recent past along with the increase in the demand for Data and Broadband based services, private participation in telecom growth have increased. Utility companies like Railtel, Power Grid Corporation of India, Oil and Gas companies account for a small part of demand for the deployment of their own communication networks.    Since 2000, the optical fiber industry has been plagued by intense competition, popularity of wireless telecom services, fall in demand and excess capacity resulting into extreme pressure on profit margins. Following a peak of 110 mn fKm in global Optic fiber demand, the market for telecom cables had shrunk considerably since 2001 to 2003. However in the recent past an additional building binge has begun with more than a dozen telecom companies laying billions of dollars worth of undersea fiber cable over the past 18 months. The projects this time connect areas that were bypassed a decade ago: the emerging economies of South Asia, Africa and the Middle East, and Greenland. In India, the domestic demand is expected to be supported by the interconnection of mobile networks using OFC, the laying of long-distance networks, and the rollout of broad band networks and IPTV by telecom companies and the government. The demand forecast for OFC is subsequently expected to increase 16 percent in FY08 to 3.4 million fKm.   Following a decline in demand from BSNL and MTNL  for JFTC, a glut of supply , intense competition and rising copper prices (a key cost driver) have lead the JFTC players to face intense margin pressure. This has led many operators to diversify into the manufacture of power and electrical cables due to the similar manufacturing process involved. In the recent past the strong growth of the Power industry and the higher visibility in earnings have led many operators to change the major revenue segment from OFC to power cables.   SOTL will double its Optical Fiber capacity to 12 Million-km from 6 mn fKm resulting in a CapEx of INR 140 Crores and production is expected to begin in June 2009. In addition, it received a contract from BSNL for manufacture and supply 20 to 2000 pair Copper Telecom Cables to enhance BSNL's Pan-India network to provide basic telephony and broadband services. The contract is valued at INR 1.43 Billion and would be completed within FY 2007-08. These factors will enable the company to drive revenue growth and expand profit margins.   SOTL is currently having 16% of its revenues from exports. Growing global demand allowed the company to clock exports of 24.78% in FY07. The domestic growth of the telecom and power industry will enable the company to increase profitability. SOTL currently generates 33% of its revenues from exports. Growing global demand in the FTTH business will enable the company to boost fixed line revenue growth.   Net profit of Sterlite Technologies rose 77.54% to Rs 34.30 crore in the quarter ended March 2008 as against Rs 19.32 crore during the previous quarter ended March 2007. Sales rose 40.74% to Rs 543.62 crore in the quarter ended March 2008 as against Rs 386.27 crore during the previous quarter ended March 2007. For the full year, net profit rose 98.03% to Rs 100.72 crore in the year ended March 2008 as against Rs 50.86 crore during the previous year ended March 2007. Sales rose 40.70% to Rs 1685.79 crore in the year ended March 2008 as against Rs 1198.15 crore during the previous year ended March 2007.   Sterlite Technologies has received three contracts valued at Rs 2.96 billion from PGCIL (Power Grid Corporation of India) for supply of power transmission conductors. With the receipt of these new contracts, the company has opened FY-09 with a total order book of Rs 10.2 billion for its telecom & power businesses. Sterlite Technologies has bagged an order worth $17.5 million from Ethiopian Electric Power Corporation, Ethiopia for manufacture and supply of AAAC power transmission conductors. In January 2008, the company received a contract worth Rs 140 crore from Rajasthan Rajya Vidyut Prasaran Nigam, India for manufacture and supply of ACSR moose power transmission conductors. Sterlite Technologies is engaged in manufacturing and marketing optical networking products including optical fibre and optical fibre cables. The optical fiber cable plants produce standard and customized cables.     Sterlite Optical Technologies has decided to double its Optical Fiber annual manufacturing capacity to 12 million-km from its current capacity of 6 million-km. This brownfield expansion at the company's existing facilities at Aurangabad, India is estimated to incur a CapEx of Rs 140 crore (US $ 35 million) and commercial production is expected to commence by June 2009. This state-of-the-art facility would be capable of manufacturing the company's existing range of optical fiber products as well as have the intrinsic capability to manufacture products as per evolving international telecom standards that are being introduced to cater to high bandwidth applications required by global markets. The company is in advanced stages of discussion with leading global manufacturing equipment and raw material suppliers to streamline its efforts towards the expansion project milestones.

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