The copper smelter has resumed production since April 1998, and has already stabilised. The first quarter of the current year ending in September has already begun to reflect the impact of the fully functional copper smelter. Sterlite has recorded a 53 per cent increase in revenues to Rs 382.33 crore, while the operating profit has risen by 120 per cent to Rs 71 crore. But fixed costs such as interest charges have also increased to Rs 22 crorefrom Rs 1.9 crore, while depreciation has risen by 239 per cent to almost Rs 20 crore owing to the full impact of the commissioning of the copper smelter. As a consequence, profit after tax has only increased by 19 per cent to Rs 29.39 crore. The despatches of jelly-filled cables and optic-fibre cables have been lower in the quarter owing to delay in receipt of orders. But there has been an increase in orders from the beginning of the second quarter. The current year should see a double positive impact of growth in the copper business as well as in the telecom cables business, unlike last year that basically saw a growth in telecom cables.

The company requires copper for both its jelly-filled telecom cables (JFTC) facility as well as its continuous cast copper rod facility. The production from its copper facility besides improvement in optic-fibre prices have improved margins in the first quarter itself, from an average of 13 per cent earned during 1997-98 to 18 per cent so far in 1998-99. The improvedcapacity utilisation at the copper smelter helps increase margins owing to the fact that Sterlite's conversion costs for its copper smelter are at a low 13 cents per pound, compared with the global average of 18.2 cents per pound (as per company sources). This the reason for the increase in marginal profits, also making it one of the lowest cost producers in the world today. The company is going to increase the copper-smelting capacity to 1.5 lakh tpa within the next two years.

With no negative news left to discount in Sterlite, the market should begin to absorb the full impact of its copper business (copper cathodes produced here will be largely consumed by Sterlite, thereby improving margins) and the high-growth telecom cables business (both JFTC as well as optic-fibre cables). The company will thoroughly benefit from the boom in creating telecom infrastructure in the country. Already eight telecom circles are either operational, or are in various stages of becoming operational. The resultant effect onSterlite has been a five-fold growth in optical-fibre cable volumes from 14,826 fkm to 85,281 fkm last year, while the volume of sales of JFTC, of which Sterlite has the largest market share in the country, has increased by 75 per cent. Similarly, sales of optic fibres have increased by 49 per cent last year. With another six telecom circles set to be activated in the near future, the growth in optic-fibre cables should continue to be buoyant, and this should be reflected in the second quarter. Further, the company has stated that it expects to receive large orders from the department of telecommunications (DoT) and the Indian Railways during the current year.

A corresponding bullish effect is being witnessed in stocks like Himachal Futuristic and Birla Ericsson, which are telecom-equipment suppliers and are also benefiting from the ongoing investment in telecom infrastructure. These two stocks have increased by 30 per cent and 40 per cent respectively from the last two weeks of October, compared to which,Sterlite has not increased by all that much. There is no real justification for a company like Sterlite not to be similarly better discounted.