India Ratings and Research (Ind-Ra) has assigned an 'IND A-'/Stable rating to STL Networks Limited (STLN) proposed non-convertible debentures (NCDs) worth INR 3,000.00 million. The agency has also affirmed the 'IND A-'/Stable/IND A2+' rating for the company's bank loan facilities of INR 25,000.00 million.

Key Rating Drivers

The ratings reflect STLN's robust business profile, supported by its established track record in the telecom industry and end-to-end capabilities in executing complex and mission-critical projects. Ind-Ra expects healthy revenue growth for STLN over 2HFY26-FY27, backed by a strong order book of over INR 65,000.00 million as of end-June 2025, representing a book-to-bill ratio of over 5.5x based on FY25 revenue.

Financial Performance and Outlook

STLN's consolidated revenue declined by about 20% year-on-year to INR 11,800.00 million in FY25, primarily due to the company's selective approach in order acquisition. The EBITDA margin moderated slightly to 6.3% in FY25 from 6.7% in FY24.

Despite the current modest credit metrics, Ind-Ra anticipates gradual improvement in net leverage and interest coverage over the near to medium term. This expectation is driven by projected enhancements in profitability, moderation of the working capital cycle, and the potential release of locked-up funds.

Order Book and Industry Outlook

STLN secured a significant contract worth about INR 22,000.00 million under Bharat Net Phase III during Q1FY26, boosting its outstanding order book to over INR 65,000.00 million as of June 2025. The company is well-positioned to capitalize on India's accelerating digital transformation, with key government initiatives such as BharatNet Phase III, Smart Cities Mission, and Digital India driving large-scale connectivity and infrastructure development.

Challenges and Constraints

The rating is partially constrained by STLN's modest credit metrics, elongated working capital cycle, and significant working capital lock-up in a few projects. The company faces challenges with delays and disputes in some projects, resulting in working capital being tied up. However, management expects a significant portion of the locked-up amount to be cleared by 1HFY27.

Liquidity and Debt Profile

STLN's liquidity position is supported by adequate free cash and equivalents, undrawn working capital limits, and expected positive cash flow from operations over 2HFY26-FY27. The company had a consolidated free cash and equivalent of INR 792.00 million at end-September 2025. STLN has a term debt principal repayment obligation of INR 360.00-370.00 million each in FY26 and FY27, which Ind-Ra expects will be serviced through internal accruals and existing liquidity.

Conclusion

While STLN faces challenges in its working capital cycle and credit metrics, the company's strong order book, strategic position in the growing digital infrastructure sector, and expected improvements in financial performance provide a stable outlook. The successful execution of orders, improvement in profitability, and effective management of working capital will be crucial for maintaining and potentially improving the company's credit rating in the future.

STL Networks Limited has successfully concluded its postal ballot process, with shareholders approving significant modifications to the Employee Stock Option Scheme (ESOS) 2025. The resolution was passed with overwhelming support on December 13, 2025, marking a strategic shift in the company's employee retention and performance alignment approach.

Voting Results and Approval

The postal ballot concluded with shareholders demonstrating strong support for the proposed changes. The voting results reflect broad-based approval across different shareholder categories:

Key Modifications to ESOS 2025

The approved amendments restructure the vesting conditions for the company's stock option scheme, affecting 1.95 crore ungranted stock options:

Postal Ballot Process Details

The company conducted the voting process entirely through electronic means, following regulatory guidelines. The comprehensive process included:

Strategic Rationale and Implementation

The modification aligns with STL Networks' strategy to enhance long-term employee commitment while maintaining performance accountability. The increased emphasis on continued employment-based vesting from 25% to 70% is designed to improve talent retention and recognize sustained contribution to organizational success.

The scheme maintains its core parameters including a minimum vesting period of one year and maximum of four years from grant date, with an exercise period of up to five years from the relevant vesting date. The program covers employees in India and internationally, directors (excluding promoters and independent directors), and subsidiary company employees.

Corporate Governance and Compliance

The approval process followed all regulatory requirements under the Companies Act 2013, SEBI regulations, and listing obligations. The scrutinizer's report confirmed fair and transparent conduct of the electronic voting process, with all procedural requirements met including newspaper advertisements on November 15, 2025, in Financial Express and Loksatta publications.

With this approval, STL Networks can now implement the modified ESOS 2025, potentially strengthening its position in talent acquisition and retention within the competitive telecommunications sector.