STL Networks Limited (STLN), a prominent player in the telecom infrastructure sector, has announced a significant move to bolster its financial position. The company's Authorization and Allotment Committee has approved raising funds through the issuance of listed, secured, redeemable, non-convertible debentures (NCDs) worth up to ₹300 crores via private placement in one or more tranches.

NCD Issuance Details

The proposed NCD issuance has received a rating of 'IND A-'/Stable from India Ratings and Research (Ind-Ra). This rating reflects STLN's robust business profile and its established track record in the telecom industry. The key details of the NCD issuance are as follows:

Company Profile and Financial Performance

STL Networks Limited, representing the Global Services Business of Sterlite Technologies Limited post-demerger (effective March 31, 2025), offers comprehensive solutions across fiber network services, system integration, IT infrastructure management, and data center network setup.

The company's financial performance in FY25 showed some challenges:

Despite a decline in revenue and EBITDA, STLN maintains a strong order book of over ₹65 billion as of June 2025, providing a book-to-bill ratio of over 5.5x based on FY25 revenue.

Industry Outlook and Growth Prospects

STLN is well-positioned to capitalize on India's accelerating digital transformation. Key government initiatives such as BharatNet Phase III, Smart Cities Mission, and Digital India are driving large-scale connectivity and infrastructure development. The nationwide rollout of 5G technology and increasing adoption of Fiber to the Home are further amplifying demand for high-speed and reliable networks.

Challenges and Outlook

While STLN faces challenges such as an elongated working capital cycle and modest credit metrics, Ind-Ra expects gradual improvement in the near to medium term. This improvement is anticipated to be driven by enhanced profitability, a moderated working capital cycle, and the release of locked-up funds.

The company's focus on increasing revenue share from technology and annuity-led revenue lines, such as data center network setup, maintenance, and system integration, is expected to support growth and profitability improvement.

As STLN navigates through its current financial challenges and capitalizes on favorable industry trends, the success of its strategies and the timely execution of its order book will be crucial for its future performance and financial health.

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.