Q3 20/21

Jan 15, 2021

Ladies and gentlemen, good day, and welcome to HFCL Limited Q3 FY 'twenty one Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Neera Panal from Maybank Kimming Securities. Thank you. And over to you, Mr. Talal. Good afternoon, everyone, and a very happy New Year. Welcome all for the HFCN Limited third quarter FY 'twenty one results conference call. My name is Neera Zaraj from Maybank and M Securities. At the outset, I would like to thank the management for giving us the opportunity to host this call. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's conference call may be forward looking in nature. Such forward looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place undue reliance on these forward looking statements in making any investment decision. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and a financial overview of the quarter under review. Now I would like to introduce you to the management participating in today's earnings call. We have with us Mr. Mahindra Naha, Promoter and Managing Director Mr. Viad Jain, Chief Financial Officer and Mr. Amit Agarwal, Head of Investor Relations. I will now hand over the call to Mr. Mahendra Naha for his opening remarks. Thank you. Thank you, Neera, for your kind introduction. Good afternoon, everyone, and a warm welcome to the earnings call of the company for the third quarter and nine months ended December 3120. Please note that quarter three FY twenty twenty one quarter results, press release and investor presentation have been made across to you and these are also available on websites of the company and stock exchanges. I hope you have had the opportunity to glance through the highlights of the performance for 2021. Our focus has always been on growth avenues and to invest in innovation, thereby creating value for our stakeholders. I would like to start by highlighting few key milestones achieved by our company in the last quarter. During the quarter, we commenced production of optical fiber cables for fiber to home applications from our newly set up FTTH cable manufacturing facility at Hyderabad. I take pride in stating that with commencement of this production facility, your company is now the largest manufacturer of FTTH cables in India with a capacity of six lakh cable kilometers per annum. We plan to further expand this capacity in Hyderabad in next few months. We have also achieved the supply of one lakh units of Wi Fi systems during '21 within first years of manufacturing at a record space. These systems are fully indigenously designed, developed, and manufactured by your company. We continue to witness great order inflow for our products from domestic telecom companies as well as other inquiries from outside India. We are quite optimistic about the opportunities that lies ahead in the wireless technology space as we believe that India is on the cusp of digital revolution led by transformational projects like the recently announced PM1E in conjunction with wired network. I would also like to share with you that we will soon have host of other WiFi family products that will cater to five gs requirements as well. Another key highlight during the quarter was that we banked an order worth INR678 crores from Larsson Interpre Limited. The The order we bank was for supply of IT equipment, software solutions, and cloud management solutions for setting up data centers, security operational centers, network operation centers, and various other equipment and systems. This is a testament of our capability to provide high quality products. Our order book has been robust and is maintained at almost 2x previous year sales even during these difficult times of pandemic. As of 12/31/2020, our consolidated order book stood at INR 7,313 crores. On the back of catering to the growing orders, the capacity utilization in third quarter of the current financial year has been inching higher, which now stands at 95% for our cable manufacturing facilities. Our R and D team in Goa and Chennai have also developed various new types of cables for local applications as well as export requirement. I would like to add here that some of our new telecom and defense products, which were on advanced stage of field trials and are on the verge of being rolled out soon. To add to this, we have already designed Wi Fi six systems and is under testing by a few large telecom operators. I would like to applaud the efforts of our r and d team, which has enabled us to launch superior products in a reasonably quick time frame. R and d is one of our key pillars as it not only helps us launch high quality products, but also gives the edge to stand up competition by innovating new products. Our focus on innovation has yielded a growing pipeline of products like electronic fuses, electro optic devices, software defined radios, switches, routers, intelligent antenna systems, ground service, and radars to cater to global market demands. Our r and d team in Goa and Chennai have also developed various new types of cables for catering upcoming demand of such cables in India and abroad. Going to COVID nineteen, there has been a thrust on digital transformation all over the world, which has advanced the need for high speed communication networks like five g. We believe that five g will lead to a fundamental shift in the way we live and work. It will have a far reaching impact on industries across verticals, more so when India as a nation is looking to become a $5,000,000,000,000 economy by 02/2025, then we will need transformation in India's digital infrastructure on a massive scale. All this put together will give immense thrust to tailcompanies. Driven by this demand, we aim to project India as a next generation innovation and manufacturing hub for telecom products ahead of the five g rollout expected later this year. We, as a company, intend to be an integral part of India's digital transformation and a one stop shop for digital and telecom solution for which we have laid down a clear path for ourselves. This includes providing world class next generation products led by innovation. This will help us improve our margins and also stay ahead of the curve along with fulfilling prime minister's vision for Adnan Israel Bharat. After a challenging first half going to COVID nineteen, wherein we still managed to achieve decent growth against all odds, we have now managed to keep our growth momentum. Now I would like to run past the consolidated financial highlights of 2021 and nine months ended December 3120. Revenue for 2021 stood at INR1277 crores as compared to INR1054 crores in the 2021, thus recording growth of 21%. EBITDA for quarter stood at INR177 crores as compared to INR130 crores in the second quarter. EBITDA margin increased by 78 basis points and stands at 13.8 for third quarter financial year twenty twenty one. For third quarter financial year twenty twenty one, profit after tax rose to INR85 crores as compared to INR53 crores in the second quarter, recording a growth of 59.7%. Price margins also improved by 160 basis points to 0.64% in the third quarter compared to 5.04% in the second quarter. Segment revenue for telecom products during the quarter stood at INR3333 crores as compared to INR279 crores for the second quarter. We expect revenue from telecom products to keep moving north from here onwards. Prenti Contracts and Services reported a revenue of INR944 crores as compared to INR766 crores in the second quarter. For nine months ended 12/31/2020, our revenue stood at INR3032 crores and EBITDA stood at INR398 crores and PAT stood at INR160 crores. On the financial performance, I would like to add that our focus is to strive towards improving shareholders' value by maintaining our strong return ratio and keeping a check on our gearing ratio. Like I mentioned, focus on r and d and innovation, coupled with robust manufacturing and seamless distribution, The dual focus on domestic as well as international business will take your company forward to a sustainable growth path. With this, I close my remarks and leave the floor open for questions. Thank you very much, and wish all of you a very happy New Year. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, you may press star and one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Anyone who wishes to ask a question, you may press star and 1. First question is from the line of Hardik Yas from ED. Please go ahead. Good afternoon, sir. I have a a few questions. To begin with, order inflow tender pipeline, how is that looking? Because we are not really seeing any fresh orders apart from the L and T order that has come in the last quarter. We have not seen any orders come in. So what is the tender pipeline? Look. You know, our orders are not only from tenders. Lot of orders come from private sector, and they are they keep on coming. Fiber optic cable orders, Wi Fi, and these keep on coming. The reason they are not announced because they are not of a big number so that we announce it publicly. So these these numbers keep on coming. Don't just go for large orders, you know, like, large orders, of course. Last quarter, we have received the 600 some crores from L and T. A number of small orders have come, and they will keep on coming. Fiber optic cable, like, you know, yesterday, we received our order for 70 crores from one customer. Another customer, we are negotiating for another $70.80 crores. They they keep on coming all the time. And that's why our order could be 7,300 crores. And we do expect certain tenders we have participated, and we are positioned well. I don't want to make a, you know, statement for future, but we expect reasonably good amount of orders to come in the current quarter. We have been seeing a lot of large orders coming in in 1819. So we we thought that the orders have not been coming in. We were wondering that. No. No. Look. You know, the that specific year, large orders came from a particular project for network for spectrum project by different services. So that always does not happen in that level. So we cannot always compare year to year. We really need to look at the overall order book. Overall order book, if you look, is that twice the revenue of the last year? That's reasonable enough. And and let me assure you. The way the market is right now, telecom market, in my opinion, is good at this moment of time because of various sectors. And the reason they are these sectors, orders will keep on flowing. One, as you all know, four g exchange spectrum auction is happening. That will lead to further expansion of networks, number one. Number two, after that, five g would come by the end of the year, and that would propel the demand to a different level, you know, which includes fiber optic cables because the number of cell towers, wherever the five g is there, would increase by three times than what we have in four g. And they're being high throughput. You will need lot of fiber optic cable or high bandwidth radios to be using used for the connectivity. Huge demand for that would come up. Then there will be demand for number of other products like Wi Fi six, which we have already designed and developed, which is five g compatible. So fiber optic cable, microwave radios, Wi Fi systems, there would be huge demand for those things when it comes to five g. Third FTTH, which is already being rolled out by various private operators as and I have told you that we are the largest manufacturers of FTTH cable in India. So further increase in FTTH rollouts would proper demands for fiber optic cables. Fourth, BharatNet, Wi Fi, and FTTH put together as single unit because BharatNet is being rolled out in next thousand days Okay. All over the country and with the mandatory requirement of giving FTTH connections and Wi Fi connection. So which means the demand of infrastructure, fiber optic cable, Wi Fi, and FTTH cable as well as electronic equipment, which we are also designing. So the whole thing would generate a huge demand opportunity for telecom companies like us. So if you ask me, I look at the demand very optimistically, and order book will continue to grow as much as supply and revenue. Okay. So, sir, have we reached the execution level at pre COVID times? And in third quarter, have we booked any I mean, have we executed any backlog of orders? That is why the service orders are up quite significantly. No. It's already almost up to the pre COVID levels. Yes. It is up. That's why you see this kind of revenue, you know, that we have plugged in 1,277 crores of revenue. Some places, you know, which is still slow. It's not as much as for COVID. It was there for the second quarter. Third quarter, those areas are you know, because the execution could not take place in COVID time, now they are snowbound, you know. You cannot do execution there. Leh, Ladakh, Northeast, Taiwan, and all those areas where the defense projects are getting executed. They have slowed down because of the weather conditions, not for COVID. But it is the impact of COVID in a sense that this could not be executed when COVID was there in the second quarter. Okay. Okay. So the next question is for the Gram Panchayat. What is the size of opportunity that we see over the next thousand days split between both the products and services? Look. You know? I cannot tell you specifically split between products and services. But if you ask me the overall opportunity for it's not only Gram Panchayas. It's all the villages. You know? Prime minister announced all the villages, not Gram Panchayas. All 650,000 villages. Out of which, only a 125,000 Gram Panchayas are connected, so that five lakhs are to be yet to be connected. I would say if you take fiber optic cable, Wi Fi equipment for optical network, you know, FTTH network, and infrastructure including services, you know, putting the cable on ground or all those kind of things. It should be somewhere near 40,000 crore opportunity in next three to five years. Three to five years. Okay. Fine. And that that would include the PON products as well? Yeah. Absolutely. That's why I said FTTH related equipment. That's what is pawn. Okay. And the the execution has already begun, albeit in a smaller way, but that's the execution is bigger. But, you know, you have to separate it out. One is what PM announces a PPP project. That is yet to happen because I think government is now planning to issue the PPP UIs and all that in next couple of months. But Bharatnat, as such, is getting executed in different states. Right now, is going on in various states, Maharashtra where we are supplying fiber optic cables, Telangana where, again, we are supplying fiber optic cables, Chhattisgarh where we are supplying, Jharkhand where we are supplying, then Kerala also some execution is going on by RF Electronics. There also we are supplying fiber optic cable. Recently, has been a tender in Tamil Nadu that is expected to be awarded sometime from now. They're also we are in a good position to get order and supply fiber optic cable. So execution of BharatNet is going on, not in the shape which balanced part of BharatNet by prime minister, but earlier part of BharatNet execution is already going on. Okay. Okay. Sir, last two questions from me. The first is can we can we get a split of the product revenue from Wi Fi and x Wi Fi? You know, look, I do I can send you the number which I have right now. Okay. Product revenue, I would say, you know, product revenue has been 333 crores. Okay. Now 20 revenue, 944 crores. Okay. No. No. So that's all we have. I just wanted the product segment revenue split between There two kind of products. You know, one is OFC, and another is Wi Fi and all that, their accessories and all that. So that would be out of 333 crores in the current quarter, 80 crores is in Wi Fi and accessories, and OFC is 253 crores. And second quarter Wi Fi was would be lower than 80 crores. Right? How would that be? Second quarter was yeah. Second quarter was lower. Wi Fi products was about 54 crores. Okay. So we have we have seen about 40% growth in Wi Fi q Wi Fi and accessories. Okay. Wi Fi and accessories. Okay. And could you could you say could you tell us what was the number of Wi Fi that we sold? We sold, I think, one lakh over the second and the third quarter. But Yeah. To get a split between the second quarter, how much and how many and Well, that number, I don't have right now. But, yes, we sold second and third quarter, and it is increasing. Every quarter, it will increase only. Okay. Sir, last one question. Our our defense minister had some 48,000 crore procurement for made in India defense products. So for drones and all the other products, how are we placed to take advantage of that? I mean, we had drones and other different equipments lined up for trials. How are they likely to be Two kinds of equipment lined up for trial, which is one is electro optic electronic fuses, which is already developed, and we are the only Indian company to have our own design of electronic fuses. Only Indian company. Okay. All our others are doing some kind of a DOT and all that. We are the only Indian company which has got physics of our own IPR. So they're ready. And whenever army ask for samples against the tender, which we have already participated, we are ready to supply the samples for free testing. So they're already there. Night vision devices, couple of types which are already ready. We have participated in tenders and couple of TCs, technical evaluation on paper and field trial. All we have already passed. So now the tenders would be open, and we'll see the orders, how they come up, you know, who wins it. But couple of few tenders, they have participated. Some trials are already there, have been happened, and we have passed those trials. Some, yeah, are yet to happen. So night vision devices and electronic fuses, these are the two products we have started with. And they're ready. You know, fuses are completely ready. Nitrogen device, few models are ready. Few are in are in the stage and would be ready next two months' time. Okay. Then we have participated in another program for upgradation of armored fight fighting vehicles, you know, which are being used by the army. And that UI stage, we have participated. Now shortly listing short listing is to be done, and then we will participate in RFP. Similarly, we have taken another project for developing r and d by r and d short software defined radio. And there also, we participated in UI. I'm happy to report that we have been shortlisted there also, and that development is ongoing in Chennai in a company where we have taken 50%. That company is developing it. For us, an IPR would be owned by HSPN. So these are some of the programs which we have done for defense, and we are not deviating from our area of operation, which is communication and electronics. We are very precisely focused on that, the communication and electronics. Even upgradation program for the armored cycle makers, our scope of work for HFCL is going to be, you know, this electro optic devices, the night vision devices, and telescopic devices, and all those kind of things. Rest of the work would be done by our partner, which is a foreign partner, and they would be doing the rest of the work, which is really not electronic or communication. Okay. So we could see execution and, I mean, order booking and revenue translating to revenues after two or three quarters from these things? I would say looks like yes. Two quarters. At least looks like. Okay. And then last question, what is the status of BSNL? Look. BSNL status, though, we haven't done much of the business with BSNL as BSNL. What business we have with BSNL is for NFS, which is really BSNL is only pass through agency. And, you know, if you ask me status of BSNL, I think we see that it should improve in future. Thank you very much. Sorry to interrupt you, mister Vyas. I'll request you to come back in the question queue for the follow-up question. A request to all the participants, please restrict to two question per participant. If time permits, please come back in the question queue for the follow-up question. Next participant is Deepak Podar from Sapphire Capital. Please go ahead. Yeah. Thank you very much, sir, for the opportunity. No, sir. So we have we are we are talking about the telecom sector, the buoyancy sector, and next two, three years should be quite good with the four g, five g, and and and and about other offerings as well, the five g, FTTH, and about so so the kind of revenue that we we are seeing, so do you see some sustainability in in in the kind of revenue or margins that we are doing? Or or or in the margins, there are some things that the cost is lower that will come come back in the coming quarters. So so any if you can throw some light on it, it would be quite helpful. Good question, Deepak. Thanks a lot. Look, you know, one one thing is clear that there is demand, and demand is going to increase because of the various projects which I talked about. Now about sustainability, you know, as I told talked about in my opening remarks, our effort is to increase our revenue by our own design products, and that's why we are investing so much on r and d. In fact, we have r and d center in Delhi, Gurgaon. We are doing the partnership r and ds, contract r and ds with number of other companies. We have taken equity in companies which does r and d and getting them design products for us. We are to open a new r and d center in Bangalore, and, this will be operational from month of April. The whole system is designed to have more of our own products, which has a higher profitability. So in fact, as we go in for our own products and selling those products in India and then possibly abroad also, I feel that is my judgment that our profit margins are gonna increase only. And if you look at the last two quarters, you know, couple for example, compare the last quarter to this quarter, you know, our EBITDA margin has grown from 12% to 13.8%, so one point almost 1.8% or 1.73% jump. PVT has grown from 8.11 to 8.9. Mhmm. So and this margins growth is there because of this particular focus that we talked about. An important point is that the products which we design are absolutely international classes. For example, Wi Fi systems, the unless it's been micro radios, they are being used by large operators in India and without any glitch, without any problem, as quality is as good as, you know, any world class company. Now we are we have already designed the next version of this equipment, which is Wi Fi six, which is five g compatible, and nobody else has attempted their design in India till now to my knowledge. So with increasing our own product range, which I talked about, like Wi Fi, like unlicensed radios, the routers we are getting designed, we are getting the switches, the software defined radios, high capacity radio relay, ground penetration radar for, you know, border surveillance, you know, so on and so forth. As the revenues increase from these areas, the profitability will certainly be better than what it is today. And that's whole that that that is the whole focus of ours at this point of time, to increase our profitability from our own design products, and so would be fiber optic cable. Now fiber optic cable, our we have a competitive advantage. I I would say we are among the two largest cable manufacturers of the country. I may be the largest also, but I don't know the fact how much other guy produces, so I wouldn't say that. But, yes, we are definitely amongst the two largest. And that kind of a large volume manufacturing gives us better handle on procuring the raw material, Whether it is fiber, partly, we produce large quantity you buy from outside also and other raw material. It gives us a better competitive edge. And as we go on producing more amount of fiber optic cable by increasing and enhancing our capacity, we will have even higher handle on the volume of raw material per cloth, which will give us a price advantage. So all these in our own products are large volume of fiber optic cable production leading economies of scale, new designs of fiber optic cables, which are for export market. So those all would result in better, revenues as well as better profitability and sustainability and revenue profitability both. Can you hear us? Sir, there's no response. We move on to the next participant. Next question is next question is from the line of Jimmy Cha from ICICI Bank. Please go ahead. Hi, sir. Thank you for the opportunity. Just have a couple of questions. First is on the working capital cycle. If I could get your comment on the debtor days currently, and how have you seen the situation improving in the nine months? Yeah. I can tell you that. You know, the working capital cycle continues to be same what it was in the second quarter, and I will give you the number. Have it. It's about 114 days. You know, net working capital cycle is a hundred and fourteen days, almost equivalent to what he had last quarter. But for if you cover the last financial year, it has gone up by twenty days because of the fact that, you know, COVID and all that have resulted in a lot of, you know, payment delays and those kind of situations have gone up. But I think we would be able to correct this situation in next two to four months time, and this is, again, improved. And, sir, debtor days currently, what are the debtor days if you can tell me? Debtor days would be roughly about, I would say, roughly about four to five months. Alright. Alright. So second question is more from a sectoral point of view. So, sir, all of a sudden, the way that the government has come up with the, you know, production linked incentive, and they're almost around 10,000 crores of telecom products. And considering our product portfolio and what the government is planning to do, do we see any, you know, scope in that as from an HSPA standpoint? Or We should definitely that scope. You know, I have not seen that scheme in detail, but any manufacturer which produces indigenously, like, what we do anyway, strong focus on that. I think, like, we should have a reasonably good advantage coming out of that, though I have not seen the scheme in detail right now. Okay. Okay. Thank you. Thanks, I'll join back. Thank you very much. Next question is from the line of Karan Deon from UVI Investments. Please go ahead. Good afternoon, mister Nada, and happy New Year to you and the team of HFCL. My question first would be, can you throw some light on the fiber prices that are prevailing right now? The fiber prices, you know, could be different for different people. You know? Not same for everybody. Currently, the fiber prices current fiber prices in the market, what we buy, is around $2.50 rupees per fiber kilometer. Around. You know? How much, sir? I didn't get you. Sorry. 250 rupees per kilometer. That has reduced from the previous quarter? Yeah. Previous quarter was a bit high. Bit high. It has reduced a bit. But I think now they have stabilized. I don't expect it to go down any further. But now it may be $2.50 for me. It may be $2.70 for somebody else and $2.80 or 300 for somebody else. It all depend you know, your quantity you buy and the volume discount you get from the suppliers. So but for us, it is around that at this point of time. Is there any specific reason this quarter the margins have increased? Anything that you can point out? Margins have increased, man. As I said, no. You know, one is that the higher volume of revenue because, you know, that also contributes. Then our own products, Wi Fi and all that accessories, that contributes to higher margin. Fiber optic cable also, certain orders are getting executed, which are at a better prices. And the decrease in fiber price and all that helped us to increase our margins. And is this margin sustainable in the It is sustainable, and our whole effort is to take it northwards. Not only sustainable, we are effort is to increase it. Okay. And promoter pledge issue? Promoter pledge issue, as I have been saying all the time, you know, that this balanced pledge of shares what we have is against the loan taken by company. It's not against any loan taken by promoters, not even a penny. And those conditions for which we had given the pledge long back, those have already been fulfilled. They have already applied to the banks to release that pledge. And as I understand, the lead bank has already cleared that has already cleared that. Now it is going in the committees of other banks to follow what LeadBand has already cleared. And I'm you know, it it is a process, you know. As you know, banks to give away security takes little time. So it is in process. LeadBand has already cleared it. I hope by the time you need need next time. It should be true. Then you decided to expand your FTTH production by 33%. Was the response very overwhelming that you have to take this decision? And what sort of revenue do you get from Bharti at all regarding FTTH? Look. And I won't go into customer that we share customer gives how much revenue. But, yes, we had overwhelming response. That's why we increased our capacity first by establishing a factory in Hyderabad, 30,000 kilometers and per month, and then expanding it another one third by another 10,000 kilometers in next two months' time, two, three months' time. And we have a large queries from export also for export requirement also. So I'm pretty hopeful that we should be able to export also in a large quantity. So sensing that kind of a demand will increase our capacity. Because if you don't increase, an order comes and then you tell the customer that I will supply you six months later, that doesn't work. So it is better to increase the capacity in advance and make sure that these orders, when they come, we are able to supply for which we are in we know in a good stage of negotiation. Is Variti also one of your key clients, or you mainly do geo? Oh, fiber optic cable to them. Yes. He's supplying. Okay. Okay. Thank you, sir. Thank you very much. Next question is from the line of Deepak Srinivasan from RH shares and stock brokers. Please go ahead. Good evening, sir. Are you able to hear me? Yeah. Yeah. Yeah. Yeah. Okay. Sir, regarding the receivables, has it been reduced or is it maintained the same level? Because we had an increase in the receivables last time. It is still maintained at that level. It's maybe there will be could be some increase only because of lot of supplies has been made in the last fifteen days of the last month. It has increased a bit, but, you know, reasonable increase is nothing else, but the payments are milestone based. As the milestones get completed, we can't keep on receiving our money. So it is a, you know, a very temporary phenomena, and I expect that by the end of the first quarter of the next year, the receivable would be starting showing a decrease. Okay. So so is there any bad debt new bad debt? No. No. No. No. No. No. No. We don't have any All all receivers, they're in a very small amount, negligible amount, which not impact anything. There would be I think only there could be one small bad debt could be possible, but nothing substantial. Okay. Thank you, sir. Thank you very much. Next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead. No. It's good, sir, and thank you for the opportunity. Sir, firstly, sir, can you give me a a idea, sir? When you say that margins are you are you are preparing the road map for margins moving northward. So on a on a blended basis, what is our next next topic for the margins to stabilize? I mean, from these levels, where where where is our first Mister Kapoor, it should not be wise for as a forward looking statement that where the percentage is. I can only tell you, we are taking steps to definitely increase margins, and I've also outlined that how they would increase, how they would increase on the product revenue, like, for example, innovation r and d, our own products, our own IPR, which can be sold in India and abroad. Fiber optic cables because of economies of scale, better sourcing of raw material because of economies of scale, and better expense control because of economies of scale. These are the reasons why the margins would has been increased. But to put a number would not be right thing for me to do right now. Right. Right. And and it will be mainly the product part that is going to contribute to the accelerated margin that we are anticipating. Products including fiber optic cables. Yes. You are right. Okay, sir. Sir, if if we including optic fiber cables, sir. My ability that means that value added cables, you are talking to other planes because the OFC prices, I think, so are still hovering at the in a in a narrow lower band only. We are talking to all kind of cables. Value added All kind of cable to who for cables, normal cables. We are talking of all kind of cables. Right. Sir, your your investor presentation articulated about this o m o m m o operation and maintenance of, I think, the 1,600 or $15.80 crore. Sir, how what has been the contribution for for the this nine months? And then plan out. Look. You know, the Current quarter, it was 60 crores. Nine months. Sorry. Current nine months was 60 crores, but, you know, this would increase in future because the O and M kicks in after some period of execution. And the major projects which are under execution, O and M would kick in as the projects are finished. So I would say major revenue from O and M will start coming from two years from now. Two years from now? Yeah. So, sir, currently, that that 7,000 crore order was so $15.80 is inclusive of that, or that is a separate Yeah. You're right. You're right. Where I'm right, sir? It is inclusive of $15.80 or exclusive of that? Yes. Inclusive. It is in inclusive of that, sir. Sir, now a very small one more point, sir. As has been the case that that you are you are speaking to investors and guiding us to in in the business vertical of the company, sir, we would as a prudent management, we'd also request you, sir, that the board should also try to come up with different distribution policy. That means that how how are you going to utilize the cash going forward? If you could give an give the investors a ballpark board will decide. I can't say this. But but the proposal should but but the proposal should move from the promoter. And you you have shown you have won the talk test. No. No. No. If I if I can promoter, it can move from either board member also, not necessary from the promoter. You know, every board member is free to give it to you. So right now, we haven't had any discussion about that. Whenever we have any discussion, I would definitely let all the shareholders know. That would be mandatory for me to inform stock exchange and all that. So whenever any such thing is happening, everybody will be able to know. Right now, there has not been any discussion either this side or that side. Thank you very much. Sorry to interrupt you, mister Kapoor. I'll request you to come back in the question queue for a follow-up question. Participants, please restrict to two question per participant. For a follow-up question, please come back in the question queue. Next question is from the line of Cheta Koreda from PagAccuriate. Please go ahead. Yeah. Good afternoon, sir. I I guess, whether it's slightly or wrongly, there is a wrong perceptions clear created about the company because of the last boom of tech tech boom. So what steps we are taking to change the perception, sir? Look, you know, I don't know. You are talking to which period, Tagbum, which was twenty years back. So well, you know, I have I cannot say anything what happened twenty years back. But last twenty years, I don't think you have heard the name of the company for any wrong reason or any wrong perception. Number one. Number two, I think perception clearing is by the work you do. You know, if I start advertising about myself, I don't think that's the right thing to do. It's the work you do which clears the perception. As we look the work of the company, the result is in front of you. The kind of revenues we are making, kind of profitability we are making, kind of order book we have, kind of reputed customers we have, that speaks for itself. You know, that speaks for itself. So I don't think it's good for me to start going around and say I'm good. I'm good. You know, the work will tell you that whether I'm good or bad, and work is in front of you. It's for you to judge whether the company is on the right track or not. And that's the way I would put it. Yes. Definitely. You know, we have started having regular earning calls. We are releasing information about the company, whatever happened in the company, any investment, any increase in any capacity, order books, larger order books. We are all releasing to the general public, shareholders, stock market, so people should be aware about the company. So we we are improving our website. You know, those kind of things we are doing, but not that we are going to advertise as we are good, and everybody should listen to that we are good. And nobody would agree if I say, you know, people don't believe it. So that's what my effort is to do good work, do better management, better results, better revenue, better profitability. That would tell people that, yes, companies are good or bad. Yeah. Sir, I just it will be a short time over, but I just have a simple suggestion. I think if you give us some 10% to some of some of the good strategic investors, that whole thing will change the perception of that. This is suggestion from my side. You can take whatever you need. No, sir. I have noted your suggestion, and any good opportunity comes, any good investor proposal comes, we'll definitely work on that. Thank you. Thank you. Thank you very much. Next question is from the line of Virendra Verma from IVI Capital Advisors. Please go ahead. Yeah. Thank you. Good evening, sir, and congratulation on good stand up number. Hello? Thank you, mister Varva. Sir, just wanted to from a preceding question, like, last two decades, telecom sector has gone through a very lot of changes from two g to three g to four g. Now you are talking of five g. Now what kind of assurance you give to shareholders that the company is on a right growth path? Well, you know, because the only way I can, you know, answer that question that whenever the technology is changing, we are improving our product range also to keep pace with the technology. Two g, three g, four g, five g. Maybe five years from now, you'll hear six g. So companies have to continuously upgrade their product range. And I'll give you examples. Wi Fi is the current example. Wi Fi five, which is also the current product in the market, which everybody is using, you are using, I'm using. That is there, but five g is coming, and Wi Fi six is going to be compatible to five g. We have already finished design of five Wi Fi six, and it's already under testing with operators. So this is one example how you keep basic technology than fiber optic cable. You know, you used to sell fiber, 24 fiber, 48 fiber cables. Now we are designing fiber optic cables for more than 2,000 fibers. Again, this is required for different new upcoming applications. So we are designing those kind of cables. FTTH. Earlier, there were no FTTH. As FTTH came, they were separate production line for FTTH cables. Microwave radios. Five g would require a high bandwidth microwave radios. Well, we have high bandwidth microwave radios in our product range coming up very soon. So military radios, technology shifting to software defined radios for better sustainability, better secrecy, better encryption. We are designing software defined radios. Routers. For five g, there would be application of routers and switches. We are designing them. So you have to keep ahead or you have to be keep yourself at par with the upcoming technologies, then only you will be having a sustainability and profit and revenues both. And that's what we are doing. So it act, you know, in another good advantage that it creates a barrier also for entry. For anybody and everybody coming to this market and make revenue and profitability would not be so easy because you have to have good r and d. You have a good tech you have to have good technology capability. And, you know, customer connect where customer believes that you will be able to improve your product range, keeping pace with technology so that he can rely on you as a long term partner. So these are definite attributes, and we are constantly following them. And that's why you see that there is sustainability in our revenue and improvement in profitability. Sir, sir, one more question. Like, we have a stake in a media company, ABCorp. That investment is lying for almost two decades. But neither this investment is our strategic fit nor it's adding value to our business. How you are going to what are your plans for this investment? We have already written it down to a very low level. Some $30.35 crores is the remaining amount we have kept in the company. So we will wait for this investment whenever the opportunity arises. We'll try to disinvest it, but we have already written it down. Okay, sir. Thank you. Thank you. Thank you very much. Next question is from the line of Vivek Gupta from GPL Capital Partners. Please go ahead. Yes. So firstly, congratulations on a very good set of numbers. Just wanted to understand this new plant of FTTH. By when will it reach, let's say, 95% capacity? And how is the business looking like for this segment for you? Vivek, thanks a lot for your good question. Look, you know, plant is already working on, you know, that kind of a capacity from this month itself. You know, of course, initial stabilization takes some time. So when you talk to 95% capacity, I would say it would be up in 95 capacity on the February month itself. February month itself, not too long. February month itself. As your second question was, what do we look at the prospect of fiber optic cable, you know, FTTH business, isn't it? Yes. Yeah. Well, you know, this is a very good opportunity. There are two, three reasons. One, telcos are rolling out FTTH network in the larger cities where there is a good demand. Geo is rolling out. Airtel is supposed to be rolling out. And I'm sure looking at that and if investment permits, Vodafone Idea would also do at some point of time. Now apart from that, as I said in my previous answer to previous question, that BharatNet would also have a large scale FTTH connectivity in all the 650,000 villages. So that would also lead to a good demand of FTTH cables and equipment associated with that. Equipment also would be required in electronic equipment. Third, there is a huge expansion of fiber to home network going on all over the world, Europe, US, Middle East, Southeast, and Africa would, of course, follow. So there would be increased demand for FTTH cables from all over the world. So I see good prospect of FTTH cable market for next some years. And that's why apart from our Chennai facility, which are falling short of requirement, we added capacity in Hyderabad, and we are increasing it further by about 30% because we see a good demand forthcoming. And this kind of demand forthcoming, we believe that we have increased the capacity in advance because when the supplier wants it, you have to be ready to supply him. So that's why we're increasing this capacity. So there's a good demand prospect for this now and few years. Can I ask one more question? Sure. Go ahead. Go ahead. You know, you mentioned areas of defense like electronic fuses and night vision devices. Okay? Which of these two have what is the opportunity size like in either of them? Look. The for the night vision devices, the opportunity is projected projected. Now how much they would buy, I don't know because budget and those constraints would always be there for the government. It's about 40,000 crores in next seven years. 40,000 crores. That's the projection. Now actual buyout would be how much that would depend upon how much money they are able to spare for defense and within defense emergency procurements, which happened couple of times this year because of Chinese issues and so many other issues. So that is very difficult to comment, but size of demand requirement is about this much. Now this may happen in five years. This may happen in eight years. You know? But total opportunity high of 40,000 crores. Fuses are also requiring huge quantity, and opportunity in that segment would be, in my opinion, would be roughly about thousand crores every year. Roughly about thousand crores plus every year. And this is a continuous opportunity because the border situation as such which is there, and lot of trials and filings take place, these are all the time required. And then we are looking at export market also. Alright, sir. Thank you so much. Thank you. Thank you very much. Next participant is Srinivas Deepan from Aryan Shares and Stockbrokers. Please go ahead. Good evening, sir. Good evening. Sir, we have been seeing that the promoter has been picking up some promoter entities have been picking up some shares from $8.09 rupees to up to 18 rupees. Yeah. MN Ventures. Yeah. And the insider trading. So That insider trading? Yeah. That's picking up in the market. Yep. Picking up in the market. It's not inside. Yeah. That's what but it's coming to SAST. It comes in the SAST and BST. Yeah. So it's the open market purchase with the Yeah. Yeah. It's open market only, but it comes in the inside the FAST. That that's how they they put it in the BSE website. It's not inside the trading. Not at all. It's free. Yeah. Okay. Sir, this promoter thing will be will further pickup will take place, sir? I don't know at this moment of time. You know, I I I can't comment on that. Okay. Okay, sir. Because so we did in inspire confidence in the company. That's the reason, sir. We are asking this question. Of course. You know, confidence in the company would be there as you see the results and the performance of the company. And promoter picked up substantial amount of shares, you know, last few months. Substantial amount of shares have been picked up. And I think more than four shares have been picked up. That's the reason, sir. They are already reaching to some level of limit, which is prescribed by SEBI for, you know, creeping acquisition. Oh, okay. Okay, sir. So nice. So, sir, then the model all the pledge pledge shares are all the all is released, sir. Can we take it as then all the pledge shares have been released? No. No. Look. I informed last time Hello? Ladies and gentlemen, please stay connected. Line for the management is dropped. Participants, please stay connected while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the management's line connected back to the call. Sir, you may go ahead. Yes. Mister Srinivas, sorry, we got disconnected in between. Yeah. Yeah. So please go ahead. Yeah. So, you know, the pledge which was there for certain facilities which company had taken, which was about 15% of the total equity, 1518%, which has already been released. 51% of the equity of the promoter, which is placed with banks for facilities which company has taken, and this is a additional security which company had given long back. And those conditions have already been fulfilled, and we have already requested banks to release that pledge. Lead bank has already agreed. Other banks are taking up to their committees for release. And as I said earlier, I hope by the time we meet next time, we should have got the release of that pledge. Okay. So that means then by next time, you should have no pledge for the company. Yeah. I hope so. Okay, sir. Thank you, sir. Because they've been picking up stakes, so I thought that the pledge should have been released also. That's the reason, sir. 18% is already released, and this I hope this would also be released. But, you know, there's no risk of this pledge being invoked because this is an additional security for the loan taken by the company. We just got primary security, additional securities, and all that. So there's nothing which should worry any investor that this pledge could be removed at any point of time. There's no question. Okay. Do not let the market. That's what we hope to know. So way. How can it be? It's a, you know, loan for the loan which company has taken, not promoter has taken any loan. And that's too you know, our gearing is it only point 43%. How can there be any, you know, flooding the market by this pledge? Because this is not against this is not a primary security against any loan. Okay, sir. Okay, sir. Thank you, sir. Thanks for the clarity, sir. Thank you. Thank you very much. Next participant is Devang Visaria Please go ahead. Good evening, sir. Congrats on a good set of numbers. I think just one suggestion. You know, one gentleman said, how would you change the perception? So, yeah, we can looking at having a consolidation from 1 rupee face value to 10 rupees. So that would like We don't have any such proposal on the table right now. Okay. Okay. Thank you, sir. Thank you. Thank you very much. Next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead. Yes, sir. Thank you for the opportunity again, sir. Just coming to the P and L part about our employee cost and the finance cost. Sir, if you could give an idea of how are these going to shape up? There have been escalation in the employee cost with the improved turnover. And for for finance cost, also, are what are what are our blended cost of funds? Look. You know, employee cost has increased with the improved revenue and also improved, you know, recruitment for the r and d resources. It has increased. And it can increase a little bit more further because we are recruiting more resources for our resources for r and d. So there may be some little bit increase further also because of no other activity with r and d. In terms of blended cost of finance, I would 9.5. It's about 9.5%. The line for the participant dropped. We move on to the next participant. Next question is from the line of Kamish Kumar Jain, an individual investor. Please go ahead. Yes. Hi. Thank you very much, Mr. Mahendra. My questions are already answered. Thank you very much. Thank you, mister Jan. That was the shortest question and shortest answer. Thank you very much. Thank you. Next participant is Raju, an individual investor. Please go ahead. Thank you, sir, for the opportunity. And firstly, congratulations for great numbers, and happy New Year to you and the team. I have just two questions, sir. First one is will you be able to advise revenue estimate for next quarter or next couple of quarters? Mister Ayu, thanks a lot for your question, and good evening, and happy New Year. You know, I can't make a forward looking statement. You know? Only thing I can say is that we would have sustainability in our revenues. Okay, sir. And my next question is what is the future expansion plans and impact to revenue? The future expansion plan, as I already stated, we're looking at increasing revenue from fiber optic cables as we talked about by increasing our product range. Then then, you know, we are designing more products of ourselves which will increase sales in the end of broad and profitability both. So we we have plans to introduce more products and acquire more customers to increase our revenue and profitability both. Okay, sir. Thank you, sir. Thank you a Thank you. Next question is from Deepak Mehta, an individual investor. Hello. Good evening, Good evening. Can you hear me? I hope everyone is doing well in your family and company. Absolutely. Right now, everybody is well. We had some COVID cases couple of months back. It's all under control now, and god willing, this pandemic will get away from us in next couple of months. Yes. Sure, sir. I wish everyone stay healthy and safe at your end. Thank you. And we we show the same to you also. Yes. Thank you so much, sir. Sir, you talked about the total market opportunity of 40,000 crores. So this is for FTT, that one? No. I talked about 40,000 crores for the BharatNet. Okay. Okay. That's for the BharatNet, which includes long distance fiber, its infrastructure, laying off cables, electronics, Wi Fi, as well as, you know, passive optic networks. So all put together, for Bharatnet alone, I talked about 40,000 crore market opportunity. Okay. Okay. So what can be the market opportunity for five g plus FTTH? And what kind of markets This will be the market opportunity. It would depend upon when the spectrum takes place, auction takes place, and how, you know, how many operators come in. It's very difficult to say how big would it know, this market opportunity for this five g. But, yeah, it is going to be substantial in the same order of, you know, what I talked about this f you know, the BharatNet opportunity. It could be much larger, but I am talking about domestic suppliers. It could be something around $3,040,000 crores. It's a very rough guess from my side. Final numbers are here to come in. But, yeah, it could be as large as that. K. And talking about the both how competitive is our company in terms of price and quality or, you know, in terms of we are as good as anybody else in the world. There's absolutely no issue in quality of our products, our Okay. Telecom products, fiber optic cables, or anything. In terms of competitiveness, yes, we maintain our competitiveness. Otherwise, you would not be receiving orders. Thank you very much. Sorry to interrupt you, mister Mehta. Request to come back in the question queue. Request to all the participants, please restrict to two question per participant. If time permits, please come back in the question queue for a follow-up question. Next participant is Utkarsh Sumaya, an individual investor. Please go ahead. Thank you for the opportunity. I just wanted to know what are the current prices of fiber and optic fiber cable per kilometer? Fiber, I already mentioned. It is around you know, for us, it is around $2.50 rupees. Now how much are the price of others? I do not know. Okay. But it could be $2.70, 8,300. I do not know. Fiber optic cable depends upon what kind of fiber optic cable you're talking about, but it's just common denominator of per fiber kilometer of cable. It is about 900 rupees right now. 900 rupees per? Per fiber kilometer of cable. Okay. So I I just I mean, I'm a little confused. If I remember correctly, last quarter, it was around 4 to 5 rupees. Am I getting the metric wrong? No. No. No. You are mixing the fiber and fiber optic cable. So fiber optic cable, I am saying, when you put all the fibers in a cable, 48 fiber, 96 fiber, all, you know, the cable price would not be a common denominator because cable size is different. But if you divide it by fiber count and do an averaging, it comes to about 900 rupees right now, which used to be thousand plus earlier. Okay. So we have grown our revenue despite fallen realization per unit. No. Because of higher quantity. Okay. So we really all growth is volume based. Yes. Yes. Yes. Yes. That the correct interpretation? Volume based value based. Yes. You're right. It has to be volume based. The market prices go up and down, but if it's still there is a market price that's gone down, so we have a higher volume. That's why this growth is there. You're right. Okay. Okay. And just to get one more thing clear regarding the promoter pledge, by the end of the quarter, will it come down to zero from around 38% guarantee? Say say that again? Sorry to be repetitive. The promoter pledge, currently, it is around 39 sorry. It is around 47%. So will that come down to zero by the end of the quarter? Is that did I get that correct? Yeah. You know, look, banks whatever pledge we have done, I have been seeing again and again. Is against the loan of the company, and the pledge conditions have already been fulfilled. They already requested banks to read the pledge because the conditions are already fulfilled. Lead bank has already agreed. Other banks have taken the measure to their own committees for internal approvals. And if they all agree, then it would come down to zero. I have no reason to believe it will not. So all the conditions are fulfilled. But I cannot make a promise to you right now that it will definitely come down to zero by the next quarter or so because the banks have to approve it. But knowing that Leed Bank has approved it, we are quite positive that it it would be approved. There's no condition which is unfulfilled, and banks should release the pledge now. Thank you very much. Mister Swamy, I will request you to come back in the queue for a follow-up question. Request all the participants, please restrict to two question per participant. Next question is from the line of Ketan Shah, an individual investor. Please go ahead. Hello, sir. Happy New Year to you and all the team members, sir. Sir, India growth story export opportunity Okay. 75 crores in the same period, which is nine months in the last year. Now, export next year onwards. Fiber optic cable sales Germany France, England, Dubai, representative. So many countries, we are now working on to export cable and some other places where direct recruitment of the salespeople. So with the whole idea export next year export fiber optic cable and other products export increase. Our internal plan is to go up by 300. Okay, sir. Thank you. Thank you very much. Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to Mr. Nahata for closing remarks. Thanks to all of you. I believe you would have got a good summary of and, you know, the way we are working, where we are trying to, you know, maintain a sustainability and improvement in the revenue and profitability. The focus we have put on research and development innovation is already in more and more products coming from our side, from our company and, you know, which would be sold not only in India, but other countries also in export market also. So thanks, everybody. Thank you very much, and we'll be in touch. Thank you very much. Thank you. On behalf of HFCL Limited, we conclude this conference. Thank you for joining us. You may now disconnect your lines. Thank you.