Q2 20/21

Oct 14, 2020

Ladies and gentlemen, good evening, and welcome to the HFCL Limited Q2 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. Anuj Sontal from Valorum Advisors. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and a warm welcome to you all. My name is Anat Sontal from Valorum Advisors. We represent the Investor Relations of HFCL Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the 2021. Before we begin, I would like to mention a short cautionary statement as always. Some of the statements made in today's earnings 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 belief and as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. I would now like to introduce you to the management participating with us in today's earnings conference call and give it over to them for opening remarks. We have with us mister Mahindra Nathal, promoter and managing director mister Viar Jain, chief financial officer and mister Manuj Bel, company secretary. And I request mister Mahindra Nathal to give his opening remarks. Thank you, and over to you, sir. Thank you, Anuj. Good evening, everyone, and a very warm welcome to this earning call of HFCL for the second quarter and first half of financial year 2021. It is good to connect with you once again at a time when COVID-nineteen appears to be making way for normalcy, both in the space of our life as well as our work. I'm sure that you got a chance to go through our Q2 results announced earlier on 10/10/2020. Please allow me to briefly introduce the company, its state of affairs and how it has been progressing on the path of normalcy in this pandemic situation during the last quarter. As a leading telecom technology enterprise, HFCL makes immense contributions to a securely connected and communicating world. It does so through a range of solutions and products deployed in integrated communication networks. It operates four dedicated business verticals, namely telecom, defense, railways, and security and surveillance. HFCL manufactures a range of high end transmission and access equipment, optical fiber, optical fiber cable, and cable accessories. Spanning across the value chain, its technologically superior offerings include product manufacturing as well as specialized services. These are deployed in both the private and government sectors towards varied applications in telecom, defense, railways, utilities, and security and surveillance networks. Our two centers of excellence at Gurgaon and Bangalore spearheading our in house research and development activities. Our innovation efforts are also supported by a few other invested R and D houses and collaborators from India and abroad. Collectively, our R and D teams are developing a range of breakthrough technology products and solutions, which can be offered for mass deployment, thanks to their cost competitiveness. Our five world class manufacturing facilities produce a wide range of new generation communication products. The company serves an enviable list of customers globally with exposed destinations to over 40 countries. The company closed the second quarter with an order book of INR7447 crores, which is approximately 2x of our FY20 revenue. Our order book is backed by a promising pipeline of bids and RFPs. To be executed over the next six to eight quarters, our order book is fairly representative of all our businesses, verticals and comes from a multitude of prestigious customers, adding significantly to revenue visibility. Our order book has an O and M component worth INR1555 crores. Our innovation journey has yielded superior WiFi network products, high capacity radio relay, microwave radios, and cloud based management platform. Going forward, our effort for innovation and IPR creation is going to accelerate, driven by next generation technology offerings by focusing on our own developed family of products, which are capable to cater the global market demands, we are undergoing a complete technology led transformation. Our innovation pipeline has switches, routers, intelligent Internet systems, electronic fuses, electro optic devices, ground surveillance radar, software defined radio, etcetera, at various stages of development. Our new product initiatives are backed with requisite global and Indian certifications. These efforts are aimed at driving our margin efforts. We have been receiving good orders from our recently launched WiFi and UBR products. These orders are from multiple customers, including Tier one telecom operators. Exploring various overseas opportunities, Also for these products, we are setting up domestic and international distribution network. Fully designed, developed, and manufactured in India, these high technology products epitomize Atman level Bharat, getting extensively deployed for rural broadband connectivity, they are furthering the digital India vision of our honorable prime minister. We started supplying Wi Fi and UBR products in the first quarter of current financial year. While we are still in early stages of the immense potential, we have already received orders for more than one lakh units of these products. The same are planned to be supplied by December in the current year and more such orders will flow during the coming quarters. Capacity utilization at our OFC manufacturing units has progressively improved in spite of restrictions witnessed at the Chennai unit on account of COVID. Collectively, the utilization reached about 70% to 80% at the close of quarter two from just about 30% to 35% during quarter one. The recovery was led by our Goa plant, which operated at 93% capacity at the end of quarter two. Some of our new generation products have entered pilot production with advanced field trials going on with customers. We are gearing up for commercial launch of our next generation WiFi systems compatible with five gs networks, intelligent antenna systems, and level two and level three switch products in quarter three. I am glad to inform you that our upcoming optical fiber cable facility, newly created facility in Hyderabad, is progressing well and we expect it to commence production by November 2020, that is about a month from now. Looking back at our performance, the recovery continues to accelerate. There is more action across new inquiries, production, shipment, project execution, etcetera. Due to impact of COVID during first half of the current financial year. From an analytical standpoint and for the purpose of comparison, financial numbers won't be comparable on a year to year basis. However, sequential comparison over the previous quarter, that is Q2 versus Q1 of FY21, is a correct picture of coming closer to normalcy. Let me share these comparisons on a sequential basis. Quarterly revenues rose to INR1054 crores in Q2, recording a jump of 50% over INR700 crore in Q1. EBITDA recorded a 65% sequential growth to reach Rs. 138 crore in Q2 from Rs. 83 crore in Q1 of FY21. EBITDA margin improved by 118 basis points sequentially to reach 13% for Q2. Profit after tax rose to INR54 crore in Q2, rising 149% over INR21 crore recorded in quarter one of current financial year. TAG margin improved by 200 basis points to Rs. 5.04% from 3.04% recorded in quarter one of FY21. Compared with the corresponding quarter of FY20, our Q2 FY21 revenue is higher by 8% while EBITDA is lower by 1.4. Suffice to indicate that we are almost back to pre COVID levels now. Capacity utilization, new product shipments, project execution, speed are all poised to head northwards from here on. We hope that we may have much brighter numbers and more positive updates and share and discuss when we meet again post the Q3 results announcement. With this, I will close my remarks. Thank you once again for your participation in SAP's earnings call. Now I open the floor for question and answer session. Thank you very much to all of you. Thank you very much. We will now begin the question and answer session. Session. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Sachil Kapoor from Hunting Value Limited. Please go ahead. Good evening, Mr. Anata. Thank you for this conference call. My question to you would be that new orders this quarter, how much you received? This quarter, we received orders worth about INR $3.50 crores, which are majorly for fiber optic cables or WiFi or these kind of own produced products. And, of course, we have participated in number of other tenders, RFPs, inquiries. So we expect Just a few minutes ago. Sir, have made up the line of mister Hammond. Please go ahead. Yeah. So $3.50 crores in the last quarter, and with the kind of RFPs and tender inquiries and pricing information we have participated, we expect a good quantity of orders to come in the current quarter also. And, sir, I want to talk about some of your you talk about your strengths and your opportunities. I want to know a little bit about your weaknesses and your just about your balance sheet. So your trade receivables is very high, and cash flow from operations is also not good. Would you like to throw some light on that? I would have my CEO answer this question. Sanjay, the receivable level in absolute terms has definitely increased as compared to last financial year. The main reason is due to this COVID impact, some of the project execution has got delayed where the release of payment is milestone based. So that impacted realization from our against our outstanding dues. And then secondly, the last two months alone, our gross sales amounted to INR $7.50 crore, which is part of the receivable. Overall operating cycle has improved from Q1. Overall operating cycle is one hundred twenty two days as on thirtieth September as compared to one hundred and thirty two days as on thirtieth June. It will we have to go a long way to bring it to the normal level as of March 20. So so hopefully, next two quarters, we can see the lot of improvements in the operating cycle and receivable level. And, sir, my last question would be the promoter group has been increasing stake in the company. So is the seller a known seller? Or Now look at this is first of all, it's a company call, but I will still answer your question from a promoter perspective, I being a promoter. There is no known seller. I don't know anybody, you know, who might have sold to the promoter or not. They have just bought from stock market, open market. And, of course, the promoters have increased their stock. We're willing to consolidate that at this point of time. Thank you so much, sir. Thank you. The next question is from the line of Abhishek Shah from Velcro Capital Advisors. Please go ahead. Hi, sir. Thank you for the opportunity. I just had a few broad based questions. First, I'm trying to understand the size of opportunity for us in our business. Second would be that, you know, of the, you know, market size, what would be the difference between what could be the opportunity for fiber and the other products? I'll ask the next question once you ask me. So, you know, size of opportunity in telecom field is very, very large. You know, four g is still is in extension mode. Five g is to come, maybe another six to nine months time. New option for four g spectrum is happening that will further lead to expansion of four g networks. Couple of service providers who have not enhanced their network to four g level to the level others have done or who have not started their four g are going to start four g now. That will increase the demand. Five g will increase demand of everything immensely. Moreover, FTTH is being put by one operator. Now Airtel has also announced a similar level of FTTH deployment, which will increase the demand. So market size and approach should be immense, 16 thousands of crores. And then the Bharatat is going to come up, which itself one project is all it's still worth 30,000 crores. So if you look at three years time frame three years time frame, I would say this opportunity could be a five year time frame, let me put it. Five year time frame, this opportunity could be on something like 3 lakhs. Okay. Okay. So so say a Bharti or a geo announces, let's say, a $3,000,000,000 CapEx, what would be our sort of target market in that 3,000,000,000? Would it be 30%? Look. You know, I can't put a number like percentage on their announcement, but we are definitely looking at, you know, increased revenue year and year growth from our side and increase our market share from these operators on not only these operators, from export market also. And mind you, we are also present in defense business, so which is completely separate line in defense communication as well as different electronics. So we are going to increase our revenue from those areas also. So it's not only from operator, it is going to be from cross section and also from, you know, BharatNet kind of an opportunity where there's really large demand of fiber optic cable as well as equipment, which we are designing indigenously, going to produce indigenously, and being all designed equipment, are going to be very competitive, designed and manufactured as well as requirement of this rural requirement. Understood. Sir, one last thing. Sir, over the last three, four years, we've also tried to focus a lot more on new product and sort of, you know, reduce our risk purely towards fiber. If you can just tell us more on, you know, how has that progressed and, you know, are what sort of orders are we getting on that side? That is one. And second part of this question is that, you know, how much time does it generally take to these are we are new to this sort of these products, I said, if if I may call it, like, you know, so what is the comfort level for the customer to give you a a sizable order for that? Look. You know, number one, we have really focused started focusing from last one and a half year or more about two years on that development of new products. Now all these products being public communication products or even different products takes time to develop. And, you know, it's not that, you know, you start making effort today for development and it becomes available in few months. It takes about a year or one and a half year time frame. So this but lot of such initiatives are taken and it started giving results. For example, Wi Fi product has come into market. And as I mentioned in my opening remarks, we've received order for Wi Fi and UBR, unlicensed band radio, which have been developed by us and already in the market for 100,000 units, one lakh units. Now this confidence customer got, at least they did the testing for, I would say, three to six months time, lab testing and then the three months lab testing and three months plus field testing. It took about six months because customer has to put it in the public network. So they cannot put it unless they are satisfied with the robustness and the quality of the equipment. So three to six months is the time frame customer normally takes in the beginning to allow any product to be inducted in his network on a very large on a large scale. So it took three to six months, and many a times customers want some kind of customization to be done for them, which being developed locally by us, we can do such customization, many such customization we have done. So this took about three to six about six months time from this Wi Fi and UBR. But now it's a one lakh order book we have and which would be shipped by December. Similarly, other products which are started as a collaborative r and d for, like, switches. Switches would be available in next probably two months time. This effort was started about years back. Routers started about few months back, would be available in six to eight months time frame as per the specifications, which are required. Electronic fuses, as an example for defense. Electronic fuses, we started about more than a year back. I'm happy to say that those fuses are now ready. We have conducted trial in a different country where this contract development was undertaken by our r and d partner, and now they're ready for trial in India. We have to ship it to the army for trial. We are waiting for the date. Whenever they are ready, we will ship it to them. And I must also say that now we are ready to market that fuse internationally also because it's ready. So one and a half year it took to start about one year it took from the time we started. Now the product is ready. Now to induct it in the any army, it will take six to nine months of trial phase. You know? So the difference, it takes that much time. So depends, you know, which kind of product you are talking. Sometime, three to six months, sometimes six to nine months. And development cycle is at least a year. Some cases, it may be little bit more. For example, software defined radio, which is very, very complicated product and the demand is about 25,000 crores in India alone. Development cycle is itself eighteen months, and the test and trial period will be about six months. Overall cycle period could be twenty four months, But all are progressing very satisfactorily, and products are coming in stream one by one. From this quarter itself, they would start coming into stream, and we will start selling and marketing them. And this process will continue for next two years' time frame with number of more products coming in this thing one by one. In fact, as I said in my opening remarks, we are completely renovating the company, I must say, by including more and more products, which are our own design products with a large r and d budget so that we become more profitable and our market share also increases because these are the products made in India but made for the world. It's the entire family of products, which is quality wise and technology wise at edge of technology. There's no way you can differentiate between a multinational Wi Fi product with our product. Right now, new standard Wi Fi six has come, which is five g compatible. We are ready with that, and we already offer for testing to the operators. And I'm sure in three to four months' time, we'll start issuing orders for them also. So is the technology in house, or are we collaborating with other companies? Both both. It's no. It's technology in house. Collaborating is r and d collaboration is there, but IPR is ours. Somebody else is doing a development for us, our own IPR. It's a joint development. So it's a it's it's our technology. There's no collaboration in these cases. When I talk the router, whether it is the switch, Wi Fi five, Wi Fi six, call based management system, electro optic systems, electronic fuses, and all our technology. Okay. Okay. Alright, sir. Thank you so much, sir. I appreciate it. Very, very important. Lovely. Lovely. Really, really nice to hear this one. If there are more questions, I'll come back in the queue. Thank you. Okay. Thank you. The next question is from the line of Sanjay Shah from KSA Shares and Securities. Please go ahead. Good evening, sir. Thanks for all Good evening, Sanjay. Yeah. Sir, I I appreciate the performance of this quarter sincerely in this current perspective. Now coming back to your all exciting comments, it is really exciting journey ahead. As you rightly pointed out, reinventing HFCN or reinnovating. So, sir, can you tell us that what is opportunity on these defense products and other products? How much what export opportunity we have? Because in India, we are not so confident about our government purchasing capacity or intention. So better we divert with our we risk divide ourselves by taking some export orders and all in that. What is our where we have reached and what potential we see is in the export for this product? Mister Shah, let thanks a lot for your question. Let me answer it in this way. There are two kind of products we have. You know, one is communication, second is defense. Defense electronics. What we have done for communication products, we have started appointing either advisers, consultants, or even our own employees in some of the countries. We have got now our people in Middle East. We have people in Europe, in France. We have people in England. We are appointing people in Southeast Asia. So what we are going to do with these people who are either onboard or a couple of them are going to onboard, we will use them for building relationship for each of our product. So that, you know, there are relationship people we who build relationship with each of our product, and the product specialist then go from India and start talking to the customers. So and right now, this is being done for fiber optic cable, which we are already exporting to more than thirty, forty countries as I already explained to you. Now you rightly say, you know, that we are not sure about how much government would purchase. That's true for communication sector because BSL is the only operator from government. That's partially true, but partially, there's a good sign also BharatNet from the government perspective I'm talking about because that money is there given by the operators. It's not government money. And there is for for probably $4,050,000 crore line there, which is now going to use going to be used for BharatNet phase two. That money cannot be used for any other purpose by law. So there is a huge requirement for BharatNet, and the demand is there. That was suddenly going to come in a different mode. It is going to come in a PPP mode. And where the viability gap funding will be done done by government of India from this USO fund. So that demand is there. In terms of other communication products, it's not really government we are selling. It's to private operators like GEO, like Airtel, like Vodafone, or any such operator or many of the ISPs. We sell to their purchase capacity. They have nothing to do with government. However, our products are different products, for example, like I mentioned electronic fuse, which is ready. I'm expecting that we will have a marketing kind of effort started for that internationally in next two to three months time frame. Three months, maybe three months time frame. Of course, getting orders is six months to a year because these kind of military products undergo trial testing in every army. They're only using the orders. Electro optics. Again, we would be from, I would say, '1 or '2 of the next financial year. We will start marketing electro optics, which is night vision devices in the world market. In India, we have already started. We already participated in tenders for electro optics in India. Some of these are going to be opened very, very soon in my opinion. We are going to participate in another very large tender next week itself for electro optics. So that effort has already started. So in terms of defense sector, I would say India still has reason to spend more as you all know the kind of situation which exist on Northern Western border. India is spending more, and there is a large scale purchase going on for these kind of equipment, which there are deficiencies. We are going to participate in another major overall program overall in program of certain kind of equipment, which I can't go in detail because restricted RFPs have been given with a very large company, global company, and that's also very, very large tender. So opportunities are there in different sector in India, but since these are our own design products, own IPR, they are going to sell it globally. Absolutely. Because that's the reason why we have gone for our own design and huge r and d investment so that we can create products and sell it globally. So so so what is your internal guidelines about the export? How much we can do for next one year, two year, three year? Look. You know, the current financial year, optical fiber cable is the only one which we are exporting. Maybe maybe we will do some of Wi Fi also. And then from the services, you know, turnkey contracts, we are doing the railway contracts in Dhaka and Mauritius. Those are coming up. So current year, all put together optical fiber cable and that contracts. Our export could be about 150 crore plus 150 crore plus. My wish is to reach to at least in three years time frame, not of 5 to 600 crores with so many products coming up. It could be even higher. I'm not projecting those numbers, but that is minimum internal target that we should cross those kind of numbers in three years time frame. It can be much more because defense products and all that would come into picture. It can be much more, but I am not making any such projections right now. That's great. So my second question is how do you see the optic fiber and fiber cable market right now across the globe? Look. Market is improving from what I probably would have talked in the last earning call to now. Mhmm. Market is improving globally because one, there was a huge impact of COVID. And because of COVID impact, market was subdued. And China was also buying less. Chinese demand has improved a bit with China telecom, China mobile coming over with the tenders for cyber. Internationally, there is going to be deployment of FTTH in large scale, including Europe. So cable demand is going to be there. In India and worldwide, this five g networks are going to come up. And with the five g, again, fiber demand is going to increase because networks have to be made ready for five g by linking all these towers by fiber. The throughput of every tower is so high, It cannot be carried over carry forward in a large scale on microwave radio. So there's going to be large scale deployment of fiber all over the world. So fiber optic cable business will see improvement. I don't say that prices will increase dramatically because there's enough capacity existing, but demand will increase. In India, FTTH by all the major operators, then five g deployment, then BharatNet. All these three things put together, demand is again going to go up. But I would be I would not be saying that, you know, there is going to be any dramatic increase in the fiber prices because there's enough capacity existing in the world. But those people in India who have large scale capacity and maybe backward integration like us, they would see that their factories get enough orders to fill their capacity. Like, for example, today our both factories, Goa and Chennai, are operating at 100% capacity. Last quarter, was problems because of COVID, not because of orders. Now we are putting up a third factory for cable, which I mentioned in my opening remarks. Third factory for cable, which is being, you know, under construction or under installation. The other construction is done under installation of machines and all that from next week. Machines are going to arrive probably in next five to seven days. And it's a third factory for cable. So you can imagine the kind of demand we have in the existing factories that we had to put up a third factory for manufacturing cable. But that may not be the case for every manufacturer, particularly smaller ones, but the large ones are definitely going to be looking at operating at reasonably very good capacity. Sir, so Bharat, my program of government was stall stopped more than one and a half year. Correct me if I'm wrong. Yes. So how confident you are there starting it again with that PPP model? And do you think that will work out properly for the business? It will. I tell you. Even the prime minister has announced that four lakh villages are four and a half are going to be connected in one thousand days by fiber by fiber. It's a prime minister announcement from the head foot. So government has to act upon it. Now money is available. That's the major point. You know? Other places, you find budget constraints, and because of budget constraints, many things do not happen. In this case, money is available even if government were to implement it all by own without PPP. You know, money is available. There's about 40,000 crores plus money available in USO fund, and it can it will increase every year. So they'll spend their money. Now instead of doing it by government, they decided that you should be done by PPP model for better quality and better utilization. In phase one, whatever they did, 1 and half lakh $1.1.0.25 lakh, one size or 1 and half lakh maybe. The proper utilization is not there. The government is not a sales or marketing organization. They can sell it properly. And quality of network was also not that too great to score. So they decided that it should be done by private on a PPP model so the private people will do a better quality. And sales and marketing responsibility will all will also be theirs because the PPP model, which would be twenty five to thirty years kind of operating contract. After that, thirty years or maybe something like that, extendable to another ten years. They have to hand over the network to government. So it's a perpetual kind of a thing. So with that model, I'm sure things will definitely pick up and it will be successful. If PPP does not succeed for whatever reason, I'm just hypothetical thing I'm saying. Alright. Government will do it its own because it's a committed announcement by prime minister. They cannot go back, and money is there. And this BharatNat is going to be beneficial to our company from different angles. One, if it is a good PPP contractor, you know, who has got money and, you know, capacity to build, We will get turnkey work from them to fiber optic cable supply. This is going to huge demand for fiber optic cable connecting four and a half lakh villages is no mean a joke. You know? It needs I don't have the numbers how much they have calculated, and it's all going to be with the ring network. It may need 8 to 10 lakhs kilometers of fiber optic cable, which is huge quantity. Then equipment. Connectivity does not mean connectivity alone. They are going to put conditions that so many houses are to be connected over fiber optic cable FTTH. That's why this OFC network is there. So that would bring us bring us lot of demand for FTTH kind of cable. And also equipment, which also we are undertaking for design FTTH kind of an we require equipment which are required for FTTH network. As I said, it is going to be a, you know, ring configuration of network, which would require routers, which would require switches, and all are there in our product line now, which are going to be available in next two to three months gradually. And those will also be required. And with the PMA condition, where you need a higher amount of indigenous content, which can only happen if it's product design and manufacture locally, we are going to get advantage out there also. So I'm looking at Bharatan with a lot of excitement. Yes. Yes. That is really exciting, sir. Thank you very much for updating in detail, sir. Thank you. Thank you. The next question is from the line of individual investor. Please go ahead. Good evening, sir. A lot of my questions have already been answered, but just one question that you had already said about SCR is the opportunity is about 25,000 crores in India alone, and it might take about two years time for it to be available in the market. So where actually are we in that two year time frame? Have we just started or we are halfway or almost through? So could you please throw some light on that? Look. I guess we have just started, and army has also come out with a UI now where they have to do the shortlisting. It's still not done. So and it's it's not an excellent stage from the customer requirement point of view also. We are not late at all. So we are absolutely on dot test with the customer requirement. They are going to give eighteen months time for development, and then they are gonna start the trial. I think they are going a little more than eighteen months. I think eighteen plus two or something like that. And we have already started. So we are on exactly as per customer requirement. So it will be our product would be ready, maybe I would say fifteen ten fifteen months or so time frame from now. Now that's a complete range of products. But the first product is going to be available in twelve months time frame because it has got various configuration. It has got head head. It has got manpack. It has got vehicle mounted. The first version, I think, in my opinion, should be available in about twelve months time frame. Okay. So everything we can expect it in 2223 that we can see it in revenue not before that. Right? Yeah. You are right. Absolutely. Okay. Not before that. And that too, you know, 2223. Okay. Okay. And, sir, I had another question on GPON. So as the BharatNet starts to define, how how do we see that how soon do we see that in execution? Maharaj said execution, you know, first of all, the PPP, UI tender, all that has to come, which is slated to happen in a few months. Then a tender finalization and all that, I think I would suspect that this execution would be about a year, next financial year. Next financial year. Okay. Sir, apart from that, we have not been seeing any service revenues come service orders coming in in the last three to four quarters. So I've think majorly from BharatNet or the government or they are from the private parties as well. No. No. Orders have been coming. If you look at, you know, you know, you you would not have seen a very major order coming in after our Gov NMS an IPMPS order, which came few months ago. Some more large orders are expected, not that they are not, you know, maybe very soon. But what I'm trying to say is orders do come, but they come in smaller numbers. You know? One single big order is not there, but fiber optic cable, for example, 20 crore, 30 crore, 40 crore. Like, you know, last quarter, we have received orders for 350 crore, which is small, small orders. Now Okay. Larger RFPs also we have participated. Some larger order also might come soon. So sometimes the larger comes, sometimes the smaller orders come. Now this quarter, my hope is much higher from order booking for them. Much, much higher. Okay. So my last question is we are going to start shipping on Wi Fi in the month of December. So we will No. No. We have already started shipping. I'm saying Wi Fi, we would have supplied one lakh list by December. Okay. One lakh. Okay. Okay. So that will be and the Wi Fi and Wi Fi six generation will be probably a little down the line. Maybe Six, we have already developed. It has already been given for testing to the operators, and the testing should take about three months time frame because then there may be requirement of some customization and all that. I would say Wi Fi six shipment in all probability should start towards end of this financial year current financial year. Okay. So so whatever we are doing in Wi Fi currently, that will be the you can go to six or that will be an additional thing? So I think, you know, some people would still continue with Wi Fi five. Some people will go to Wi Fi six, particularly the five g operators who definitely like to go for Wi Fi six because their throughput is going to be higher. So they would like a you can can take that throughput and give it to the customers. Okay. So what would be the difference in pricing per unit of Wi Fi five and six? I I don't know what is Too early to say right now. It's too early to say, but difference may not be much. May not be much. And then Wi Fi five goes for what? I'm I'm just trying to calculate what can be clock in this year from Wi Fi. Pardon me? What can be generated revenues from this year in Wi Fi? We are looking at generation of about 125 to 150 crores from this our own design products from the current financial year. Okay. So some 100,000 units, we'll we'll be generating that amount. That that is what you're indicating. 100,000 units of that, and then there are antennas, accessories, UBR, all those put together. Okay. Okay. Okay. Thank you so much, sir. You've been very intuitive, and I look forward to the third quarter as well. Thank you. Very much. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Giraj Daga from KN Visaria Family Trust. Please go ahead. Yeah. Yeah. Hello, sir. My question is related to, like, what is the order pipeline you are seeing which can be awarded over the next six months till, let's say, by March 21 end? If you say the case will go back to any number to that? Look. You know, I didn't say that. It would be not good for me to put any number because this is a forward looking projections. I'm not supposed to give in a comment. I'm thinking how much industry will be ordering will be done. Whether you will go it or not in the next question. Oh, you are talking industry orders? Yeah. Yeah. I'm saying how much total total bidding will happen or the the total will probably will be awarded over the next six months. It could be several thousand crores. It will you know, and if I put PPP or BharatNet and output together, it will be several thousand crores. Defense products, these communication products, I think this could be in five g coming in. You know, I don't know five g would happen in this current financial or not. But even then, you know, the communications civil communication itself, I think it could be something like $67,000 crores, 10,000 crores maybe. Okay. Okay. My second question, I missed the number. What is the the capacity of the third factory that you are putting for cable? And how much effect you are doing? It is going to be cable kilometer perspective. And, again, let me question you. This all depends on what kind of cable you manufacture. This particular factory is being put for FTTH cables. Fiber to home is a low fiber count cable, and capacity is going to be 30,000 cable kilometers per month. Okay. For FTTH only. It's not going to be high count fiber. It's only FTTH. Right now, we would expand more in future, but right now, it is for FTTH and 30,000 cable kilometers per month. And what is the CapEx you're incurring there? CapEx would be in the order of roughly about 25 crores or so. 25 crores plus civil already undertaken, which has been done 10 crores. The total would be up to the tune of 35 crores. And just assuming, like, the duration 90% range, I'm not putting a time there, how much revenue we can generate from this or, like, how much EBITDA we can generate from this? Revenue, I would say. Revenue should be around about 200 crores. And profit margin of twelve, thirteen percent? Well, I can't say that at this point of time. I would say lower number. Profit margin, I would say little below 10% or 10% maybe. Okay. Okay. My next question is a bit more on the technology side. There are some some reports which are mentioning that five g effect may not entail a large number of tower, what many people are expecting. Do you also say that again? I am getting some reports which mentioned that what the technology you are going to adopt on PiC. That may not result in a more number of densification of more towers. So are you seeing something on that line? So are you in in in this interaction that the I I can't comment about any particular operator, geo or anybody else. But generally generally, five g would need densification because, you know, with that kind of throughput five g has and kind of spectrum it has, It has to be densified. You know, there's a lot of physics. Higher you go in the spectrum, smaller is the coverage. Higher you go in the data speed, smaller is the coverage. So it densification has to happen. There is no way out of that. It has to happen. For every four g tower, you will need depending on area area two to three five g towers, maybe three. Okay. Because what I was reading is that the people will be using 3,500 megahertz for the download and about 1,800 megahertz for the uplink uplinking. And that's why it might not require in a that number of hours people are expecting. It might be higher, but hours are At least two times, if not three times. At least, if not three. Okay. And and existing towers will have to be upgraded with the more power supplies, higher power supplies, and fiber optic cable. Okay. Okay. Understood. Thanks a lot, sir. Thank you. Thank you. The next question is from the line of Abhishek Jain from VC Corporate Advisors by Private Limited. Please go ahead. Good evening, sir. Actually, I have got two questions. One is the Mister Chen, we request that you please use the handset mode. We are not able to hear you. Hello? Can you hear me? Yes. We are. Better. Yeah. Okay. I have got two questions. One is, sir, if you can provide me with the bifurcation of the revenue in terms of fiber, cables, equipment, defense, and country projects, right, if possible. And another thing is, sir, I'll let him know about the opportunity in the next five years. If we see the company revenue has increased during 2016 to FY '20 to thirty eight thou 3800 during the peak four investment both by GEO and Airtel. So, sir, looking at the opportunity in the next five years and terms of lack of close rupees opportunity, so where do you see your company signing in terms of revenue? How much the company will be able to capitalize on this opportunity? Because in the last five years, it has not grown much. Look, you know, not that last five years, we have not grown. You know? Last particularly 800 comes to 3,800 from But this is a by three times since this not a growth, number one. Number two, in terms of revenue mix in the current quarter, out of 1,050 crore revenue, we have the telecom products, which includes fiber optic cable and WiFi and all that. 279 crores and $7.75 crores out of was our projects, you know, which includes products as well as services like our needs, communication network, and all that. So total revenue was thousand 54 crores. Time to come, we see revenue from products growing and the project revenue went down and which is a conscious decision we have taken in the company to when I say, you know, conscious decision, complete reinvention of the company taking place now. Year after year, it will happen. Quarter after quarter, it will happen. That more revenues will come from products, which are our own design products, our developed products, higher profitability margin, and less from projects. Because, consciously, we have taken a decision that let us design products ourselves, but there's a huge, you know, effort by government of India also to get the products manufactured locally for local market and for there is a provincial market access that those kind of policies have been created. And once you fulfill a local demand in a such a huge market, you become competitive to export it also internationally. So you would find product revenue would grow. Project revenue may remain static, but in terms of percentage, it will come down. Product revenue will grow. I'm not saying that actual numbers will come down, but the percentage might come down. So that's the strategy we have adopted, but that is certainly going to give better profitability to the company. In terms of what kind of revenue, think, three to five years, these are very forward looking statements, mister Jain. I would not like to talk on a forward looking number. Okay. Fine, sir. And But there is going to be growth. That much I can tell you. Okay. Because the internal because what I wanted to understand was that the greenfield purchase of Jio and the retail in our country about on the four g network, the revenue has gone not not so much, actually. In the last six years, it it has grown, like, from 2,500 crore rupees to 3,800 crore. That's, like, about 8% CAGR growth. Means I wanted to understand that the opportunity is so huge, but what is it about the company? I mean, in terms You have to look at it from the products you have. And as we are increasing our product range, revenue will also grow. But, again, in three years, 2,500 to 3,800 is not not a bad growth, mister Jain. It's not that bad. 2500 to three three eight hundred in three years is quite reasonable. Thank you. Mister Jain, may we request that you return to the question queue for follow-up questions as there are The next question is from the line of Mangesh Kulkarni from Almonds Global Securities. Please go ahead. Yes. Thank you for giving me an opportunity. I just wanted to understand the opportunity which we are going to get from the recent Jio app announcement that they are ready with the five g solutions, which they are ready to offer to the world. So what kind of participation do we see for HFCL in this opportunity? We have not discussed any such thing with you, and I cannot talk about any particular operator, any customer, but we have not discussed any such thing with you. But are we supplying some of the products to them for the five g implementation or whatever their r and d they're doing? They have not started five g implementation, but whenever they start, we will definitely discuss with them. We continuously supply them fiber optic cables. So we will hopefully keep on supplying fiber optic cables to them. And if any other opportunity comes, we will definitely look at that. And but Wi Fi, for example, Wi Fi, we are supplying to geo also to a large extent. When we do Wi Fi six, you know, we should be very compatible with five g. We would certainly approach them for supplying Wi Fi six also. Wi Fi five, are supplying them in large number. UBR, we are supplying to them in a large number. And whenever they start five g and they need equipment for five g, whether it is routers, switches, all the new person, you know, trying to bring in on the WiFi, fiber optic cable. We'll simply discuss with them. Now it is up to them to give the order or not. It will depend our competitiveness and all that. But we are hopeful that we will definitely try to get more and more orders by supplying competitive and quality products. Okay. And, sir, I just wanted to know about our EPC business. Now how is the situation after this unlock process starting? Contracts, are they coming back to the schedule or still delays are there? Well, it is improving. If you look at EPC execution in the last two quarters, q one was about 510 crores and q two is 775 crores. It has shown improvement, but still it needs to improve more. And I think q three would show further improvement because COVID situation is easing down, and it's it's a new normal now. You know? I don't know whether it's easing or not, but it's a new normal. People have to people have understood they have to leave it leave it work, you know, in this situation. So I'm I'm expecting to improve further. Only only impediment which is right now is there for the army projects which are in the northern border of India. It's Northeast or maybe mostly in the northern areas where we have large number of projects, and out of the total projects, concentration is in North India. So there, because of border situation as we know already, we all need in reading newspapers and media. There, you know, access is restricted. You know, they don't allow people to go and go in and out as easily as it used to happen earlier because of the current situation. So there, the restrictions are there, but I I suppose they would remain there for some more time till the time border situation is there. So there, the situation is a little bit more difficult in other areas. But as than that, as in those RV projects in northern areas, the situation has improved as it can be seen that, you know, turnover from revenue from projects have gone up by 50%. Okay. Thank you. Thank you very much. Thank you. The next question is from the line of Sonali from Wood Group. Please go ahead. Hello. Yeah. Yeah. Good evening, mister Nathati. I have got a couple of questions. First is regarding the release of shares which are pledged. And earlier, I have seen a video where you have mentioned that many I mean, some percentage of the pledges have been released, and the management doesn't talk to the banks, but the banks have their own procedures. So can you just please update on that? And my second question 20% of shares have been released. One was placed for the as a collateral to one of the banks for for urgent quarantine requirements. That has been released. And the second was placed because of, you know, this fiber fiber plant which you put. There's some issue out there with the lender. This land being trans you know, registered in the condition when you yeah. Condition was there that that can be placed only after we start commercial production. That has also happened. That 13% has been released. So 7% I think 20 has been released. And balance shares, we have already applied to the banks that the conditions under which they are in place, they have all been fulfilled. So they should better release it. So I'm hopeful that banks should see it with a positive sense because the condition no longer exist under which we had put them in, you know, place them. But as I said all the time, no loan has been taken against shares. No loan. It is all collateral for the business of the company. There's no promoter borrowing, no loan against shares either to the company or to the promoters, and it's all collateral to the banks. For the loan, we have extended to the company as collateral. So I I am hopeful that some more release should take place. We have already sent obligation to the banks. Okay. Thank you. And my second question is regarding the debt reduction plan. No. Debt reduction is we don't have much of debt. It's it's a point four three only. The gearing is only 0.43. We don't not much of debt in the company. Yeah. Okay. Okay. Fine. Thank you. Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead. Good evening, sir, and thank you for the opportunity. Sir, correct me, You told that going forward, the mix between the telecom product and the 20 part will will be skewed more towards the telecom product. Money, the growth which will happen going forward would be higher on the telecom product side. Correct, sir? Yeah. I said product side. Telecom and defense all Telecom both ends Put together. Cable all put together. Product side. When we when we are putting the revenues of telecom products, both defense and telecom are clubbed in under one head only, that is worth $9. So, sir, sir, if we see the the margins there, sir, last year, we did revenue of 127 crore last September. And this year, it is around 2,209 crore. But the but the PVT numbers have fallen from the there at a turnover of $1.27, we posted PVT of 23 crore. And here, out of 209 crore, the probability is only 12 crore. And when we take the console part, sir, we find that with an improvement of if I'm not wrong, with an improvement of 70 crore in the revenue, the profitability goes up by 20 crore. So I just wanted to understand, telecom product consolidation profitability improve only, on a stand alone, it is lower? Saket, the variation in margin is not because of this product mix or anything else. It is because that you know that we have this commodity fiber production from this q one, q four of the last previous financial year. So initially, it is getting stabilized, and the capacity utilization is comparatively low. It has been low, one, because of the COVID situation. And secondly, the initial stages of the plant is getting ramped up. So That's right. The interest and depreciation is being charged to those facilities once it has started the commercial production. So that is how it looks on the lower side. The situation is going to correct from q three onwards with with increased production of fiber. You know, it is because of the interest and depreciation on the new plant, you know, which is what you see is like this is not really the margin on the product. It is interest and depreciation, which as my CFO said, is going to improve from the q three because now this plant plant is 100% running on 100% capacity now. Okay, sir. But since we are developing the product, this this fiber and fiber cables goes into the product development when I I think the the fiber cable is mainly catering towards the EPC part. So just wanted to understand. We have built up the Is most of them more than 90% is being sold independently. In the? Independently. But but but will it will it will club in the product category only, sir. Yeah. Yeah. Sure. Oh, okay, sir. Sir, one more more point of about this. Sir, we have seen in our shareholding pattern Reliance Strategic Business Venture Limited being a shareholder. So, sir, are these any strategic investor or what kind of strategic investor. This is just a normal investor. Okay. And and my it is a treasury operations only because this company belongs to Reliance Oh, yeah. What is their operation? So they would know that. No. I know that we are a shareholder. Alright, sir. And one more point was that we have a nice one conference call that was not held that didn't happen with in the month of July. So have you taken any more step to reschedule them for any further con call? I think it was scheduled in in the month of July. No. I couldn't follow your question. Sir, in the month of July, there was one conference call that was scheduled for one of the biggest wealth adviser, Juliet Behr Wealth adviser. That was that was scheduled, but it could not happen. So I just wanted to understand whether become whether whether any further call No. As in the day, the call happens, we would keep on informing the store exchanges that he has Because of the Yes, sir. Because the timeline, it it was second July, and now it is fourteenth October. So the investor did not took interest going forward. That was about investor interest, but if any call happens, we will immediately let you Absolutely, sir. And last point was about that you spoke that the synergies, which we are going to the the cost saving which you which will which we are going to have because of this backward integration. If you could explain how how are these going to benefit and improve the bottom line, and what should be the sir, our endeavor for the sustainable EBITDA margins going forward? Because there is a fluctuation although there's consolidation we are seeing overall from from the last two, three quarters. So if you could throw some light about the synergies and the and the consolidate and the customer No. No. Always there in backward integration. You know, when you do backward integration, there are two reasons. One, they are stabilized supply chain and take advantage of backward integration in the cost. So both are going to be there in this case. There's no doubt about that. And to maintain our profitability and all that, as I said, to enhance it, we are doing more and more new products. Even in cable business also, we are designing new products, which are not used in India, but they are used in different other countries. So those products will increase our market. It's fair and enhance our profitability and stabilize that also. Mister Saket, I have, you know, a couple of more question I can take, then I have to leave for some other appointment. So Definitely. If you can send me a question, BLSL is disabled, you can send me from other investors, other other participants, kindly. I will tell you that you, sir. BLSL is if you could give, sir. How much is due from BLSL? BSNL dues. There are no dues much from BSNL as such. There is about $130.40 crores. But rest of the dues is for army projects, which is via BSL, but which keep on coming on regular intervals. There is no overdue for that. Correct. Thank you, sir, for for all the answers. Thank you. Ladies and gentlemen, due to time constraint, we'll take that as a last question. I would now like to hand the conference over to Mr. Mahindra Nachata of HFCL Limited for closing comments. Well, thank you, gentlemen. As I said that quarter two has been an improved quarter over quarter one. And quarter three, we believe that it would improve quarter on quarter three also. Quarter two also, quarter three should be an improved quarter because the impacts of COVID and these kind of impediments have gone down considerably, and we are sure that we will do much better in the current quarter. Our emphasis on our own product development and marketing them worldwide is going to sort of reinvent the company in the next couple of years, and we'll position the company as a leading technology enterprise in the world market in communication as well as defense related products. And I'm happy to share that we we are very enthused about that. We are very optimistic about these products, which we are developing with international class and which will certainly increase our revenue from products. And project revenue will go down in percentage, but may in in terms of overall number, it may not even go down. But in terms of percentage, product revenue will go up. And I am sure that in future, with the COVID situation becoming more normal, economy as a whole will progress. We will come down to the normal, the country, and the economy as such, and HFCL being a part of that will also show improved performance. Thank you very much, gentlemen. Thanks a lot for your time and attending this earning call. See you again in the next earning call. Thank you very much. Thank you. Ladies and gentlemen, on behalf of HSBC Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.