Ladies and gentlemen, good day and welcome to Q1 FY2025 results conference call of HFCL Limited, hosted by ICICI Securities. Before we begin, I would also like to read the disclaimer statements. Statements made during this call may be forward-looking in nature based on management's current beliefs and expectations. They must be viewed in relation to the risk that HFCL's business faces that could cause its future results, performance, or achievements to differ significantly from what this is expressed or implied by such forward-looking statements. Investors are therefore requested to check the information independently before making any investment or other decisions.
As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then 0 on your touchtone phone.
Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Lohia. Thank you, and over to you, sir.
Yeah, hi. Good afternoon, everyone. Thank you, Sumit, and thank you, everyone, for joining us today for Q1 FY2025 earnings call of HFCL Limited. First of all, I would like to thank management for giving us the opportunity to host this call. From the management side, we have Mr. Mahendra Nahata, Promoter and Managing Director, Mr. V. R. Jain, Chief Financial Officer, Mr. Manoj Baid, Company Secretary, and Mr. Amit Agarwal, Head of Investor Relations. Without further delay, I would now hand over the call to Mr. Mahendra Nahata for opening remarks. Thank you, and over to you, sir.
Thanks, Mohit. And good evening, ladies and gentlemen. I'm delighted to welcome you all to HFCL's earnings call for the Q1 of financial year 2025. I trust that you got a chance to go through our financial results, press release, and earnings presentation, which are all available on the website of the company and also on the website of the stock exchanges. For achieving the vision of exit by 2047, technology and the telecom sector are poised to play a vital role. The growing demand of reliable, high-speed internet connectivity, increased smartphone adoption, 5G network expansion, hyperscaling of data centers, advancement in artificial intelligence and machine learning promises large opportunities both in domestic and global markets.
Implementation of fiber-to-home globally, BharatNet Phase III, and the PLI scheme, alongside initiatives for promoting semiconductor manufacturing in India, will fuel long-term growth and encourage indigenous manufacturing.
In the last few years, HFCL has relentlessly focused on R&D and innovation. The company has entered into strategic partnerships with global tech giants and also invested in enhancing capacities and capabilities, thereby making your company future-ready. Our comprehensive new cutting-edge products, such as first Indian IPR-owned and made in India 5G Fixed Wireless Access Customer Premises Equipment, unlicensed band backhaul radios, switches, MPLS routers, open-source Wi-Fi 7 access points, new generation defense products such as electronic fuses, thermal weapon sights for assault rifles,
light machine guns, and rocket launchers, ground and coastal surveillance radars for various range and applications, TI cores for thermal sights, next-generation optical fiber and optical fiber cable, among others, will drive sustainable and profitable growth. We strongly believe that our investment in R&D, leading to innovative telecom and defense products, coupled with global expansion, will reap dividends in the near future.
Having ended FY2024 at a pivotal note, we have commented on the current fiscal with a significant positive decision from the European Commission. In a landmark verdict on 14 June 2024, the European Commission has decided not to impose anti-dumping duty on optical fiber cables manufactured by HFCL and its subsidiary HTL, whereas provisional anti-dumping duty has already been imposed on all other Indian optical fiber cable manufacturers. This significant verdict by the European Commission places HFCL in a formidable position to tap growth opportunities in the European market. This also speaks of fair business practices followed by HFCL. The demand for our designed communication equipment has also shown strong growth. We are witnessing strong demand for 5G Fixed Wireless Access Customer Premises Equipment, which presents an important use case for telecom operators for enhanced revenue from 5G networks.
HFCL has developed various Made in India Fixed Wireless Access Customer Premises Equipment variants to meet diverse country-specific needs, positioning it to supply both to domestic and international markets. HFCL has already received an order worth INR 623 crore for this equipment. Friends, HFCL has made remarkable advancements in wireless technology by designing new generation point-to-point unlicensed and backhaul radios. HFCL has developed radios that can transmit data much faster than traditional methods in unlicensed frequencies, reaching speeds up to 4 Gbps already, with plans to hit 4 Gbps soon. These systems can maintain speed over distances ranging from 10 km to 20 km. HFCL's UBRs are also more affordable compared to competing technologies like E-band radios and traditional microwave radios, making them a product of choice for telecom operators for backhauling their traffic for 4G and 5G networks.
These radios are also being used extensively for highly reliable enterprise connectivity. Our UBRs have tackled the challenge of interference in unlicensed bands with smart algorithms that cancel out noise, ensuring that mobile calls and data stay clear even in noisy wireless environments. Apart from being of lower cost, our UBRs also save significant spectrum costs for telecom operators by operating over long distances at significantly high data rates in unlicensed bands. HFCL has become the largest supplier of UBRs in India and one of the prominent global suppliers, having delivered over 5 lakh units globally. HFCL now dominates over 70% of the EVR market in India. Major private telecom companies have already installed over 1 lakh radios in just the last one year itself to handle their 5G network traffic.
Sanchar Nigam Limited has also placed an order for 30,000 of these radios on HFCL to backhaul their 4G network traffic. The BSNL radios are currently under installation. With HFCL's innovation in UBRs, the telecom operators are now able to provide high-speed, reliable wireless connectivity and lower CapEx and OpEx. HFCL expects large opportunities from this product in the near future. HFCL is now also developing point-to-multipoint unlicensed radios, which will have even higher market opportunity globally. With the introduction of new products and markets, our revenue from the telecom equipment segment is expected to rise substantially.
We expect the revenue from this segment during financial year 2025 to reach approximately INR 2,000 crores from just INR 143 crores in financial year 2024. I'm happy to share that during the Q1 itself, the company has already achieved a revenue of INR 401 crores from the sale of telecom and networking products.
As the transition to 5G continues and new technological standards gain traction, global telcos are predicted to invest $342 billion in their networks in 2027 alone, according to PWC report. This kind of large capex will support HFCL's effort to get higher revenue. In addition to the continued focus on the traditional telcos market, HFCL has also put a strong focus on the enterprise market. A dedicated sales organization has been created to serve enterprise customers, which includes banks, hospitality industry, educational institutions, and other bulk consumers of such equipment. As part of our strategy to deeply engage with both these segments, that is, telcos and enterprises, we are constantly working to add new products and cutting-edge technologies like artificial intelligence to our existing portfolio products with rigorous R&D initiatives.
On the defense side, India's defense exports have reached an all-time high, INR 21,000 crore in financial year 2024.
Our Honorable Prime Minister has declared his intent of making India a net exporter of defense products over the next five years. The focus on indigenization of defense products is creating significant opportunities for Indian companies like HFCL. HFCL is extensively working on the development of defense products for domestic and global markets. We have introduced a comprehensive range of defense products both for domestic and global markets. The domestic market size alone for HFCL's current products is expected to be in excess of $25 billion in the next six to seven years. Our comprehensive defense portfolio products include different types of electronic fuses, thermal weapon sights, Ti cores for thermal sights, ground and coastal surveillance radars for various range and applications, high-capacity radio relay, among others. Our electronic fuses for artillery ammunition have already undergone extensive trials and testing.
HFCL has already started receiving inquiries from several countries, and discussions are underway for the export of these fuses. We are confident to build a sizable order book of export for electronic fuses during the current fiscal year. HFCL has also participated in tenders for thermal weapon sights for assault rifles with its indigenously developed products. These products are currently in various stages of trials. Inquiries have also been received for the international market for these products. We are pleased to share that inquiries have also been received for the development of technologically highly advanced components of defense equipment-related subsystems from globally renowned companies. This shows the confidence of such companies in our capability to develop advanced technologies. Quotations have already been submitted against these inquiries.
HFCL, through its subsidiary Raddef Pvt Ltd, has been at the forefront of designing and developing a range of cutting-edge surveillance radars to meet diverse operational needs. Raddef specializes in the development of advanced radars and RF solutions. It has developed ground and coastal surveillance radars using frequency-modulated continuous wave technology. This technology offers numerous advantages, including high accuracy, low power consumption, less weight, and resistance to interference, making our radars highly reliable and efficient. Our surveillance radars have undergone extensive trials. We have participated in RFPs issued by ISRO for the coastal surveillance radar requirement. Recently, senior officers from the Indian Navy visited our R&D facility in Bangalore and expressed their appreciation for the progress we have made in the development of coastal surveillance radars. This acknowledgment itself is a testament to the quality and reliability of our technology.
Our ground surveillance radars are also under trial by the Army, paramilitary forces, and Border Security Force. Our drone detection radar is also in an advanced stage of development. Its field trial is expected to start by the end of Q2 of FY2025. As already informed, HFCL has successfully cleared the User Trial Readiness Review for the armament upgradation project of the Indian Army's BMP-2 Infantry Combat Vehicle. The RFP for this project is expected soon. The wire harness business unit of HFCL, a subsidiary company, has been consistently performing well by supplying harnesses for power distribution units, auxiliary power supply units, and wire harness assemblies for various defense programs like fighter aircraft, battle tanks, armored personnel carriers, missile launchers, towed gun systems, military radar systems, and military communication systems.
Friends, optical fiber and optical cable with fiber cable business remain a substantial and important part of our company's business. Presently, the global optical fiber cable market is going through a relative slowdown phase. Geopolitical situations throughout the world have had an impact on important aspects of business, that is, the cost of raising capital, the cost of logistics, large inventory built with operators, and delaying major government-funded programs have resulted in this temporary slowdown. Global operators have delayed their plans of expansion, waiting for the situation to get better.
It is expected that the global optical fiber cable market will start witnessing growth again from the last quarter of financial year 2024-2025. HFCL has taken steps to offset this slowdown by increasing its business and market share from passive connectivity solutions for optical fiber cable networks. This is a global market opportunity worth $68 billion.
Explosion of data centers around the world will further contribute to the expansion of this market. HFCL is concentrating its resources to increase its penetration in the passive connectivity solution market, both for telcos and data center segments. HFCL expects revenue of INR 250 crores in passive connectivity solution business in the current financial year, showing a substantial increase from last financial year's revenue of only INR 66 crores from this segment. Looking at its growth potential, HFCL expects to grow this business to INR 750 crores in the next two to three years. HFCL has also channelized its R&D resources to develop several types of new optical fiber cables, including tactical cables for different requirements. These initiatives, coupled with the upcoming BharatNet Phase III project, will lead to a substantial market opportunity for HFCL.
BharatNet is one of the most anticipated opportunities under which the government has already floated approximately INR 60,000 crore tender for capex to be incurred in the next three years, followed by an additional O&M opportunity worth approximately INR 40,000 crores over a period of 10 years. The entire funding for this project is being provided by the Government of India for the Universal Service Obligation Fund. The BharatNet Phase III project tender presents a huge opportunity to HFCL, as it will strengthen the demand for optical fiber cables, telecom and networking products, system integration services, and NVT revenue through O&M, all of which are in alignment with HFCL's core strengths. HFCL is uniquely positioned to offer end-to-end solutions that meet BharatNet's stringent requirements.
It holds good prospects for us, given our vertically and horizontally integrated manufacturing capabilities in optical fiber cables, its accessories, telecom equipment, and SMPS through one of our group companies, coupled with vast experience of laying more than 200,000 km of optical fiber cable for various telecom operators. We are optimistically looking forward to securing a substantial pie of this opportunity. In order to optimize operational efficiencies, better utilize resources, and to focus more on passive connectivity solutions, HTL Limited, a subsidiary company, has decided to discontinue the manufacturing of polymer compounds, which are now available from large Indian and international manufacturers at relatively lower prices. We also plan to integrate artificial intelligence into our telecom and networking products, which will enhance the experience for network services providers as well as end users.
The AI-powered equipment will help build a resilient network for people worldwide in all kinds of deployments. We believe that AI-based networking will provide more reliability and security to the end users. Our total order book today stands at INR 6,776 crores as of Q1 of financial year 2025. While our order book has been stable, revenue mix has favorably changed our product business. The revenue from private customers and international business stands at 51% and 9.82%, respectively. HFCL is eligible to avail production-linked incentives for telecom and networking products.
We expect to start receiving PLI benefits for the current fiscal year on the production of these products. Our company is focused on ESG initiatives and deeply committed to fostering workplace diversity and inclusion through various initiatives, fostering an equitable and inclusive environment. Friends, let me now brief you on the key performance metrics for Q1 of financial year 2025.
Revenue for Q1 of FY2025 is INR 1,158 crores as compared to INR 1,326 crores in Q4 of FY2024 and INR 995 crores in Q1 of FY2024. EBITDA for the quarter is INR 185 crores as compared to INR 209 crores inQ4 of FY2024 and INR 160 crores in Q1 of FY2024. EBITDA margin stands at 15% for Q1 of FY2025 as compared to 15.78% for Q4 of FY2024, and it stood at 16.04% in Q1 of FY2024. For Q1 of FY2025, profit after tax stands at INR 111 crores as compared to INR 109 crores in Q4 of FY2024 and INR 76 crores in Q1 of FY2024. Net margin stands at 9.55% in Q1 of FY2025 as compared to 8.25% in Q4 of FY2024 and 7.59% in Q4 of FY2024.
Segment revenue for telecom products during the quarter stood at 61.42% as compared to 27.33% in Q4 of FY2024 and 66.56% in Q1 of FY2024. As I have mentioned, the demand for optical fiber cables is in a temporary slowdown phase, which has impacted our revenues for optical fiber cable business in FY2024 and also in Q1 of FY2025. We anticipate that optical fiber cable demand will be restored from Q3 or Q4 of FY2025 onwards, both in India and key global markets. However, I am happy to share that with our diversified product portfolio in telecom, optical fiber cable, and passive connectivity solutions, the company has been able to sustain and grow its performance.
We are confident that our focus efforts in increasing our product portfolio in telecom, optical fiber cables, passive connectivity solutions, and defense products, along with capacity expansion, rapid integration, expansion of customer base, and entering new geographies, are set to drive revenue growth, margin expansion, and optimum usage of working capital resources. We are upbeat about tapping opportunities ahead and look forward to a strong year with great optimism. Thank you once again for your keen participation. With this, I conclude my opening remarks and open the floor for a question-and-answer session. Thank you very much.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on the touch-tone phone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Balasubramanian A. from Arihant Capital. Please go ahead.
So we target price-related comments. Good evening, sir. Thank you for taking my question. My first question: HFCL has decided to discontinue the manufacturing of polymer compounds. So what is the revenue and margin in that business, and what kind of impact can we see for these discontinuations?
Yeah, you know, first of all, there was no revenue for polymer compounds. It was being used internally as a backward integration for the manufacture of optical fiber cables. So it was remaining within the company. So there was no revenue.
The reason we have discontinued manufacturing is that worldwide, the major refineries like Borouge or LyondellBasell and all such refineries, they have increased their production of such compounds, and they are manufacturing huge quantities. So their cost of production is much lower. What we have now seen is that these compounds are available at a lower price from these refineries rather than we manufacturing ourselves. The price difference has gone roughly about INR 6 per kg. If you buy from the market, they are cheaper by about INR 6 per kg. So there was no point in continuing to manufacture these compounds once we have ourselves been able to buy it from outside the market. That's why we are closed. So there was no loss of revenue in this case. Right, sir.
I thought, like you have mentioned about electronic fuses, which are the regions that are witnessing order inquiries for electronic fuses.
We have received the inquiries and their advanced stage of discussion, mainly from European regions, and we expect good results very soon.
Got it. From this HFCL project side, we have cleared user trial readiness review. So what's the next step for this project's access opportunity? Look, UTRR has been cleared up. Next step is floatation of RFP, that is the tender, which is expected soon now, maybe 1 or 2 months, which is expected soon. Only 5 companies have been shortlisted, as I might have informed you earlier: Tata, L&T, HFCL, Government's own factory, and I think one more company. I don't remember the name, but only 5 companies have been shortlisted. And HFCL has cleared all kinds of user readiness: night firing, missile firing, gun firing.
I think we have been the most successful in UTRR.
Got it. Also, the final question regarding what you mentioned, the slowdown you continued on optical fiber and optical fiber cables there. So what is the realization point of view in this quarter? And any changes in the CapEx? What are the progress? And is there any changes in the funding mix? And you mentioned about this NOIDA plant eligible for PLIs. What kind of CapEx we can expect? And now for. If you ask me 10 questions in one row, then I would not be able to answer. Okay, got it. I'll come back and.
So no, no. You can ask me a question on optical fiber cable, but you ask 10 questions in the same question. It's very difficult to be quick. So ask one by one. Okay. So you can. Slowdown in the optical fiber cable market.
Yes, there is a slowdown globally, which I have been very transparent about. Reasons also I've shared in my opening remarks. But one thing needs to be appreciated that we have taken steps to see that this slowdown does not impact our business on an overall basis. One, it includes that, as I said, passive connectivity solutions where we are increasing our revenue to INR 250 crores from something like INR 60,000, INR 60,000, INR 70,000 crores of last year. And we expect in two to three years' time to grow to INR 750 crores.
And in any case, by that time, the optical fiber cable market in the next two to Q3 would have picked up in any case. So this will add up to our revenue. Moreover, overall company, as I mentioned, huge increases there in the revenue of telecom products from last year's about INR 140 crores.
This year will be going to INR 2,000 crores. So within the various diversified product range of the company, these ups and downs happen in different segments. But the important point is that the management has foreseen this, taken adequate steps to have such a product range that the company's revenue is sustained and also grows. This year, for example, you will see a reasonable increase in the revenue of the company from 25%-30%. So which is possible despite the slowdown in optical fiber cable business because the revenue from other segments is increasing substantially.
Got it, sir. From the price realization side.
Sorry to interrupt, Balasubramanian sir, but we request you to return to the question queue for the follow-up questions.
Sure, sir. Thank you.
Thank you. The next question is from the line of Siddhant Singh from Green Portfolio. Please go ahead.
Hello, sir.
Am I audible?
Yes, yes, yes, yes.
Sir, so my first question is regarding ammunition fuses. In last quarter, you told us that you are into the trial zone. Within a few months, the Indian Army will start trying the ammunition fuses. So what is the update regarding that?
Look, as I said, we are concentrating right now on the export market. And while the Indian Army is expected to float some more tenders, which we will definitely participate in, the export market has given us good traction. And soon, we expect to receive reasonable-sized orders from the export market. So our concentration right now is more on the export market because the Indian Army's tenders will come. They will decide it. It will take time, some amount of time. But the export market order booking may start much sooner.
Okay, sir.
So we can expect in this financial year itself, we will start generating revenue from the ammunition fuses from the export market?
Look, we will definitely start having good orders soon. Revenue, I would say that they may start from the Q1 of the next year because of the building of infrastructure and all that. We may take a little bit of time. We may be able to start at the end of this current financial year or maybe in the Q1 of the next financial year. But there will be substantial revenues coming from the different segments.
Okay, sir. And sir, my second question is regarding the recent budget allocation. BSNL has got around INR 83,000 crore of allocation from budget. So, sir, as we are getting many orders from BSNL, what are you expecting this huge amount of budget will get benefited to our company?
How can we expect how much order we can expect from the BSNL side for this financial year?
Look, I can't quantify what kind of orders we will receive, but we have good hope from BSNL. The reason being, one, the government is making full effort to revive them, and a good amount of budgetary support is being given to BSNL apart from their own revenues. Moreover, with this improved financial position, BSNL's payment situation for their own tenders has improved substantially. What we earlier had a situation where payments were not coming from BSNL, now BSNL is releasing payments twice a month, which is a very much improved situation than what we had experienced last year or even in the beginning of the current year.
So we have good expectations from BSNL, not only from their own requirement but from the BharatNet Phase III also, which is the tender which has been floated through BSNL, where it's approximately INR 60,000 crore of CapEx. And the entire funding, this is no BSNL funding. The entire funding is coming from the Government of India through USOF funds, which has got a substantial amount of money already with them. So payment would not be a problem in BharatNet Phase III. So BSNL, yes, it presents a good market opportunity. And it is really beneficial to companies like us because BSNL always buys indigenously manufactured products from indigenous manufacturers.
That is a great advantage to us because with the preferential market access regime where indigenous manufacturing is preferred, and also at the same point of time, improved payment position of BSNL, I'm sure HFCL will be able to get good order books from BSNL in the current financial year and following years also. It's not possible to quantify exactly the amount, but I am sure that the market opportunity in BSNL would be reasonable for telecom equipment as well as fiber optic cables.
Okay, sir. So I have one last question regarding optical fiber. Sir, as we are expanding our manufacturing capacity in optical fiber, do we have any future plan to install our in-house preform plants? If we will have our own in-house preform plant, then our operational efficiency will increase. So do we have any plan for installing that?
Look, we are under discussion for this because it involves reasonably large CapEx. So we are discussing at this point of time the capacity which we should install and the CapEx per ton or per kg, whatever you call it, of a plant which should be there to make it economically viable against the purchases. So it's a make versus buy decision, which is under evaluation at this point of time. And whenever this evaluation is completed, which we expect should be near future 1 or 2 months, we will definitely be working on this. And if we find it economically more viable to manufacture, substantially viable to manufacture, we will definitely do that. And moreover, it's not only economic viability. There's also the sustainability of raw material supply in the situation where the market demand goes very high.
We have seen in the past that the price of preform also goes very high, reducing the margin for the manufacturers of fiber and cable. This plant kind of backward integration offers more sustainability also. So all these things are being under discussion very actively. And maybe in the next 1 or 2 months' time, we will take a final decision once we reach our expected CapEx per ton. And also, the sustainability aspect is also well understood. And then we will take the final decision. But I can tell you this is under active consideration at this point of time.
Okay. Okay, sir. Sir, can you give any ballpark number of how much CapEx we will need per ton? Any ballpark number? I would not really go on that at this point of time.
Let us wait for the next call when I would be able to be in a better situation to tell that. Right now, if I tell you any CapEx number, it's not good to divulge our position to our suppliers.
Okay. Okay. Thank you so much, sir.
That's it. And all the best for. Thank you. Thank you.
Thank you, sir. The next question is from the line of Aryan Oswal from Fintrust Capital. Please go ahead.
Hello. Am I audible, sir?
Yes, very well.
Yes, sir. So what is the scope of margin uptake as we are anticipating the revenue to grow from INR 143 crores to INR 2,000 crores? What was your first part of the question? So what is the scope of margin uptake as we are anticipating the revenue to grow from INR 143 crores to INR 2,000 crores?
Look, this revenue growth, it's INR 143 crores to INR 2,000 crores in the current financial year. It's majorly coming from the equipment of telecom products, which we are selling to private operators and BSNL both. And generally, the net margin is around 8%-10%, as you know. Added to that would be some benefit from PLI also. So this will definitely result in an increase in the margin with an increase in revenue. The percentage and revenue, you can calculate. These are my best estimates at this point of time. So it will be an increase in profitability as the net profit before tax remains around 8%-10%. And some benefit from PLI would result in this.
Okay. Okay. Thank you, sir. And sir, are there any plans or timelines in place to reduce the percentage of pledged shares in the near future?
Please say that again.
So are there any plans or timelines in place to reduce the percentage of pledged shares in the near future?
No, there are no pledge. There is no pledge, and there is no plan to pledge. There is no pledge of pledged shares.
Sir, it is showing 44%.
Yeah, yeah. There is a misnomer at that. We have brought in the notice of the stock exchanges and the depository also. When the shares are, we have given a non-disposable undertaking to financial institutions against loans taken by us. They are shown under pledge column. But there is no separate column for non-disposable undertaking. So it is a non-disposable undertaking by promoters rather than any pledge. This is a completely wrong format by the stock exchanges and depositories. This format needs to improve.
We have made several representations that this gives a completely misleading information to the shareholders that there is a pledge of shares. There is not a single share of the HFCL which is pledged anywhere. Let me be very clear. There is only non-disposable undertaking. There is no pledge.
Okay. Thank you for the clarification, sir. One last question from my side, sir. Sir, as we have a strong order book of INR 6,700 crore, what is the order execution timeline?
This is different in different orders. They range from immediate 1-month kind of supply, and they range for a 1-year supply also. So not 1 year. In most cases, it is something like 6 months to products in the case of turnkey projects, about 9 months to 1 year. And for O&M, operation and maintenance, that may be 5-6 years or maybe 7 years also.
So it is different. For the products and the time period ranges from 1 month to 1 year. For the O&M, of course, it's a continuous stream of revenue, which goes from 6 to 7 years.
Okay, sir. And sir, can you throw some light on the status of capacity expansion?
Yes. Capacity expansion is continuing for fiber in Hyderabad. The plant is under construction. Civil construction has already happened. Equipment installation is under progress. And for fiber optic cable also, it continues in each of the plants, of course. But we are also now working on, as you have seen our announcement, to produce internationally also. In Poland, for example, where roughly about 3.5 million kilometers of fiber optic cable capacity we are looking to create. So that is a separate decision. But yes, it is under progress.
Okay, sir. Thank you so much, sir.
That is all from my side. Thank you.
Thank you, sir. The next question is from the line of Ketan Athavale from Robo Capital. Please go ahead.
Hello, sir. Thank you for the opportunity. Sir, out of our total BharatNet tenders of INR 60,000-65,000 crore, how much will be the OFC component? How much will be EPC component?
OFC component, we are expecting a total it is being under some bit of a revision by government itself. But assuming certain numbers, we expect about something like 1,000,000 kilometers of optical fiber cable. So if you take a price of roughly about INR 50,000 per kilometer, so it's roughly about INR 5,000-6,000 crore of fiber optic cable opportunity, INR 5,000-6,000 crore, I would say. Double that amount would be EPC part of that, double or maybe a little more than that.
And then there will be equipment like routers and optical equipment and all those kind of things. They would also be there. So for cable itself, I would say roughly about INR 6,000 crores, INR 5,000-6,000 crores. Similarly, about the routers, routers and those kind of equipment would be similar numbers. And then the EPC portion. And also, certain equipment of products should be outsourced from other suppliers like ducts, which we don't manufacture. We're sourcing from others. They will also have some INR 5,000-6,000 crores. So INR 60,000 crore is roughly divided in these kind of numbers. Roughly.
Yeah, sure. And I just wanted to confirm you expect 25%-30% revenue growth this year. Is that correct?
Yes. We very much expect that. That is our best estimate at this point of time.
Looking at the products we have and the market opportunities here, tenders we have participated, and orders we expect. And sir, can you have revenue guidance for the next two years as well? So FY2026, FY2027. So I will not give any guidance. But I can say the way we are planning our products and the way we are planning diversification into defense and those areas, where products have now shown a lot of maturity, we expect that every year we should be able to grow by some 20%-30%. In three years' time frame, our telecom equipment business should be around INR 3,000 crores. Similar number would be the fiber optic cable. Similar number would be the EPC business.
So this is the kind of best estimation we have, looking at the market and our product portfolio and the market opportunities we see in front of us.
Okay, sir. And how much margin are we targeting?
So generally, as I said, profit before tax is 8%-10%. But now, if you ask me any guidance, there is no guidance. This is our best expectation.
Okay. And just one last thing. So what is our current capacity and how much are we expanding?
The current capacity for fiber is about 12 million fiber kilometers, which is getting into 25 million. Cable was 25, which is getting into 33.
Okay, sir. Thank you so much for answering my questions.
Thank you.
Thank you, sir. The next question is from the line of Hardik Vyas from A.T. Capital. From AT, please go ahead.
Hi, good evening, sir.
I had a couple of questions. The first one being, what is the status of the two orders that we had of INR 623 crore on the FWA and the second one of INR 1,100 crore? What is the execution in this quarter? What was the second question? One is the FWA. What was the second one? The other order that we had received of INR 1,100 crore, what is the status of the execution? Okay, okay, okay, okay, okay. I can tell you.
The FWA order, I expect the supply to start either end of this month or may not be end of this month, then August itself. The product is under final stage of some software changes decided by the customer, some small application-related changes, which is being done right now. Production line has already been set up, which has been approved by the customers.
We expect the bulk production to start maybe another 1 or 2, 2 weeks, maybe 2 weeks. That is our best expectation. In 2 weeks, bulk production will be starting. And we will be commencing our supply from the month of August itself. The whole compiled of this quarter. Yeah, go ahead, go ahead. So some part of this quarter, we'll see some revenue coming in from that FWA order. Oh, absolutely. Absolutely. Absolutely, we will see.
Okay. And we have not had any execution on the FWA order in the June quarter that we have seen. So say that again. In the June quarter, we have not seen anything from the FWA company. No, no, no, no, nothing in June quarter.
That's why I very clearly told you that we will start mass production from July end or August beginning.
Next 2 weeks' time, I expect the bulk production to start. So can we expect that to get over in this financial year? Or will it be spread?
Our best effort is to supply the entire quantity before the end of the financial year so we can get more of it.
Okay. Okay, sir. And out of the INR 400 crore of telecom equipment orders that we have had, could you split it up in Wi-Fi and other telecom equipment?
I don't have exact split available now. If you send your query in writing, I will give you the exact bifurcation of these numbers. But yes, there are orders for. I can tell you which are the items we have ordered. Orders are for Wi-Fi access points. A lot of orders for UBR. Like UBR has got a lot of traction.
We have developed such unique applications, use cases for this UBR that all the operators are preferring it. BSNL earlier had no plan to install UBRs for backhauling their 4G traffic. But once they saw commercial benefit and reduced CAPEX and OPEX, they are now demanding more UBRs and much earlier than what they had asked us to supply. Our supply program was, let us say, by November. They have taken the supply by June, July itself. And they want more. So we can give you speed, but there is requirement for UBR. There is requirement for optical equipment. There is requirement for Wi-Fi access points. Those all orders are there. Okay. Okay. So my second question is on the services. We have seen healthy margins of roughly 20% range for our services orders.
So is this a sustainable kind of margin or because we have booked our cost in the previous quarter?
No, look, there is no booking of anything. It's only as they approve, it happens. As they approve. So this is a variety depending upon contract to contract. Some cases where there is a contract which is highly manpower intensive or product intensive, in some cases, margin is much higher. Some cases, margin is just 8%-10%. Some cases, it is 20%-25%. Depending upon contract to contract, it varies. But on a longer term, in a longer term, if you ask me that what's going to be the overall margin on 20 contracts, I will keep it around 10%. And it may change. Sometime it may be more. Sometime it may be less. But generally, you should take it at PBT of 10%. PBT of 10%.
Okay. So, I think we had stopped taking any lower margin orders on the services side.
Yeah, you're absolutely right. Absolutely right. We don't take any lower margin orders of EPC. We have left away a number of these contracts because we are not interested in wasting our resources, manpower, trained manpower, as well as working capital on contracts which are of a lower margin. Okay. So my last question, why are our product margins so less? I think they are in mid-single digits. And what happened to our consolidated numbers? I think that is because of the optical fiber cable business being a little slow. Because I think on the consolidated, we are a little less EBIT than the standalone.
Look, basically, I tell you, the lower margin, the product business in some cases, it is mostly because of it happens product to product and time to time, depending upon competition. Sometimes strategically, you like to take order in the beginning of a particular product and a lower margin also because strategic reasons. So it differs from product to product and time to time.
There is no long-term particular margin you can predict that this would be the margin. As I said, generally, you can say the 8%-10%. And margin has been lower in OFC business, definitely, because of the reduced revenue and also decrease in the prices of the products globally. Because of less demand, the prices will go down. So there has been lower margin on OFC business also, which I said is a temporary phase. We expect to improve in next Q2 .
Okay.
And our export thing is the last one. Last one.
Yeah, last one. Export thing is INR 1,500 crores revenue target this year? No, it would not happen this year because, as I said, the global demand has gone down. So it will be considerably lower. And overall revenue from fiber optic cable business is expected India and abroad, both about INR 2,000 crores. We had about INR 2,800 crores two years back because of the lower revenue in the global market. But as I said, we have compensated it by increasing the passive connectivity solution market, which is part of optical fiber cable business only. And we have also compensated it by increasing our revenue from the equipment market substantially, from INR 140 crores to INR 2,000 crores.
I think companies' working management, my product heads and business heads deserve a great appreciation for diversifying the product range, which in spite of lower revenue, because of global circumstances, one of the major product areas, still the company will grow its revenue and profitability both in the current year.
Okay. That's all from my side. Thank you so much, sir.
Thank you.
Thank you, Mr. Hardik. 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 participants. The next question is from the line of Hitesh K. Patil from Kris Associates. Please go ahead.
Thank you, sir, giving me the opportunity to ask the question. Sir, my question is regarding that in the last month, the European Union has exempted HFCL from any kind of anti-dumping duties.
HFCL is the only company from India that has been given this exemption. So how can you capitalize on these things?
Look, this is a very good question. HFCL and HTL, both these companies, both of our companies only, they have been exempted from anti-dumping duties by the European Commission. There was a very extensive inquiry from the European Commission. I think hundreds of pages of documentation we had to send them. Then their teams came down to India from the European Commission. European Commission teams, they came down to India, sat in our factories in Hyderabad for maybe 10 days, around 7-10 days in HTL in Chennai, examined every piece of paper we had sent them by going into our SAP system to see that every information we have given is authentic and correct. Documents were verified, including suppliers' invoices, our invoices to the customers.
Finally, they came to the conclusion that HFCL has followed absolutely fair trade practices, HFCL and HTL both, and they have not dumped any material into the European market, which means we have not sold at a lower price than what we are selling in our local market. And also, we have not sold below cost. And therefore, there cannot be any anti-dumping duty on us. Whereas on every other Indian manufacturer, anti-dumping duty has been imposed from 8%-11%. So this opens possibility for us for a better competitive price to that percentage as has been imposed on others in the European market in competing with our Indian competitors and also Chinese competitors who will already face a much higher anti-dumping duty in the European market.
Sir, my question is still that in the monetary term, how much of the benefits can we expect from the revenue from the European Union because of these anti-dumping exemption benefits?
You have to look at this question as two aspects. Benefit one comes from competition. Second, it is the market position, which is also very important that what is the kind of consumption is there in fiber optic cables. Right now, there is a slowdown in the market on an overall basis. So it will be very difficult to tell you in a quantitative term that how much would be the benefit in the current fiscal year or the next fiscal year. But yes, at least I can expect increase in profitability to the extent the anti-dumping duty has been imposed on others.
Maybe some competitiveness, half of the percentage of the 10% or 11% goes in increased competitiveness, and half of it comes as a profitability. So it will all depend how much is the demand in a particular year. But it will result in increasing profitability and competitiveness both.
Okay. Thank you, sir. My last question is about that, sir, this PLI scheme announced by the government, sir, how much of the money will we be getting from that PLI and from when it will be started, tentative dates on about if you can?
Total is about INR 650 crore we'll get. And it is expected, not expected, definitely. We will start getting it with the current financial year itself because ours is not PLI, but DLI. It is Design Linked Incentive, which is 1% higher than the PLI. Ours is 6%, whereas others is 5% on an average.
So we will start getting it from this year itself.
Okay. Thanks a lot, sir, for your reply, sir.
Thank you.
Thank you, sir. The next question is from the line of Sanket Kapoor from Kapoor & Company. Please go ahead.
Yeah. Namaskar, Nahataji, and thank you for the opportunity. Sir, firstly, out of the total revenue from the telecom product of INR 615 crore, what would be the contribution from OFC, sir? We can answer this. Where this INR 615 crore number is coming up? Around 44% is coming from optical fiber cable and related businesses and 56% from telecom and networking products. Ajay. So Jain Sahib, the lower margins are attributed because of this higher percentage of or even a competitively higher percentage of OFC. That is the reason why we have.
No, no.
Margins are, I mean, on overall basis, it looks low because there has been extremely low revenue out of this optical fiber cable business. So that has a lot of pressure on the margin. So capacity utilization is just 45%-50% this quarter. So that is impacting the overall margin of this product segment. In the OFC segment, we have 45%-50% total capacity utilization levels for the Q1 ? Yeah, 45%. Yeah, roughly 45%.
And as I said, it is because of globally the market has slowed down. And it is not only HFCL. It will be every Indian company or every global company. This is the kind of slowdown is there. And looking at this slowdown, what we have done, as I said, one, increase our business on passive connectivity solutions, which will have multi-fold increase this year and multi-fold increase in years to come.
At the same point of time, developing products for data centers and concentrating on data center market. So what we are losing in optical fiber cable revenue can be compensated by these two areas. Optical fiber cable revenue from telcos to be compensated from PCS, that is passive connectivity solutions and data centers. But in any case, the demand for optical fiber cable from telcos is also expected to come back to its original situation by next Q2 because spending, which has gone down because of various reasons, as I explained, is possibly would pick up by the beginning of the financial year 2025. It is very well expected. All over the world, it will pick up because of higher FTTH deployment, higher disbursement of government subsidies.
In the US alone, the government subsidies for fiber optic cable to home is $61 billion, which has slowed down because of the current political situation, elections and all that, which is expected to again pick up from going from the Q1 of the new calendar year. So demand will pick up for fiber optic cable, and our revenue from that will also increase. Capacity utilization will increase. But also at the same point of time, our data center revenue and passive connectivity solution revenue will also go up. So in long term, this diversification increase in product range is going to be highly beneficial to the company.
Sir, as you are arguing on the point for passive connectivity solution and data center addressable market, what are our products which will be catering to these two segments?
If you could elaborate.
For Passive Connectivity Solutions, all products which are required to install fiber optic cable either underground or overground. All products, except the ducts we don't manufacture, distribution boxes, couplers, splitters, jointing boxes, all these kinds of products which are required for installation fiber optic cable, number one. When I talk of data centers, again, these kinds of installation material which are of a different level of quality because of high-quality requirements of data centers and high-capacity fiber optic cables. In telcos, you mostly require fiber optic cables starting from two fiber going up to 288 fiber, mostly. Nowadays, some demand is there for higher count of fibers also for FTTH solutions by large telcos internationally. But India, mostly, it is limited up to 288 fiber.
But in data centers, the demand is for more than 1,700 fibers per cable in each cable going up to 3,400, 3,800 fibers in the same cable. So these are very, very high technology and high count of fiber cable in the same high count of fibers in the same cable, which we are developing. Some 1,764 fiber cable we have already developed. Some 3,400 cable, 3,400 fiber cable is under development and under trial also. So these would be the equipment for data centers. But again, as I said, this would be used by some telcos also. So telcos, as well as data centers, would use this. PCS connections, connectivity solutions, there would be different grade of quality for data centers than the telcos which use for underground and overground purposes. And we will see.
Sorry to interrupt.
We request that you return to the question queue for follow-up questions as there are several participants waiting for the turn.
The next question is from the line of Purva Shah from Perfect Research. Please go ahead.
Congratulations for the good set of numbers, sir. I still have two questions. One, looking at the numbers for this quarter, we see that the tax rates have fallen. What is the reason behind that, sir? Our CFO would like to explain that. Maybe Mr. V. R. Jain, you can explain. Tax rate has fallen. What could be the reason behind that? So we had some long-term carried forward losses in past. And because of some non-strategic income on some of the investments which got listed recently, so we had to create that deferred tax asset.
So that is why it is a bit low, relatively.
Okay. Okay.
My second question was about the Poland Capex that we are doing.
What could be the completion guideline for that? Look, we are right now working on acquisition of land and all that, which is in advanced stage. The total Capex anticipated from that facility for about 3.5 million fiber kilometers equivalent cable is about INR 170 crore. About INR 170 crore. Okay. So I wanted a timeline about when could that Capex be actually commercialized? Oh, okay. Okay. Project we would expect is to be commercialized within the calendar year 2025. Calendar year 2025. Calendar year 2025. So in about six, seven months, it could be commercialized and in operation. I would say a little more than that. Nine months, something like that.
Nine months. Okay. Okay. Thank you, sir. All the best for the future. Thank you.
Thank you. Thank you, sir.
The next question is from the line of Dipesh Sancheti from Manya Finance. Please go ahead.
Yeah. Hi. Am I audible?
Yes. Yes. Yeah.
Most of my questions are being answered, but I just had a query regarding this recently, what happened with CrowdStrike all over the world. Do we see an opportunity here with our networking products?
No, no, no, no. This is a different thing which happened. Unfortunate thing. There is no opportunity lost or opportunity gained by us because of this. Because this is a failure of a cloud system, which was Microsoft, as we all know. Either there is no loss of opportunity or no gain of opportunity because of this for us. Unfortunate which happened. I was in the U.S. I had to go to some place. Flights just didn't go. There are thousands and thousands of people at the airport.
No place to even put your foot. So you all had to come back. It's very, very, this is one thing which tells you how good technologies are, but how bad technologies can be. One person acting in one company brought down the whole world on their knees. Can you imagine that? But no impact on us either way. Okay. So I had this discussion. Well, I'll wish all the very best for the future. Thank you.
Thank you. Thank you, sir. Ladies and gentlemen, we will take this as the last question. As there are no, I would like to hand the conference over to management for closing comments. Okay. So should I give my closing comments if there are no questions? Yes, sir. Yes, yes, yes. Good. So friends, I have outlined our performance of Q1 , our expectation for future.
Most important point I would again like to re-emphasize to all of you that the company is very optimistic about its growth in near-term and longer-term. The basic reason of that is we have concentrated on developing products ourselves, which our own IPR, which results in lower cost, though it means a lot of effort, a lot of hard work. With our own IPR, not only the lower cost, we can modify the products as required by the customer. As I just now said before a few minutes, fixed wireless access, customer wanted some modifications to be done to suit their installation practices and applications.
We have been able to do that. If I was taking technology from somebody else, it would not have been possible to make sure of that. Now, most important point is that we have created a diversified product portfolio within our product area.
Not that we have gone into products which are not related to us. All are either telecom or electronic defense electronic products. Now, in fiber optic cable business, if there was a slowdown, we have taken steps to go into passive connectivity solution data centers. We have created good product range of defense products, good product range of telecom products. So with this kind of a diversified product range, we are insulated from any downtrend in any particular segment. Downtrends can happen. Can happen on any of the segments at any point of time. That's a phenomenon in every business.
But the good part is that management should be able to foresee all that and take steps to broaden the product range so that any downtrend in any particular segment does not impact the overall performance of the company and the growth keeps on happening.
So those are the steps we have taken in the last couple of years. Now they are showing results. As an example, INR 143 crore of revenue last year in telecom products is going to INR 2,000 crore this year. In spite of slowdown in cable market, our revenue performance would not be impacted. These are the steps we have taken to make sure that our growth is sustainable as well as its rather profitability and revenue both increases. Now, another important point is the defense products. We spend a lot of efforts and money also to create a defense product portfolio, which is now showing results. I may be able to give some good news very, very soon in terms of acquisition of orders for defense products.
So what I'm trying to say, we look towards future a very good optimistic manner because of diversified product portfolio, because of increased product range, our R&D, and increased in customer base indigenously and geographically worldwide. Moreover, projects like BharatNet Phase 3 is also expected to give us much increased revenue in the next few years, though the tender is yet to be bid and finalized, but we expect good opportunities from that also. So good future lies for the company as the management best expects in near future and longer term. And we will keep on our stress on R&D, development of a diversified product portfolio within our range of products so that revenue and profitability growth both are sustained. Thank you very much, friends. And see you all again next quarter. Thank you very much.
On behalf of ICICI Securities, that concludes this conference.
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