Ladies and gentlemen, good day and welcome to the HFCL Limited Q4 FY24 Earnings Conference Call hosted by ICICI Securities. Before we begin, I would also like to read the disclaimer statement. 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 risks that HFCL's business faces. That could cause its future results, performance, or achievements to differ significantly from what is expressed or implied by such forward-looking statements. Investors are therefore requested to check the information independently before making any investments or other decisions. As a reminder, all participants' 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 this conference call, please signal an operator by pressing star zero on your touchscreen phone.
Please note that this conference is being recorded, and I've handed the conference over to Mr. Mohit Lohia from ICICI Securities. Thank you, and over to you, sir.
Yeah, hi. Good evening, everyone. Thank you, Neha. Thank you for joining us today for Q4 FY24 Earnings Call of HFCL Limited. First of all, I would like to thank management for giving us the opportunity to host the call. From the management side, we have Mr. Mahendra Nahata, Chairman and Managing Director, Mr. V. R. Jain, Chief Financial Officer, Mr. Manoj Baid, Company Secretary, and Mr. Amit Agarwal, Head Investor Relations. So without further delay, I would now like to hand over the call to Mr. Mahendra Nahata for opening remarks. Thank you, and over to you, sir.
Thank you so much, Mohit, and thanks everybody for joining our call. So time is very valuable, and I am thankful that you all could join our quarterly call for Q4 of financial year 2024, 2024, as scheduled. I'm delighted to welcome you all to HFCL's this earnings call for the fourth quarter for the year-ended financial year 2024. I trust that you got a chance to go through our financial results, press release, and investor presentations, which are available on the website of the company and also on the website of stock exchanges. Well, friends, it is a matter of great satisfaction that despite the tough global macro environment, Indian economy is having robust growth, and India is poised to become the third-largest economy by 2027 as per IMF, surpassing Japan and Germany.
During the interim budget of 2024, the Union Finance Minister underscored the forthcoming five years as a period poised for unparalleled development, aligning with the vision of Viksit Bharat at 2047. She highlighted that technology, alongside the telecom sector, will play a pivotal role in India's transformative journey. The Indian telecom sector is undergoing a transformative change and will continue on its expansion trajectory fueled by liberal government policies, proactive government initiatives focused on national priorities, including BharatNet phase III program and PLI schemes. Government's initiative of promoting semiconductor manufacturing in India will also fuel long-term growth of the telecom sector. Hyperscaling of data centers, increased smartphone usage, strong customer demand for high-speed internet connectivity, and 5G network expansion will further fuel growth of the telecom sector.
The economic impact of 5G in India's GDP could reach up to $450 billion by 2040, according to Deloitte's Technology, Media, and Telecommunications Prediction Report 2023. Financial year 2024 has indeed proven to be a pivotal year for HFCL. Our strategic investments in research and development have yielded significant returns, resulting in the introduction of a comprehensive range of 5G connectivity solutions and products tailored specifically for telcos and enterprises, both in India and across global markets. Led by innovation in financial year 2024, HFCL successfully launched the first made-in-India 5G fixed wireless access customer premises equipment portfolio, then 1 Gbps unlicensed band radio, also IP MPLS routers, and introduced innovative 1,728-fiber intermittently bonded ribbon cables. Our 5G fixed wireless access equipment gives market-leading performance in delivering higher throughput.
We have introduced hot swappability features in our routers, making them rugged for use in rural areas in projects like BharatNet. Overall, I view the result of our R&D team has achieved is a milestone showing we have talent and capability to deliver the latest technology products. We believe demand for 5G fixed wireless access customer premises equipment is at an inflection point and has become an important use case for 5G monetization both in India and globally. With 5G network rollouts continuing, with streamlined monetization has been a key focus area for operators. Industry reports indicate FWA connections worldwide are projected to reach 350 million by the end of 2029. As the transition to 5G continues, newer technological standards gain traction. Telcos are projected to invest $342 billion in their networks in 2027 alone, as per PwC reports.
Every country has different types of specifications for fixed wireless access customer premise equipment. Our company has been able to develop different variants and types of this equipment and is uniquely positioned to manufacture and supply both for India and international markets. HFCL has already received orders for 600,000 units of this equipment. One of the landmark success stories of HFCL's R&D efforts has been the design and manufacture of point-to-point unlicensed band radios. We have achieved record market share for this product in India. More than 500,000 of these radios have already been supplied by HFCL and are working to the full satisfaction of telecom operators for network backhaul and enterprise connectivity. HFCL is not only the largest supplier of these radios in India but also can be counted amongst the leading suppliers around the globe.
We are continuously receiving strong feedback from our customers for its low power consumption and zero-spectrum costs. It is also worthwhile to mention that through its R&D and scalability efforts, HFCL has created a full solution of enterprise networking products. These products include Wi-Fi access points, routers, switches, backhaul radios, and network management systems. Having established its name in the telecom service providers' market, HFCL, with its enterprise product range, is now aggressively moving into the enterprise market of telecom networking products. Distributors and channel partners are being appointed throughout the country to reach the wide spectrum of enterprise customers, both in government and private sectors. Opening of this new customer segment will provide higher sustainability to our revenue. With the introduction of new products and markets, our revenue from telecom equipment segment is expected to rise substantially.
We expect that the revenue from this segment during financial year 2025 will reach approximately INR 2,000 crores from INR 150 crores only in the year financial year 2024. Driving growth through innovation is a fundamental trend in digital economies. These trends are bringing very large opportunities for innovation and growth, not only for HFCL but for the entire ecosystem. Similarly, the optical fiber cable market remains a significant opportunity both in India and globally, driven by high-speed internet penetration, 5G network expansion, growth in data centers, BharatNet phase III, demand for fiber-to-home and global opportunities in key markets coupled by government policies. Development and manufacture of 1,728 fiber-based optical fiber cables will open new market opportunities for sale to hyperscale data centers.
In alignment with our strategic expanding capacities and geographical access, HFCL has announced the setting up of an optical fiber cable manufacturing plant in Poland to address the increasing optical fiber cable demand in European markets. Mirroring the trends in the Indian optical fiber cable market, European countries are also on a significant digitization drive as a national priority. Committed to meet this growing demand and contribute to Europe's digital future, HFCL has committed an initial investment of EUR 15.9 million, that is, INR 144 crore, for its Poland optical fiber cable manufacturing plant, with an initial annual capacity of 3.25 million fiber kilometers, which is further scalable to seven million fiber kilometers per annum capacity. Our fiber and fiber optic cable manufacturing facilities in India are producing world-class cable and fiber. Our fiber manufacturing plant has set new standards of productivity.
One of the most anticipated opportunities on the horizon is the government's ambitious BharatNet Phase III project, under which BSNL has already slotted approximately INR 60,000 crore tender for CapEx to be incurred in the next three years, followed by additional O&M opportunity worth INR 40,000 crores over a period of 10 years. BSNL's BharatNet phase III project tender presents a huge opportunity to HFCL, as it will strengthen the demand for optical fiber cables, telecom networking products, system integration services, and annuity revenue through O&M, all of which are in alignment with HFCL's core strength. HFCL is uniquely positioned to offer an end-to-end solution that meets BharatNet's unique requirements.
We foresee good prospects for us given our vertically and horizontally integrated manufacturing capabilities in optical fiber cable, its accessories, telecom equipment, and HFCL as one of our group companies, coupled with vast experience of laying more than 200,000 kilometers of optical fiber cables for various telecom operators. We are optimistically looking forward to securing a substantial piece of this opportunity. Export our products is going to be our cornerstone for increasing revenue. HFCL is already exporting its manufactured fiber optic cable to more than 40 countries. With its own designed network connectivity solutions, including 5G networking solutions, HFCL is now poised to start the export of these products to a number of countries. The capability to customize the products to customers' requirements and also low-cost base provides positive outlooks for HFCL.
With the release of every new version of software tuned to customers' requirements, we improve our product performance. I think these opportunities are the tip of the iceberg, and there are far more opportunities to come. We are confident in the durability of demand drivers of industry and our own capability to take advantage of sales for increasing our sales and market share. Driven by vision to fortify national security and contribute to India's defense sector, HFCL envisions a significant opportunity for itself in the defense sector with innovation and ties with leading international companies. India accounts for 3.7% of global military spending, making it the third-largest military spender in the world after the U.S. and China. This presents a significant market opportunity to HFCL.
In alignment with government's Made in India policy, HFCL has already developed defense products like electronic switches, high-capacity radio relays, and thermal weapon sights, all of which have good demand in the Indian and international markets. HFCL, at its 90% owned subsidiary, Raddef, has developed state-of-the-art ground surveillance radars, which is an important component of modern surveillance systems. This radar design by Raddef is a vast improvement in technology over the current generation of radars being used in India. Our ongoing R&D initiatives extend to a diverse range of radar technologies, including the development of drone detection radars, Doppler weather radars, LTE-based passive radars, fog and foliage penetration radars, coastal surveillance radars, and avalanche detection radars. We have also successfully tailored a user trial readiness review for the BMP-2 armament upgrade project of the Indian Army, further demonstrating our commitment to meeting the defense sector's requirements.
This will lead to more opportunities and prospects for HFCL in the defense sector. We are also exploring opportunities for the development of more products in the defense sector, and we are confident that we will be able to further grow and contribute to India's defense sector with our own development and new alliances. I am of strong belief that in the current year, we will have good growth in the defense sector, and it will achieve its escape velocity. During FY24, the company added an incremental order book of INR 3,725 crores, comprising orders worth more than INR 1,500 crores and system integration orders worth INR 2,225 crores. Our product business has secured a purchase order of INR 623 crores for the supply of indigenously manufactured 5G networking equipment. It is the first such order for 5G networking equipment placed on any Indian company by any telecom service provider.
This strategic move is a testimony of HFCL's vision of designing and manufacturing high-technology telecom equipment in India. HFCL has been investing in building a portfolio of 5G networking equipment which transforms telcos' access and transport and last-mile networking requirements. HFCL also secured a purchase order worth INR 141 crore from BSNL to supply indigenously designed and developed unlicensed band radios in 5 GHz frequency band and 1 Gbps capacity. This landmark deal aims to build their 4G network infrastructure, ensuring cost efficiency by minimizing equipment expenses and eliminating hefty spectrum usage charges. This significant win solidifies HFCL's position as a leader in indigenous 4G and 5G backhauling solutions.
The system integration order book comes from a prestigious order valued at INR 1,127 crore from Bharat Sanchar Nigam Limited to transform the optical transport network infrastructure across BSNL's Pan-India network and position the telco for the future in anticipation of 5G services.
HFCL also secured INR 1,500 crore orders from Madhya Pradesh Jal Nigam, which encompassed system integration services including provisions for laying of optical fiber cable on critical and important routes. Further having added a strong track record in deploying communication networks for various marquee projects globally and domestically, HFCL also secured orders worth INR 80.92 crores from Delhi Metro Rail Corporation. These substantial wins underscore HFCL's sustained momentum and solidify its position as a trailblazer in advanced communication technology solutions. Our order book now stands at INR 7,685 crores as of 31st March 2024, as compared to INR 7,010 crores last year. I must tell you that behind these numbers is the relentless effort and work done by the entire team for the development of new features and product innovation. We are very structured in our approach to business. The product and sales teams are working closely than ever.
We remain incredibly focused on sales and growth of our market share. Further, HTL Limited, one of our subsidiary companies, has successfully secured various prestigious orders in its wire harness business during financial year 2024, with its focus on automotive, aerospace, and defense sectors. As you may be aware, this segment is of low CapEx and high revenue-generating segment. We strongly believe that this wire harness business can grow manifold in the years to come. Given that, HFCL has received an approval to avail incentive participation in the production-linked incentive scheme. The company will start receiving PLI benefits in the current fiscal year on the production of telecom and networking products. Friends, let me now brief you on the key performance metrics of quarter four and the whole year.
For the 12 months ended 31st March 2024, the company reported consolidated revenue of INR 4,465 crores as against INR 4,743 crores in the financial year 2023.
EBITDA of INR 682 crores as against INR 666 crores in FY2023. Profit before tax of INR 454 crores as against INR 431 crores in FY23, and profit after tax of INR 338 crores as against INR 318 crores in FY23. Revenue of quarter four FY24 stood at INR 1,326 crores as compared to INR 1,032 crores in quarter three of FY24 and INR 1,433 crores in quarter four of FY23. EBITDA for quarter four stood at INR 209 crores as compared to INR 163 crores in quarter three of FY24 and INR 160 crores in quarter three of FY23. EBITDA margin stands at 15.78% for quarter four in FY24 as compared to 15.83% in quarter three of FY24 and 11.74% in quarter four of FY23.
Profit before tax for quarter four of FY24 stood at INR 149 crores as compared to INR 108 crores of quarter three of FY24 and INR 109 crores of quarter four of FY23. Net margin stands at 11.2% in quarter four as compared to 10.45% in quarter three of FY24 and 7.6% in quarter four of FY23. For quarter four of FY24, profit after tax stands at INR 109 crores as compared to INR 82 crores in quarter three of FY24 and INR 79 crores in quarter four of FY23. Net margin stands at 8.25% in quarter four of FY24 as compared to 7.99% in quarter three of FY24 and 5.49% in quarter four of FY23. Segment revenue for telecom products during the quarter stood at INR 362 crores, that is 27.33% of quarter four revenue as compared to INR 364 crores, that is 35.24% of FY23 revenue.
FY23-24 has witnessed a slight decline in year-to-year revenue due to a softening demand of optical fiber cables. This temporary decline is in line with the worldwide trend. It is attributed to inventory buildup with major operators, resulting in an overall reduction in revenue in absolute terms. Our growth is driven by three independent drivers, which all are working together. These are robust investment in research and development, system integration with capacity expansion, and expanding national and international positions. With these growth engines, we have been able to significantly improve our revenue mix, product mix, geographical positions, and customer mix, ensuring sustainable growth in times to come. We remain confident in opportunities ahead and the execution of our long-term strategy, confident the OFC demand will be restored in quarter two of financial year 2025 onwards in both India and key global markets.
Furthermore, we are confident our continued effort in designing and developing innovative and geography-specific optical fiber cables for international markets, along with the introduction of new 5G telecom networking equipment and defense products, will further yield results in the coming quarters. These efforts are expected to provide impetus to both revenue growth and profitability, along with the potential of increasing our margin. Our outlook is very bright, and we look forward to a very strong year ahead. Friends, 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.
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 their touchscreen telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Parth Mehta, an individual investor. Please go ahead.
Sir, I have a couple of questions. The first one is, this time, we have executed services turnkey services worth some INR 990 crore. So I wanted you to shed some light on that, as in we have done better on services margins front as compared to products. And is it the way forward, or are we going to is this a one-off kind?
Look, yes, we have executed INR 964 crore of services in the current quarter, and margins have also been good. These margins, I cannot give you a definitive answer that this is a trend that will continue or there will be a difference because this all depends upon contract to contract. Sometimes, contracts are there which are of high margin, high profitability. Sometimes, they are of lower margin and lower profitability. So there cannot be any definitive answer to this. But yes, we look for reasonable margins to continue in our contracts, and we are not taking contracts which are of a lower margin.
Okay. So is this anything to do with the orders that we have got from BSNL worth INR 1,100-odd crores? Is it execution on that front, or?
No, no, no, no. Execution of that order would be in the current year. That execution has not even started significantly.
Okay. That would start in this quarter, June quarter, or it will take some more time?
No, no. It will start in the current quarter, in the June quarter.
Okay. And the mix of products and services would remain 70/30 going forward whenever, as in when the optic fiber cycle turns?
No, I think this year, there will be a very transformative change. One of the important factors which is going to happen, as I said in my opening remarks, last year, the revenue from telecom products was only about INR 150 crores. This year, we are expecting revenue of INR 2,000 crores from the telecom products. So INR 150 crores reaching to INR 2,000 crores.
Is that INR 2,000 crores ex-OFC, or?
No, no, without OFC. That's the use of our telecom products. Now, OFC also, we are expecting revival of market this year globally and India also, most of globally. And we expect a revenue, again, more than INR 2,000 crore in the current financial year from optical fiber cable business. So there is a potential of product business reaching to INR 4,000 crore+ in the current financial year, which would mean that our revenue would consist of more than two-thirds of the product-driven and less than one-third of project-driven. And this trend is expected to continue in the future. If you recall that I have always been saying that our effort is always to develop the product business, not as much the project business. Last year was an aberration because of lower demand of fiber optic cable. And new products had not been sent to market.
They were undergoing test trials and all that. With the new telecom products, which have been designed by us, already in the market now and also fiber optic cable demand picking up and both these segments giving a revenue of possible revenue of INR 2,000 crore each in the current year, this would be a very, very transformative change. With almost 70% of revenue coming from product business, which is cable and telecom products. But the important point is, first time we will have such a high revenue coming from telecom products.
Okay. My last question is, have we executed anything from Madhya Pradesh Jal Nigam order that we have received?
Very small portion. Probably about INR 50 crore. Around a little less than INR 50 crore.
Okay, okay. And the BSNL order that we have, INR 1,100 crore order, that is a mix of products and services, right?
Yes. It's a mix of products and services.
Okay, okay. Thank you so much, sir. That's all from me.
Thank you.
Thank you. The next question is from the line of Balas ubramanian from Arihant Capital. Please go ahead.
Good evening, sir. Thank you so much for taking my questions. Sir, my first question regarding, we have seen a lot of strong tower additions by one of tower infra players, majorly led by rural expansion and 5G rollout. And sir, what kind of demand and business opportunities do we have in this tower rollout? And what kind of business share do we have from telecom players like Jio, Airtel, Vodafone, and BSNL?
Look, tower rollout companies like Indus Towers or these companies do not represent any major demand opportunity for us because tower is more construction of towers, which we don't do so much, and also not so much of fiber optic cable and all that. So that does not represent any great demand opportunity for us, a tower per se. But when you ask about telcos, who are themselves building towers like Jio, for example, they have built this demand opportunity for us because they connect all their towers by fiber optic cable or wireless. Both these areas, we are present, and we supply equipment to telecom operators, whether it is fiber optic cable or whether it's backhaul radios. They are really the demand opportunity comes from us because typically, tower operators do not provide transmission, neither fiber nor wireless.
They just provide a tower, and the equipment is fitted by the operators. So our segment is the telcos, not the tower operators. So if there is an increase in towers by telcos, there is strong demand opportunity for us, and we will continue to receive such orders.
Okay, sir. Sir, on the press release, like V.R. Jain mentioned, inventory buildup will clear from Q4 FY23 onwards. So what is that triggers are there to clear those inventories on operator levels? Especially, you can share what kind of environment in Europe, US, and China, and other markets.
Look, inventory would get cleared up with this increase in demand of fiber optic cable. With this demand increasing, this inventory will automatically get cleared up.
Okay, sir. Sir, on the price levels for hello?
Yeah, yeah. Go ahead, Mr. Balas ubramanian.
Sir, on the price levels of optical fibers and optical fiber cables, earlier, V. R. mentioned in the calls around optical fibers around INR 250 per fiber kilometer and OFC side.
No, no, no. INR 250 was the fiber, not cable.
Yes, sir. Fibers and OFC is around INR 950 levels. So what is the price range right now? Have you seen any improvement?
This fiber price, you mean around the same INR 250, INR 260 per kilometer? Almost. You can say that INR 250-INR 275, depending upon who is the manufacturer and how good is quality and all that. And fiber, as far as this is concerned, cable is concerned, it is around INR 1,000, around INR 1,000. Some will have a little bit more. Some will have a little bit less. But it is around INR 1,000 per fiber kilometer of cable.
Okay, sir. No problem. Sir, on that Poland plant, you mentioned around EUR 15.9 million. It's a Euro or dollar terms?
Euro, euro, euro.
Euro terms. Okay, sir. So in this 3.2 million fiber-kilometer capacity, what kind of peak revenue potential in those plans?
About INR 350 crore.
INR 350 crores. This scaling up to 7.5 million cable when it's expected, sir? 3.2 million and 7.5 million, any timeline?
I could not understand your question. Be a little clearer when you speak.
No, sir. Execution timeline for those capacity completion.
Yeah. The 3.25 million capacity, we are targeting to start manufacturing from April of next financial year.
Okay, sir. Sir, and overall, we have seen that when we can expect these large order inflows from new telecom products and defense side. Could you share?
We already have significant order book for our telecom equipment products. Of the INR 2,000 crore revenue I am expecting, we have more than INR 1,500 crore worth of order already in our hands, more than that, about INR 1,700 crore. So expectation of INR 2,000 crore of revenue from these telecom equipment products is not a problem at all. In fact, we may be much higher than INR 2,000 crore, which I am not projecting. But when you have INR 1,700 crore worth of order in hand, the whole year is there. 11 months of the year are still left. You can definitely expect more orders, which would be executed in the current year itself.
So there's already a robust order book. And I expect, as we start supplying of some equipment like fixed wireless, fixed equipment, as I mentioned, of INR 600 crore it is ordered, I expect more orders to come.
And also, export is a good potential for this equipment. There also, I expect reasonably good orders. So order book is already there. But as we supply, we keep on getting more orders.
Got it. Okay, sir. Sir, on that balance sheet, we have seen capital work in progress around INR 154 crore. How much CapEx we have spent in this financial year and how much we are planning for FY 2025 and 2026?
So we have already spent about INR 140 crores of CapEx in this financial year. Total CapEx expected to be this year and the next year, two years now I am talking about, is about INR 900 crores.
Okay, got it, sir. Okay, sir. Thank you, sir. Last question. Any plans to enter in internet cable?
Thank you, sir. I request you to come back for a follow-up question.
Yes. Thank you, Manoj.
The next question is from the line of Himanshu Jain from Tiger Assets. Please go ahead.
Hello?
Yeah, please go ahead.
Am I audible, sir?
Yeah, you are audible, Himanshu, perfectly audible.
Congratulations on a great set of numbers, sir. I have two questions. One, what is the expected order book completion timeline? And the second one being, what is the expected rollout time according to you for 100% 5G rollout in India?
Look, the expected timeline of orders is different in different orders. There are so many orders. It's not one order. So, for example, this order of fixed wireless access, we expect about five months timeline to complete that, about five months now. This can be six. This can be four. For BSNL order for INR 1,100 crores, we take at least eight to nine months time for completion. Certain orders for these 20 contracts, we expect about one year to complete. So different timelines are there for different orders.
The BSNL order for UBR, we expect a timeline of three to four months to complete. So this extends from three months to 12 months, different orders and different timelines. And your second question was, when would the 5G network deployment get completed? Himanshu, this is network deployment never gets completed. It always continues. As the subscriber increases, more number of towers are required, more number of base stations are required, more connectivity solutions are required. So this keeps on going on. And while this is going on, there is a change in technology. Like 4G happened, then 5G has happened. Earlier, 3G was there. 4G came. After that, 5G has come. 5G is there. Now, 6G will come. So this will ever continue. This is not going to change at all. And this is good for us. Imagine there was nothing after 4G. There is only 4G.
Then the demand would be much less. There would be no demand of new equipment, new technologies, new equipment. So 5G has come. There is all of a sudden increase in demand of equipment, increasing demand of services. 6G will come. It will further increase the demand and demand for equipment and services both. So this cycle will keep on continuing forever.
Okay. Thank you, sir. That's it from my side. I hope this is for the future.
Thank you.
Thank you. The next question is from the line of Siddhant Singh from Green Portfolio. Please go ahead.
Yeah, Mr. Siddhant?
Yeah, yeah. I'm audible, sir.
Yeah, Mr. Siddhant, you are very audible.
Sir, my first question is regarding your defense product. So could you provide an update on the current status of the defense products that are under development and what we can anticipate about contributing them as a top line of our business?
Siddhant, let me answer your first question. Products, we have electronic fuses which are now completely ready. We have already produced 200 fuses for trial testing in army's firing ranges. We have already deposited almost INR 2 crore to buy ammunitions for trial. We ask for firing range. It needs to be fired with air force guns and similar kind of guns. So you need a firing range of 30km-50 km without hesitation. So we expect that to be given to us sometime either end of this month or the next month. The test firing will happen by the Indian Army. We see very good potential for this product in India, but more than in India in export market.
I have not really budgeted anything in my projection for the next year or the current year, but still, though not budgeted in AOP, but I still see a very good future for this product for export even in the current financial year. As people have come to know that we are going to produce fuses, I have already started receiving inquiries for lakhs of fuses, for lakhs of fuses. I am already receiving inquiries. So there is a huge demand potential for these fuses from export market, which would be running into hundreds of INR crores, hundreds of INR crores. I am already receiving inquiries, which I am not responding back right now except general discussion. First, I want my fuse to be tested and all approved, which is certainly going to happen.
But demand potential is very high, more outside India than in India because of the global geopolitical environment, which is happening, as you know very well. So I have a huge demand opportunity for fuses in my hand, number one. Number two, thermal weapon sights, which is in layman's word, night vision devices for the assault rifles, machine guns, and rocket launchers. We have participated in a number of tenders, which are undergoing trial right now. When the trials are over, then, of course, tenders will be opened, and we expect to receive some orders for that. Then we have radars, high-capacity radio relay. Radars, as I shared in my presentation, is developed by our subsidiary, 90% owned subsidiary Raddef, located in Bangalore. Those radars have been designed for various kinds of applications. And this ground surveillance radar, for example, is a real breakthrough in technology.
Currently, the radars of similar kind being used are weighing 30-35 kgs. What we have designed with better features and better performance is weighing only seven or eight kgs. One man can lift and take it anywhere. So you can imagine the kind of technology innovation we have done. Now, the Ground Surveillance Radars have got different variations also, Coastal Surveillance Radars. We are talking to many other defense establishments for the supply of that. I cannot name them now, but we are talking. We have another radar coming up in the next six months' time or so, Drone Detection Radar. You know how important the drone warfare has become in current times. Whichever fight you see happening, war happening anywhere in the world, drones are becoming an important method of attack. Now, therefore, detecting incoming drones is a major issue.
So our drone detection radar, which is under development and is a final phase of software development, that will, again, have the ability to look into 10 km, and 100 objects can be detected simultaneously. So that is happening. Radio relay is another equipment, which is required by army, high-capacity radio relay. Then for the defense, we have just installed new machines in our fiber optic cable manufacturing facility in our subsidiary HTL, which is going to be these two machines are going to produce a special type of fiber optic cable required by defense forces. If even a tank rolls over that cable, nothing happens to that cable. So that kind of a cable we will be manufacturing, which is called tactical fiber optic cable for use by the army in the field. So these are some of the defense products I just mentioned.
Apart from that, in a system integration business for defense services in defense electronics, we have already gone through user trial readiness review by the army for upgrade of armored personnel carriers BMP-2. We are completely successful in that. Now, tender would come. We will participate. Trials will happen. Then only we will see the size of the order, if we win. But yes, these are the opportunities ahead of us. And as I said, as much as the opportunities in Indian market, India being the third largest defense spender, with about $90 billion of spending every year, there are huge opportunities in the export market also. So I look forward to defense business quite optimistically. But I have not projected any revenue from that in the current year. But I certainly hope we will get revenue in the current year.
May not be very big because these trials and all these things will happen. But next year onwards, I expect defense revenue to reach to higher three-digit numbers.
Okay, okay, sir. Sir, do we have confirmation for ammunition fuses for their delivery in next month? Sorry.
No, no, no. I didn't say next month. I said trial in next month, not delivery. Trial fuses are ready. They are ready.
Okay, okay, sir. And what is the average? Can you give me the average price of a fuse per fuse?
They are very difficult. There are nine different kinds of fuses, nine different kinds of prices. There is no single price. Price is also very market to market. In India, it is something. In export, it is something else. But in general, I can say they are from INR 5,000-INR 20,000.
Okay. My last question is that you have any plan or tools?
For iteratively, sir, I request you to come back for follow-up questions. Ladies and gentlemen, in order to ensure that the management is able to address the questions from all participants, please limit your questions to two per participant. The next question is from the line of Rajesh Agarwal from Moneyore. Please go ahead.
Hello? Yeah, Mr. Rajesh, please.
Thank you. Sir, when will the substantial part of telecom products, new products, come into revenue?
This will start from this quarter, but from quarter two onwards, it will be substantial part coming up.
Okay. It will be optical fiber or new products?
No, no. As I said a little earlier, it is going to be equally divided in optical fiber and the equipment both. It is going to be our estimation is that it will be INR 2,000 crore from optical fiber cable or a little more than INR 2,000 crore, and similarly, INR 2,000 crore from equipment. This is going to be very, very transformative this year, Rajesh. Now, first time, we have a four-digit number on equipment business in the company.
The combined margins, or combined margin will be around 18%-19%? No?
Sir, not. We are talking of net margin, gross margin, or?
No, EBITDA, EBITDA margins.
EBITDA margin would be something like, I would say, 15% or so, 15%-17% depending upon order-to-order situation.
There will be a contribution from Turnkey projects also, what we did in this quarter?
Turnkey projects. What was your question?
This quarter, there's a substantial revenue from turnkey projects. So going forward also, turnkey projects also will contribute?
Yeah, current year, we are looking at turnkey projects of about INR 1,250 crores + 500 crores, about INR 1,750 crores-INR 2,000 crores.
2,000. So the combined revenue for 2024/25 may be INR 5,000-INR 6,000 crores?
I would not do any forward guessing, but at least I can tell you we can expect INR 2,000 crores from equipment business, about same from fiber optic cable business, and again, same from Turnkey. Within that, order for INR 1,700 crores are already in my hand for equipment business. Cable orders keep on being received in small sums. It never comes in INR 1,000 crores or INR 1,200 crores or something like that. But with the revival of market, INR 2,000 crores+ seems to be quite certain. And on the Turnkey side, wait a minute. On the Turnkey business, we already have orders worth about INR 1,200 crores in hand. And there is a regular business from one of our customers, which is from last 10 years, it is coming INR 500 crores every year. That should continue. So that INR 2,000 crore is more or less assured.
So if you count all these three, two, two, two, you can guess the number yourself.
Sir, what is the reason you are so bullish on the optics side, but the traction has not been coming for the last one or two years?
Look, I tell you, no, not one or two years. Only one year. Last year, last to last year was very good, a revenue of INR 2,400 crores. This year, what happened, in anticipation that the demand would be very high, the operators and distributors had accumulated stocks. Demand did not go up that high for geopolitical reasons, overall effects, and all that. As a result of that, operators as well as distributors had a lot of stock with them. So that reduced the demand in the current year with a lower consumption and stock in hand. It reduced the demand. Now, that traction has started coming back again in the U.S. Demand has already increased. You have seen a statement by Corning pretty recently, two, three days ago. They are also seeing the same thing. And we are also looking at the same thing in the global market.
In India, demand would be very substantially increased, which is BharatNet, which is going to be announced in the next one or two weeks. Tender is already there. Clarification has started to be given. And I think another month or 45 days' time, tender has to be submitted. So that would be huge demand opportunity in terms of fiber optic cable for Indian companies.
Okay. So I was reading recently an article by the Telecom minister. He was saying that there are a lot of companies because we don't want to import telecom equipment. So a lot of companies which have come under the PLI scheme will buy from them. So when I understood Tejas, whether the products are same or not, they have got a lot of patented products. And if you see this quarterly, how Tejas has completely turned around, they have bagged a lot of orders. So same thing can happen with us also?
Yeah. Back orders. Tejas is a Tata company. And their major order is from BSNL for this from this 4G networking equipment, which is better, better than good. And we have also got good orders, as I said. It's a reasonably good opportunity for all of us. And the minister's statement is right. And that is good for Indian companies.
Indian companies are right.
They are from India. It's good for Indian companies like us.
Indian. Yes, sir. Sir, how is the bidding pipeline?
The bidding pipeline is good. With BharatNet itself, it would be INR 50,000 crore.
Okay. So that tender already has opened?
No. That is to be submitted, I believe, in about 45 days' time. Then it will get open. Finalization of that is expected in some time in August.
Okay. Sir, can we see the R&D facilities? No. Can we visit? Can we visit the R&D facilities?
It is in Bangalore. You can certainly visit with a prior appointment.
Okay, sir. This time, the presentation was very good. You were so short and very crisp.
Visit our factory. Just go and see the Hyderabad factory where we put in fiber and cable both with a prior appointment. You can be most welcome to visit that also.
Thanks a lot, sir. Thanks a lot.
Thank you.
Thank you.
Thank you. The next question is from the line of Darshil Zaveri from Crown Capital. Please go ahead.
Hello. Thank you so much for taking my questions, sir. Hope I'm audible.
Yeah, yeah, yeah. You're audible.
Okay, okay. Sir, thank you so much. A lot of my questions have been answered. But I just wanted to ask something about our CapEx and our debt. So currently, we are expecting INR 900 crore CapEx in the next two years. So what will be our debt level? How are we planning to fund it currently? So could you just give some color on that?
My CFO, Mr. V. R. Jain, will answer that.
The CapEx plan is around INR 900 crore during this financial year, and part will go to the next financial year. This entire CapEx will be funded by internal approval and some equity raise which we have already done. The money is lying with us. Part debt. So that equity ratio, which is currently 0.24, it will remain in the same range. I mean, 0.24 may be 0.27. At max, it will be 0.30, not more than that.
Okay, okay. Fair to say. So, sir, after the so when can we maybe see debt reduction? Because interest cost is also substantial.
Our debt is already very low. 0.28 is no big debt itself.
So majorly, it is working capital debt, which is required for various project execution and all that. And the most part of that is in the form of LCs and bank guarantees. So the interest cost, the finance charge includes the charges of BGs and LCs as well. It is not entirely the interest cost.
Okay, okay, okay. So fair enough, sir. Sir, again, thank you so much. So most of my questions have been already answered. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address the question from all participants, please limit your questions to two per participant. The next question is from the line of Sanjeev Damani from SKD Consulting. Please go ahead.
Namaskar, sir. Am I audible?
Yes, yes.
Thank you, sir. Sir, thanks for the opportunity. My two questions are: one is regarding our debtors. That is INR 2,200 crores. So almost it is coming to 50% of our sales. So if we are going for INR 7,000 crores sales, then will our outstanding be and debtors will be as high as 50%? And.
No, no, no, no, no. I tell you why. So debtors are more when you do turnkey projects. And when you have heard me saying that next year, revenue, we are forecasting INR 4,000 crore coming from cable and products, which are not having that larger period for recovery. So they may be more like 60-90 days, 60-90 days, maximum 90 days. So it will not be in a level what you are just saying. It will be much lower than that.
Soon we will be recovering all this. Whatever is outstanding, will we be getting it cleared by this quarter end?
Say that again. I missed your question.
Will we be able to realize most of the money by this quarter end of our debtors?
Quarter end, not this quarter end. It will come up in phases. The major part is from NFS, Network for Spectrum, which we are executing for Indian Army. So part of that would be about take, I would say, more than a year or so after completion of the project. And rest of the debt, we will keep on realizing as we go by in time, some are 60 days, some are 90 days. So it's something like that.
Second question is regarding making my understanding better about the fact that our ministers have said that we are introducing 6G also very soon. All this will be and is being manufactured within India. Can I take it this way that HFCL is the only supplier of all these telecom exchanges and facilities of 5G and?
No, no, no, no, no, no. We are not the only supplier. We are one of the suppliers for telecom equipment. So we are not the only supplier. Nobody can be the only supplier, number one.
On a listed place, sir, only you are listed who are supplying all this equipment and exchanges and all these things.
No, no, no. Tejas is there who are supplying. We are there. There are a number of companies who are there. Not only us, number one.
We are also equipped to completely supply the exchange and facilities to Bharat.
There is nothing called exchange these days. There is nothing called exchange these days. That time is gone. We call core and access and that kind of a transport, that kind of a network. But we are supplying not the whole network, but a part of the network. We are more on the access side and the transmission side, not on the core side. Core is we don't have core. No Indian company has core, rather. So we are having access and transmission. And there are other companies also who are doing the same business, access and transmission. But at the same point of time, 6G, you can see the 6G question. 6G developmental effort has started. Really, 6G to become commercial, it is at least four or five years away.
Okay. Thank you very much for the understanding and time given, sir. All the best.
My pleasure, sir. My pleasure.
Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.
Namaskar, Nahata ji. Namaskar, Jain sahab.
सर जी, मैं आपका इंतजार ही कर रहा था। आप कहां से इतनी देर?
सर, मैं तो क्यू में कतार में ही खड़ा हूं, सर, जब नंबर आएगा। कभी प्रश्न नहीं।
सोच ही रहा था, सागर जी, कहां गए अभी तक?
नहीं, सर, मैं आ गया, सर. थैंक्स. धन्यवाद, सर. सर, when we look at the order book split up, we find as a breakup in your presentation, INR 4,758 crore is the network services, INR 890 crore is the product, and INR 2,037 crore is the O&M. So under this network services, there is a combination of both turnkey and the product?
Yes. For example, this INR 1,100 crores of orders for BSNL for equipment has been clubbed into that what you are seeing, INR 4,700 crores. It is more of product, less of services, but it has been clubbed into that because it includes some part of services.
Okay. So the Turnkey order book, the core Turnkey order book कितनी है, सर, हमारी?
Core turnkey order book would be something like out of INR 7,000 crore should be something like about INR 4,000 crore, about INR 4,000 crore plus, something like INR 4,000 crore plus.
Didn't get you, sir. I'm talking about only the Turnkey project. Turnkey project, is there a product?
Yeah. Only turnkey portion of the project. That's what you are saying, no?
Yes.
Yeah. So that should be same.
That is INR 4,000 crore.
Turnkey portion, services portion of the project should be around INR 4,000 crore.
Yeah. I think I'm getting mistaken on that front, but I take it offline from Jain said. On the O&M part, sir. Hello.
Huh?
On the O&M part, INR 2,037 crore, how will that start accruing the same, and how much have you booked for this financial year?
It will take about seven years, Mr. Saqib. Seven years.
Right. And from the next year itself, it will start, or when will this start taking in?
This year itself. It has started already. Some of that is already started. It will continue through this year also.
Okay. Jain said, I have a question on this other intangible asset and intangible asset under development. If you could just explain to us what are these two line items? There's a significant increase in intangible assets under development from INR 200 crore to INR 315 crore, and other tangible assets have risen from INR 18 crore to INR 118 crore. So what are these? Are they related to R&D? How are we going to benefit? This is a large sum of money.
Darshil ji, we are developing a lot of products as part of telecom and defense. So whenever any product is ready for launch or it has been launched, so that part of the R&D spend is capitalized. And remaining is known as intangible under development. Once it is commercialized and capitalized, then it is amortized over a period of five years.
Right, right, right, right. And lastly, sir, on this, the successful IPO for Vodafone, sir, does this give the impetus to the entire ecosystem, and a new CapEx cycle can be envisaged going ahead? The confidence that the investing community has on the Vodafone issue?
Very good question. And in fact, I used it to talk about it in my opening remarks. It definitely gives very good impetus to equipment manufacturers in India. You are with a new operator, not a new operator, old operator, getting active now in the equipment business, which was not active earlier because of the money issue and all that. With IPO and today's news item that INR 18,000 crore they are going to raise from banks, which makes it almost INR 40,000 crore of CapEx by then, which is really good with that kind of a CapEx. New demand would be generated for fiber optics, cable, equipment, and everything. And some share will be available to us also, of course. So we are really happy about it with the revival of VI as well as revival of BSNL and continued growth of Jio and Airtel.
Right, right. And do you have any dues from them, sir?
No, no. They are very minor dues maybe from regular supplies we do. There is no overdue.
Right. And on closing, sir, Exicom issue was also a public issue, was also a grand success. And HFCL holds a minority stake in Exicom. So what's the roadmap ahead, and what are the synergies with Exicom, the other listed company for the HFCL growth?
There is no roadmap as far as investment is concerned. That is there. But there is synergy, definitely. Synergies, they also produce, apart from EV chargers, they produce critical telecom power supply equipment. So wherever we have customers for critical power supply equipment, any Turnkey service or all that, we can source certainly from Exicom. And that would give us more competitive and more complete product range.
Right, sir. Thank you for all the detailed answers, sir. Jain said, INR 120 crore income tax has been paid for this year. So does this include for this year also or prior period also? And what is our current tax rate?
No, no, no. Income tax is charged year on year. So part is the regular tax, and part is such as part of the deferred tax, current and deferred tax. It is segregated in two parts.
सर, मैं कैश फ्लो से बता रहा हूं. कैश फ्लो में आपने दिखाया है INR 120 crore का पेमेंट.
Cash flow mein?
Under cash flow, income tax paid is mentioned as INR 120 crore, 120.
तो ये अपना जो टीडीएस टैक्स जो डिडक्ट होता है ना?
अच्छा, सर. वो दोनों मिला के रहेगा. Okay. Got the point. Thank you. Thank you, Nahata ji. This is one of the very transformative calls from HFCL, sir. You have infused a lot of confidence among the investing community in your remarks in terms of this product sales, then again, OFC, then the Turnkey project, and then the entire ecosystem getting charged up. So we hope for a transformation and exponential growth next year. And we hope this becomes a reality, sir.
There are three things in revenue. One is equipment business becoming very robust. So, INR 2,000 crores expected, and INR 1,700 crore orders are already there, INR 2,000 crore plus an optical fiber cable. And defense business, don't forget, though I have not put anything in the estimated revenue, but defense business has a huge opportunity coming up in a sense that fuses, for example, there's so much of demand. If I start production today, I would be booked for one year. That's the kind of demand coming up for fuses. Even before I have tested, there are demand of lots of fuses in front of me. So defense business has also got very high potential, including this then the upgradation of BMP-2. Again, a very huge potential. So defense business also is very huge potential. And that would be a very transformative change for HFCL apart from equipment business.
Right, sir. Thank you for and we hope to see things on ground improving drastically, dramatically rather, for the financial year.
Thank you. Thank you. Thank you, Mr. Kapoor. And this would be the last question, operator, I can take because I have a flight to take.
Thank you. Thank you, sir. All the best to the team. Namaskar. Thank you.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Mahendra Nahata for closing comments.
Well, gentlemen, some of the questions would remain not answered, as I can see. So kindly send emails to us for your questions, and we would be very glad to answer to our investor relation officer, Mr. Amit Agarwal. We'd be very glad to answer those questions. But as a concluding remark, I would say that we are looking forward to this current year with a lot of optimism and a lot of growth in our revenue in equipment business. As I said, from INR 150 crore to INR 2,000 crores, which will give, coupled with fiber optic cable together, the growth in product business itself would be substantial, reaching roughly about INR 4,000 crores. That is what is the best expectation of the management is on the basis of order book and as well as the kind of orders we are expecting to receive in fiber optic cable.
Moreover, orders for turnkey projects are also in hand for INR 1,250 crore or so, and more such orders are expected. So my expectation of INR 2,000 crore of order from that part of business is also quite robust expectation, not based on estimation, but based on realistic expectation.
So we look forward to the current year with a lot of robustness and expectation of good revenue coming up. And our R&D efforts are certainly going to throw in more number of products in defense as well as telecom sector. That would be this kind of R&D and development of products would be really an impetus for our long-term strategy for keeping on increasing revenue through products and not so much from services. So we are very optimistic about growth with the growth of telecom sector, growth in the defense sector, and export also. We are very optimistic for the future.
Thank you very much, gentlemen.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.