Q2 21/22

Oct 12, 2021

Ladies and gentlemen, good day, and welcome to Q2 FY 'twenty '2 Earnings Conference Call of HFC Limited hosted by ICICI Securities. On the call, we have with us today, Mr. Mahendra Naka, promoter and managing director mister V. R. Jain, chief financial officer mister Manoj Bed, company secretary and mister Amit Agarwal, head investor relations. As a reminder, all participant lines will be in the listen only mode, and there will be an option ready for you to ask questions after the presentation concludes. Please note that this conference is being recorded. And I'll hand the conference over to the management for their opening remarks. Thank you, and over to you. Hello. Yeah. Ladies and gentlemen, good morning, and, greetings for the festive season. Thank you for making it to SSP's earnings call for the second quarter and the half year of financial year 2022. For quarter two of financial year twenty twenty two results, press release and investor presentations are available on the website of the company and stock exchanges. Record vaccinations and responsible social conduct are occurring to help him in the pandemic. I wish and hope that the country and the world is way past the worst. It is important to still to keep the vigil up while we usher into more stable and prosperous future henceforth. For SSCL, our resilience and uncompromised focus on profitable growth, capability ramp up, innovation and expansion of product portfolio as well as manufacturing capacity would serve well going forward. Our drive to analyze technology led enterprise that innovates and manufactures for the world is deepening at the right time. Digital connectivity and data security will be the twin foundation for the post COVID world. Dense fiberization, high speed data transmission and secure transmission network would feature among the fastest growing economic teams right through this decade and right across the globe. HSPL finds itself in the right place to actively participate in this abundant growth opportunities to maximize stakeholders' value. Going by various global estimates, India is well on course to analyze one of the fastest growing major economy from the next fiscal year of twenty twenty two-twenty twenty three And hold a firm conviction on the ensuing decade turning out to the India's decade. Opportunity, '96 is brimming with better prospects and we are entering into the golden phase of sustained economic growth. Except here, the Fortune nine ks appears even much brighter. BharatNat Phase two, exclusive STPS demand growth, additional four gs spectrum allocations to Telco, five megahertz four gs spectrum approval to Indian railways and subsequent rollout of five gs, realized scheme for telecom and networking products, government initiated in securing indigenously developed defense products backed by Aftonutus Harat and Make in India program are all going to total HFSA into its next orbit in the coming quarters. But Harat Broadband Network Limited has invited this for implementations in PPP mode to roll out high speed broadband services in rural areas across both 16 states. This network is projected to have demand on approximately 12 lakh kilometers of fiber optic cable comprising of both overhead and underground cables. This massive demand of fiber optic cable coupled with the demand of associated transport and access equipment like Wi Fi and optical access equipment presents tremendous business opportunity for the company, both in equipment and to this segment. And currently, India has a fiber based network spanning across 28 lakh fiber kilometers, several kilometers as against the target set up by the National Broadband Mission deployed as much as 50 lakh kilometers of cable by 2024. A distinct allocation of additional spectrum for four gs wireless services to telcos will benefit HFCL with added demand for fiber optic cable and also turnkey products. Union cabinet approved five megahertz four gs spectrum for Indian Railway in the month of June 2021 presents another huge opportunity for us. The project targeted to be completed in five years is estimated to cost over 25,000 crores. The project intends to provide secure voice, video, and your data communication services for operational safety and security applications for the National Transporters network. A four g long term wireless specific system to railway will be used for modernizing signaling and ensuring pain correction while also maintaining constant communication between local pilots and parts. We see a huge opportunity from this modernization campaign of the individual. As you all know, trial spectrum for five gs has already been allotted to the telecom operators. Auction for commercial use of five gs spectrum is expected to happen in the beginning of twenty twenty two. Rollout of five gs networks will result in massive increase in demand of fiber optic cable. In addition to the related radio access network and other required equipment. This again presents an excellent market opportunity for the company. The company will be presenting a large number of equipment and services segment required for five gs network. Five gs network implementation presents a very attractive opportunity for the company, both in domestic and international markets. We have one of the largest capacity for manufacturing fiber optic cables, which will see huge upsets in demand when five gs networks are implemented. We have started development of five gs radio access networks, both for micro cells and small cells, which will be required in very large numbers. We are in process of developing transport network equipment like routers and front door gateways, which are also required for five gs network in large capacity. In order to capitalize these opportunities, it is imperative for HFCL to keep pace with capacity and capability build up. We have made significant strides towards advancement of technological and R and D capabilities and ramped up our manufacturing capacity across our optical fiber and cable business. Upon completion of our ongoing CapEx, existing capacities of optical fiber cable and FTTH cables have increased by 20% to 25% and new capacity will also add new types of cables like microduct, micro module, advanced hidden cable among others. Our newly commissioned R and D center in Danuru is shaping up well. This is our dedicated R and D center for five gs products and Wi Fi products. Hence, we remain committed to steadily investing R and D capabilities, innovate and remain nimble to capture the opportunities ahead. A PLI scheme has been introduced at the most appropriate time. The scheme will go a long way to make our country a global health of telecom innovation. HSPL through its wholly owned subsidiary HSPL Technology Limited and also submitted its application under CLI scheme to continuously evolve our revenue mix towards enhanced share of margin accretive products and capital efficient projects. As of thirtieth September twenty twenty one, our consolidated order book stood at INR5822 crores. New orders for fiber optic cables and instruments are being received regularly by the company. Last week we have received orders of crores from Retail Corporation of India to set up a secured network for Indian Air Force. The Board of Directors of your company has approved fundraising of up to Rs. $7.50 crores on third September twenty twenty one, which was also approved by the shareholders at the Annual General Meeting held on thirtieth September twenty twenty one. We are happy to share that informative valuation and hedging private limited, RCAG and steady registered credit rating agencies. I assigned A rating and with stable outlook for long term and A1 for short term banking facilities for the company. Existing credit ratings with clear ratings stands at A negative for long term bank facility and A2 for short term bank facility. The board has approved allotment of 353,200 equity shares having placed value of rupees 1 each to HFCL employees first on fifteenth July twenty twenty one for implementing the benefits of HFCL employees long term incentive plan 2017 in lieu of a vested use of branches to the eligible employees of the company. Hence, let me now brief you on key performance metrics of the quarter and the half year. Revenue for quarter two of financial year 'twenty two stood at INR1122.05 crores as compared to INR154.32 crores in quarter two of FY 'twenty one, both recording a year on year growth of 6.42. EBITDA for the quarter stood at INR173.30 crores as compared to INR137.47 crores in quarter two of FY21. EBITDA margin increased by two forty basis points and stands at 15.44% for quarter two of financial year '20 '20 '2. For quarter two of financial year 2022, profit after tax rose to INR85.94 crores as compared to INR53.32 crores of quarter two of financial year 'twenty one, recording a growth of 61.18%. Net margin also improved by two sixty basis points to 7.66% in quarter two financial year twenty twenty two as compared to 5.06% in quarter two FY21. For the half year ended on thirtieth September twenty twenty one, the company reported consolidated revenue of INR2328.92 crores as against INR1754.10 crores in September 2020. EBITDA of 360.74 as against $2.20 crores in September 2020. Profit before tax in this after stood at 239.29 crores as against INR 104.6 crores in the half year ended in September 2020. And profit after tax stood at INR 176.63 crores as against only INR 74.6 crores in half year ended in September 2020. Segmented revenue for telecom products during the quarter and the review stood at INR503.92 crores as compared to INR278.86 crores in the quarter two of financial year twenty twenty one, which is a significant decrease on revenue of products. We expect revenue from products business to continue this uptrend. Our performance reflects sustained growth and strengthening our value proposition that we have achieved over the last few years. Looking ahead, our constant focus on innovation, steady expansion of our products became shift to margin accretive product mix, alignment of our offering with emerging and future market opportunities, deepening of our market engagement in export geographies, added contributions to our underdevelopment capacity and pursuit of new products and opportunities by our recently constituted dedicated five gs division shall keep fueling our journey towards sustained growth and profitability. Hence, we remain focused to achieve the targets we have set for next few years and remain confident on our growth momentum ahead. Thank you once again for your team participation and wish you good health. With this, I conclude my opening remarks and open the floor for q and q and a session. Thank you. Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press and 2. Participants are requested to use handsets while asking a question. Participants, you may press and 1 to ask a question. The first question is from the line of Harvik from ETnow. Please go ahead. Good morning, sir. My questions were pertaining to services as a whole. We have seen the contributions in services absolutely has gone down in this quarter from roughly $7.50 crores in the last quarter and the last year of the same quarter to about 600 odd crores this time. So, of course, the product contribution in the total revenue also has gone up as we had guided in the previous short of concern. But when do we see absolute growth also in services going forward? And is it directly linked to the five g rollout? And so how how do we go ahead from here on the services front? Thank you for the question, Abhi. You know, basically, as I stated in my previous calls, our focus has been growth of revenue by product, not as much by services. Reason being, services payments are little elongated and that's discussed on working capital. Our strategy is to increase revenue by product and which we have seen constantly, If you look at the whole year ended on thirty first March twenty twenty one, the product revenue was 27% and services revenue was 73%. Now it is 45% for products, 55% for services, which has been my sort of assurance to all of you that we will reach to 40 five-sixty five in the current year, and we are on course commenting in that. Now services revenue, of course, I'm not saying no to services revenue, if the payments are in time. So if for example BharatNet comes in PPP mode and it is implemented by respected operators or companies where the payments are good or five gs implementation starts where services are required and high end value added services required. We are not adverse to that, we would definitely go for that. But my key consideration in that would be that it should not be linked to some performance by the customer, and then it is linked to a milestone, which is dependent on customer performance. And if the customer performance is delayed, then my revenue and my payment is delayed. I don't want to go into that kind of a situation. If it is a simple services revenue, not linked to any customer related milestone, We're very happy to do that, and we are not always increasing revenue from services if that happens. Okay. So this quarter, we did about 600,000 services. So are we likely to go back to $75,800 per quarter kind of service revenue, Or this is because of that I I I won't credit that, Harjit, at this point of time. But, yes, we would like to maintain the balance at 45 for product and 55 for services at this point of time. But, yes, if the good services contracts are available, we are not able to do that. Okay. So on the product front, I had a couple of questions pertaining to our opportunity coming up for optic fiber and fiber to the home. Then are we likely to see production coming on stream and realizing revenue out of that? Well, I think we are talking about extension of capacity because the Yes. Yes. Is already there. And fiber exam for example, we are producing 8,000,000 fiber kilometer per annum, which is slated to drop to 10,000,000. And it will happen within this financial year before March, it would start. It is already under implementation. Machine orders have been placed. Now the delivery work and all that are going to start pretty soon and before end of this financial year, maybe further year or so, we will starting production from the enhanced 2,000,000 additional capacity. In terms of cable, part of that facility has already been commenced, it is under production and the completion would happen maybe under two months' time, so it will be completely under production. And we have targeted our revenues also from that facility and which we will be able to achieve. So it is partially complete. Production is on already on. Completion would be another couple of months' time. Okay. So my last question on the product side, can you throw some light on the software defined radio and browser view for that for us, the opportunity used, but how soon do you feel that, okay, this will realize into certain amount of revenues or the time line for that? Look, in our revenue target of the next financial year, we have not included any revenue from SDR or ground segment, Raj. Because SDR development is going to be finished sometime mid of the next year, sometime mid of the next financial year. I would say something like that August, September time frame. And then it would go to the qualification process of army, which as you know, takes a pretty long time. So we are not looking at any revenue from Software Defined Radio or in the next financial year. We'll be looking for revenue from them in the year next, which is 2324. Not in 2223. Will you be able to will you be able to quantify the kind of revenue you might get in 2324 from these two? Is it very difficult to predict that kind of a revenue? But because the demand is very significant demand is very significant, I think we should be able to get reasonably good revenue and should be somewhere in 3 figures with exact number. I'm not able to say at this point of time. It could depend upon kind of tenders come from army, time frame they take in finalizing those tenders. I would not predict, but one thing I can say, SDR, there is software defined as a huge opportunity. Majority part of the Indian armed forces network is going to be shifted to SDR because of its high technology, high encryption, and less vulnerability to inclusion these qualities. The demand is going to be massive in next five, six years. So we expect to get a reasonable market share out of that and it is our own development. It is Indian design, Indian development, Indian manufacture it is going to be. And that's what is the requirement of RVs, and we are one of the shortlisted companies. So I have I have very high expectations from this product. Is under development. We have already started. Some small orders are under process to be received by us. It's not very big, but still it's a good beginning. Most tenders, we have participated, and those tenders are under evaluation. In fact, one of the tenders which is very reasonably large when we are submitting samples by, I think, another week or ten days. We are submitting samples for the final evaluation by Army. Couple of more tenders we have participated, the samples will be submitted soon. Number of more tenders are in process where we will be participating. So after electronics, nitrogen devices, yes, that process has already started. And for manufacturing this, we are going to build up a facility in Hyderabad, which I have already informed to all my shareholders in past. And land for that facility has already been allotted and possibly construction activities will start in another two weeks' time. Construction activity will start and it is expected that that facility will cost us 40 to 50 crores. And it is going to for two things. One for auto electronics and second for electronic usage. In future, we might add more products out there. Okay. Okay. Thank you so much, sir. All the best for the future. Thank you. Thank you, Adi, for your very good question. Thanks a lot. Thank you. You may press and one to ask a question. The next question is from the line of from ICICI Bank Limited. Please go ahead. Good morning, sir. My question is on the what is your view on OS optical fiber prices? What are they currently? And what is your view it is going to be because it's a global commodity? So what is your view on global optical fiber pricing, and what are the prices right now? Look. You know, in our quarter two, I can give you a number. It was average procurement price was about $2.67 rupees per kilometer. Okay? Now it is In case you can give in dollar for STM, if you can give? A dollar by country. Yeah. $267, you can divide by 75. Dollar will be keeps on changing. I take the price which is reaching to my factory. But, anyway, I can divide this. This is factory reaching price, so we have to divide by, you know, that duty and all that. Yeah. I think it was two and a half dollar, I think. 2 and a half. More than 9. Yeah. $3.03 4 or 3 and a half dollars for FPM. 3 and all that. So it's a $2.67 rupees. Okay? Okay. It is increasing. There's an increasing trend. I would say now this would go up more than 300 rupees. Right now, this is 3 and half dollars. If you take it, I think you have to do the multiplication. But this $2.67, which is the cost right now, I expect it to go up to 300 very, very soon because the large tender has come up in China, which is only opened up on fifteenth of this month, '1 hundred and '14 million fiber kilometers, 114,000,000 fiber kilometers. So I think there will be a swing in the trend of the fiber prices and, it may settle around something like $3.30 to $3.50. Okay. This is inclusive of all duties and everything delivered in my factory. Okay. And what has been the all time high of this fiber pricing? No. This is not all time high. All time high what is the all time high? What what what's the past? $8.08 or $9. You know, all time high has been much higher. Okay. Okay. So don't you don't see going to that level. Right? No. No. Not at all. Not at all. I think $3.50 is a maximum. Okay. Okay. Thank you, sir. Thank you. Thank you. Participants, you may press and 1 to ask a question. The next question is from the line of Neera Dalan from Maybank M and A Securities. Please go ahead. Hello, sir. Thank you for the opportunity. A few questions from my end. One is now that we are seeing the telecom products business pick up, what would be our exports, say, in the first half of this year? I think last year, they were at about INR 200 crores. So what would be the exports? That is my first question. And of the order book, is it possible to split it between telecom products and turnkey projects? And if we could also share what has been the YOI increase in the two numbers. Okay. In terms of export, Niran, you know, this first half of this current year, are excluding hundred and 71 crores. Okay. The first half of the last year, it was only 63 crores. 60 3 crores has become hundred and 71 crores. Now the full year last year, it was 201 crore. Correct. And now this year, you know, in half year, it's still $1.71. So we expect to reach to at least 300 crore in the current year, at least 300 crore, which is. Okay. And the targets you know, I have defined two targets for the company, very important. One, increase revenue from products and homegrown products, which are designed by us, developed by us, manufactured by us, which will give higher margin. Which will give higher margin. Second, exports. So new products, new geographies. These are the this is a mantra I have in my company now. So to increase export, you know, we are taking several steps, and we just showed results. You know, for example, 200 code would become 300 code ACL. For the team, I have set a much higher target for the next year. I I have set a target of 500 codes for the team for the next year, the introduction of new products, and maybe a much higher target in the years to come. Now targets are set, but we have to take appropriate steps to make sure that those targets are achieved. What are we doing in that aspect? One, as I told previously, we have pointed people to in different countries to sell our products, you know, France, Germany, England, Middle East. We are employing now more people to sell these are the fiber optic cables. Now we are employing people to sell telecom products because, you know, technology are completely different in these different kind of people. So we have already shortlisted two people for selling our products in Europe and couple of other countries, Middle East and, you know, Africa. So we are strengthening our sales force for selling products even before the products, most of the products are yet to come in the product line. They will come gradually from now to another one year. But we are already strengthening our sales force, creating our sales team all over the world by people or by agents or by distributors, who will be selling our products to these people who are being recruited. Some of them are specialized in distribution network through distributors and agents. So that's what we are doing right now to increase our exports. So one is innovation, new products number two, not only sales in India but sales worldwide. And both the things, I had committed to shareholders number of times. One, my revenue from products would increase, which you have seen it has increased. Second, my revenue from export would increase, which is increasing. So our strategy, which we have decided, we are on the right path to implement that strategy. In terms of order book from, you said, product and services, the product order book would be you know, let me tell you one thing. Sorry. Product orders are never received in bulk. You know, they are received in a constant fashion. It they're kept on being received all the time. You know, fiber optic cable, some maybe 50 crore order, 30 crore order, 60 crore order, those are the kind of orders we receive. In 20 contracts, we receive orders, a single large order. So you would find there will always be a, you know, a contradiction in terms of revenue and, order book in terms of product and services. Your service orders are received in large quantity of one book, product orders are kept on being received a small pieces one after another. So currently, the order group from products would be around 15% to 17 and has to do with the services. But that doesn't mean the revenue would be in that percentage. Revenue, we would see we are expecting to maintain a 40 five-fifty five ratio, which we have done in this quarter. Sir, thank you for that. Just on the exports now, so if I were to look at of your INR800 crores, INR900 crores of revenue now already INR171 crores is exports. What is there a regional mix that broad regional mix that you can share? And what what are the and and the other part is all of these exports would be optical. Right? And the and what would be your ASP on the cable side in these orders? Broad number would be fine. What would be among USD? No. No. The average selling price. So this would be the two revenue breakups of products and service, you know, telecom products as well as the optical fiber cable. Now realization in terms of, you know, per fiber kilometer, I would say it would be around 1,100 rupees per fiber kilometer approximately. So I don't have right number at this moment, but it would be somewhere around 1,100 rupees per fiber kilometer would be the average utilization from export revenue for cable. Okay. So that is about 14 and a half, $15. So that is good. Yeah. Whatever it comes to, 1,100. Yeah. Okay. And it would be correct to assume that, obviously, exports would have a better margins than domestic products? You know, I can't generalize that. Some of the domestic market products have also good margins, some of the But we are generally, you can say export would be better, generally on an average. Got it. And secondly, in terms of what is the status in terms of the PLI scheme? And in terms of fundraise, what is the time period you are looking at for the fundraise? Look, you know, as far as PLI scheme is concerned, we are informed by DOT officially that tomorrow no. Fourteenth. Fourteenth, minister is going to inaugurate that scheme by announcing the names and all that. Since we have been informing officially to be present there, I'm sure we must be one of them to be this is end of the period. Correct. As far as the fundraising is concerned, though board has approved, shareholders have approved, but we are looking at various options, know, options and timings. Whenever we finalize that, we will be coming back to you. Got that. Thanks a lot, sir. Just for the update. Thank you. Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead. Yeah. Hello. Yeah. Hello, Saket. Good afternoon. Good afternoon. So what what I'll do that, sir, I'll come in the queue, sir. There is some noise there. I ask the moderator to just send me speaker. Thank you very much. The next question is from the line of Subhish Kumar from HFC Unlimited. Please go ahead. Hello? Go ahead, sir. You're audible. Hello? Is there any other? Yes. Hello? In the last call, we have stated that the chip and semiconductor shortages will be resolved by your Qualcomm partner. Has that been done? Sir, sir, can you repeat it? You know, your wife was very, you know, kind of a sounding hollow, you know, That's what In the last con call, you have said that the semiconductor or and chip shortages related to the product has been, will be solved in this quarter. Has that been solved? No. No. No. The semiconductor shortage worldwide still continues. It has not been sorted out. Worldwide, everybody is suffering from that problem as much as us. The current quarter, which is in the review, the product revenue could have been higher. I just now think that the global shortage of switchbacks, which is entering increasing revenue from products like WiFi and Wi Fi and, you know, this radio as well as also the switches. So, unfortunately, that shortage continues, and I don't think it will be resolved at least for another three to six months. Okay. And the balance pledge quantity, by when can we see that? I you know, all other banks have assumed except one. The other banks with this one bank wants to have a meeting on this last week, which could not happen. I hope, they will be having this meeting actually eight to ten days. So let us wait for that. Okay. And one more last question. Since the product revenue has increased, but margin quarter one and quarter two is less, Any reason? There will be small variation. There is small variation because of different currency projects may have a different kind of revenue mix and different profitability. So it's a very slight variation, variation, which can always happen from quarter to quarter. Yes. Okay. Thank you. Thanks. All the best. Thank you. The next question is from the line of Yash Sarva from Daiwa Capital. Please go ahead. Hello. Am I audible? Yeah. Yeah. Yes, ma'am. Yes, So my question is regarding the new facility. You you have mentioned that the construction is set to begin in two weeks. So what is the timeline you're looking at for the completion of the facility? And what is the peak revenue? Yeah. Please go ahead. Yeah. And what is the peak revenue which you are expecting from the new facility once at full utilization capacity? Maybe say 90% to 95%. You know, look, this facility construction is only starting over a couple of weeks. I think it will be about eight to nine months if it takes to complete this facility. And since this is a difference to that facility, I won't really say that how much revenue we can get. That will be a little bit of a forward looking statement. But yes, different products, know, electro optics, software defined radio, we believe that we're looking at the demand of those equipment, which is very reasonably good demand, we will be able to get a reasonable market share and return on equity or return on capital investment, you know, revenue compared to investment. So it's significantly good. Okay. Thank you. That's all I had. Thank you, sir. Thank you. Thank you. The next question is from the line of Shivam Saxena from ICICI Bank. Please go ahead. Yes. Thank you for taking my question again. One two questions. One, what are the what are what are the margins of better in services or in product? One is this. And what and another is are you competing in exports with the Chinese competitors like Hawaii and Red Tea for the achieving the products? Are you are you competing with them and Tejas in Indian company? Look. We have first of all, the new product and services, you know. Generally, I would say product revenue margin will be better, generally. But then there are some service companies that margin could be good also. In some cases, it's generally, yes, product margin will be better. Particularly when you own design and own manufacture products. That is generally, I would say, that statement I would make, number one. Number two, in terms of exports, as I said, our exports predominantly has been optical fiber cable in the last quarter or the half year. And in optical fiber cable, is no Huawei executive, they don't do optical fiber cable, they are mostly in the equipment business. Equipment business, we are right now supplying in India, export as I said, we are creating export infrastructure and we will start exporting of this product in next few months time frame. So at that time, we would compete with them, but I don't have a problem. But, you know, the product which we are going to manufacture or we are manufacturing like WiFi or unlicensed and radios and the products which are going to manage the routers, three k, five g, small cell, flat cell, very huge market, billions of dollars billions of dollars. So even if there is Huawei, Jetty, or any other company, the required market share which we are expecting for ourselves, it should be pretty easy to get, you know. And we would be cost competitive. For example, in fiber optic cable, so there may not be Huawei executive. There are other large Chinese companies, Huawei, Samsung, ZPT, FiberHome, those companies are there and we are effectively competing against them wherever they are. Sometimes we lose, sometimes we win. But we are able to compete, and we are able to get our business. Right? We will still have increased our. So we will be able to compete effectively. So so so within products, how much proportion of the revenue you expect from OFC, and how much from other equipment going forward, one to two years down the line? If you what is the Two years down the line. Three years down the line, I would say, because one has to do a market development time frame also. It must be probably, I would say, sixty forty from cable and product something like sixty forty. This will change to $50.50 also, but maybe $60.40. Okay. Thank you. Thank you. The next question is from the line of Deepak Maika, an individual investor. Please go ahead. Hello. Yeah, Good morning, sir. How are you? I'm fine. Thank you, Deepak. Sir, my question is around the five g strategy. If you can close on, like, what's the recent development in this quarter, sir? Look, you know, five g, our strategy is simple. You know, we want to develop equipment which are required for five g network, which includes, as I said, g small cells, which are under development, five g small cells, indoor and outdoor both applications. Then five g macro cells, which is also under development for different capacity eight by eight, sixteen by 16, which will be followed by 32 by 32, you know. When I say all this, you know, this refers to RF chain, how many RF chain one radio has. So one is the video access network for five gs. Second one requires front out of gauges, sort small routers, and the large routers, switches, they're all five gs related products, which will be required in large quantity in the five gs network. So we are designing those equipment by ourselves and we will be selling not only in India but worldwide export market also for which we have already started our market development activities. Now our development would coincide with the launch of five gs networks in India. So first, have to sell in your country, then we sell worldwide, you know, because we have to prove yourself in your country first. So which we'll be doing in India and then we'll be selling worldwide also. So that is our strategy for our five gs business, develop products in time to be able to catch up with the market in India and then sell worldwide. Okay, sir. Sir, I wanted to ask about the R and D, so how you are hiring the right talent and how how is the direction of r and d and when you can see that different, you know, delivery from the r and d investment. So that was the main reason for us because But, you know, look, if you have to succeed, you have to innovate. Unless you innovate, you don't connect. This is what is the mantra of success in technology. We are innovating constantly in two areas, cable and telecom for export. For cable also, R and D is important. So what we are doing is recruiting some talent internationally also. We have got excellent expertise in development of new kind of cables, which are more for export market. We are recruiting people for that. We have already shortlisted the person for that, very highly experienced person. So we will be bringing you onboard very soon. Then, of course, same point of time, whatever new products we develop in server, we have to match in machinery here to produce those products, which we'll also be doing. On the other hand, r and d would be equipment. Equipment as I told many number of times, we have three pronged approach. One, our own R and D facilities, which is Bangalore and also Durigram in New Delhi. Then we have a partnership R and D, where not partnership, contact r and d by companies which are specializing in contact r and d. We have given contacts to them where we have a joint teams, our team, their team working on development of products for us, wherein IPR will belong to us. It's a contract development. IPR will belong to us and then my team will take it over and keep on doing developing that product, making it better and better from cost perspective, future perspective, it will continue. Then the third way is we are taking equity in companies who are designing products for us, like software defined radio. You know, that's a equity has taken 50% equity in a company called BigTech wireless in Chennai. That is developing software defined radio for us. So three pronged approach, on r and d facility, contract r and d with other joint teams working. Third, we have a recruiting company who are designing products for us. This is a three pronged approach we have taken. Our recruiting mind of people, yes, we are finding talent, you know, a bit difficult to find talent in r and d than the normal production lines and normal function areas, but yes, we are still able to find good people, which is a mixture of very experienced people, experienced people and freshers. We are taking lot of freshers also. This is we have hired 30, almost 30 freshers in our Bangalore R and D center and they are being trained appropriately by experienced people and they would come up good, are coming down good. So this is how we are looking at R and D and increasing our R and D facility and people. Thank you so much. Thank you very much. The next question is from the line of K. N. Sharma, an individual investor. Please go ahead. Sir, thank you for the opportunity. I just want to know when we are shifting our focus from service to product, what is the market price we are targeting, and what would be the margin in that area? The market price of products, you know, once you're marketing not only India, but worldwide, it's just billions and billions of dollars, you know, because four g networks are getting expanded, fiber to home networks are getting created, five g networks are coming like, you know, huge number of networks are coming up in five g. So market opportunity and overall stable and instrument area which you are looking at is even billions of dollars. There's no type of market. So only a question is how many countries you go in, select those countries, go in and build up that in your marketing infrastructure there, sales infrastructure there, and sell it. Because you can't be selling in 80 countries. You will be selling probably 10 or 15 countries with that marketing infrastructure, sales infrastructure, after sales infrastructure, and get your revenue, and which we should be able to be comfortable. And, sir, what about when we are coming with five g's products and we are targeting in the local market, international market for the five g's products, what kind of pricing power do we enjoy in that? And what will the market price for this product? What is your what sort of marketing power? That was your question. What did you say? I said that what kind of the pricing power we would be having for the five g product in that local market as well as in international market. And what is the market? Pricing power, you know, the question is we are doing our own design and doing the latest design based on the latest components. So believe, you know, in terms of pricing, we should be complicated with other we should be complicated with other people, so no doubt about that. And then of course, our PLI scheme and those incentives which have been given by government adds to our competitiveness, no doubt about that. So innovative designs, low beyond cost, low overhead. Being a company located in India and manufacturing India, our overheads are low. PLI scheme would benefit us to 5% to 6% of revenue, which is what the PRI we are doing is receive. This all would make us complicated. And, you know, we wouldn't as competitive as anybody else with our own design, own manufacturing based on latest technology and latest companies, there is no doubt that we will be very competitive. In terms of size, again I say, size of the market is billions of dollars. There is no depth of the market. It's only how many countries you can sell with what kind of best in your sales infrastructure and your after sales service infrastructure. So market opportunity is huge. The kind of sales we are targeting members would be 0.07% of the overall market size. Okay. Thank you so much. Thank you. Thank you. The next question is from the line of Kankit Pandey from Quant Money Managers. Please go ahead. Hi, thanks for taking my question. Sir, could you talk a little bit about your trade receivables, a good INR 400 crore improvement since March. So could you talk about BSNL and Atherbeet, other key projects? We had a recent commencement in metros in Uttar Pradesh to a couple of cities. So could you just talk about that? Yeah. I'm just, know, thanks a lot. You know, if you look at our trade receivables, it has gone down. You know, in the q one of financial year twenty one, this kind financial year, I've received over 3,056. Now it has become INR 2,664 crores. There is a reduction of INR $3.50 crores or so. In the current month and the next month, these two months, we are expecting to receive about 400 crores more from different customers as from some receivables. 400 plus, I would say 400 plus. So next quarter, we will see the further decrease in the receivables from our various customers. Major portion of receivables is from the different contracts, which I've been mentioning that those are 20 contracts and milestone based payments are there and milestone completion got delayed because of problems by a non completion of infrastructure by customers, not because of us. And as a result of that, you know, revenue, got delayed and also whenever there'll be revenues, you know, we supply goods, but infrastructure not being complete. You know, our payment were not received. But that situation is now where it started we've gone gone to the situation where their infrastructure also getting completed because now they are also realizing that they need this kind of network very fast. So, though it has gone down by 300 crores, I think it will we'll be receiving payments of another 400 crores from, this this project in the next month, the current month, and it will further go down. So the situation is improving and it will keep on improving further by March year end, you will find it has improved further considerably. Cash flows of the companies have also built out, free cash flows are becoming better and it will keep on becoming better quarter to quarter. Amongst that so this extra INR400 crore that we are supposed to receive, is that all coming from projects or some of that also from the projects? This INR 400 crores, I talked from the previous only. That is not the entire revenue, know, cable business and all that revenue is completely separate. This particular INR 400 crores, talked, this is from the projects. And I noticed that with this 400 crores reduction, our payables have also reduced by a good INR $3.50 crore. So that kind of proportion will continue or do we expect to net a lot more this time? It will go in tandem. There will be increased cash flow, but yes, receivable will have been you know, money will be received and will be paid to the creditors also. Paid also. Free cash flow would also be there. Okay. Okay. Okay. Probably in that proportion that we have to pay down about 300. Absolutely. Absolutely. So this would be a lead out our balance sheet quite a bit in terms of Okay. That's really good to hear. And in our order book, you mentioned that under 20% would be from projects so far. Amongst the remaining, how much is government order book, and how much is export order book, if you could give from excluded projects? Of the order book, 20% is from product. Sorry. I think about 15% is from products, and 85% is from project. Product value you know, one should not miss, miss get misled because of fifteen and eighty five. Because product orders keep being kept on this is a small this is all the time. It shows on almost daily basis. So product revenue would be around 45%, whereas order book is only 15% because they kept on being received small pieces every day. Now coming to the breakup of order book, in terms of, I would say, domestic order would be about 5,750 crores. Export order would be around hundred crores right now. Again, export order, as I said, is only for products. They kept all in receipts in small cases. And total export currently, know, would be around 300 crores, I believe, 200 crores last year. In terms of different projects which we have order book, about 2,500 crore is from Jio, about thousand sorry. 2,500 crore is from different. Thousand crore is from about geo. Then we have various orders on railways and telecom projects and all that. You know? So total orders is about 580 5,822 crore. In terms of further breakup, government and nongovernment, out of INR5822 crores, 46 percent is from government, INR3157 crores is non government. Okay, okay. Thanks for that. That was very helpful. And just on that, do you think the geo sort of on the book or the pace of their orders, do you would you like to put a little bit of color on it? Do you think it is as expectations or do you think it's faster than expected given the recent change in the expectation. You know, if I show tell you the current order book. Right. About 21% of my order book is from geo, and 79 is non geo. And it's expected to continue in the same manner. Okay. Okay. Lovely. Great great. Thank you so much for all the details, and all the very best to you, sir. Thank you. Thanks a lot. Thank you very much. The next question is from the line of Vishnu Kiji from GM Financial Service. Please go ahead. Hi, sir. Thanks for the opportunity. So there is a small clarification. So when you say that you have engaged people in, Europe and Middle East for sale of product, are they more like third party organizations who would act as resellers to our products? No. We are our own people also. We have our own people, and there are resellers also. So our own people will talk to the operators directly and also manage the resellers also. There are distributors, of course, and there are our own people also. Okay, sir. So should it be fair to assume that, we would have a, like, a 505050% kind of mix between resellers and products, at least in the near to medium term till we change the Not necessarily. We can't put a figure like that because it keeps on being changed, you know. If you receive a large order from an operator, this percentage will change. And if you receive more orders from distributor, this percentage will change. Right now, we cannot put a percentage to that. Sure, sir. Thanks. Just a small, follow-up there. So, I mean, is it fair to assume that the margin profile in our direct selling will be slightly higher than the reseller part? No, no. I don't see that. It can avail the right customer to customer order to order and situation to situation, what kind of competition and what kind of table, it can always change. We cannot generate that. Okay, sir. Sure, sure. Thanks for the opportunity. Thank you. Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead. Dhunivat, sir. Thank you for giving me a second chance, sir. Sir, firstly, when you were it it it is really hard very heartening that the receivables have come down. Sir, if you could give us the breakup between the receivables which are older than sixty days and lower than sixty days of the total mix or in any proportion which you have. I can't break up right now. I right now, I don't have breakup. But if you send me your email address, I can send you the reply. Right now, I don't have that break up, of course. Okay. I was just looking at the aging part. And now, sir, secondly, towards the order book part, sir, how much is towards the operation and maintenance proportion, sir? And when is that going to kick into the number, sir? It is already kicking in small distances, sir. Of the total $5.08 $2.02, I think operate this was about 1,500 crores to the and that's. Okay. And for and, sir, for this quarter and for the six months, what should be the breakup from the O and M out of the total revenue which we have booked? And end of it will it is clubbed under which segment? In the current year, I can say it would be about hundred crores on o and m revenue in the current year. For the entire year, sir? For entire year. Entire year. Sir, when will that be a bulky figure? 1,500 crore total position. So when will that warranty period get over and the the OEM will start? Yes. 2425. You know, that will be the year. Where we are expecting a revenue of 300 crores plus, $3.50 crores about. Okay. Okay. Sir, currently, sir, what are the industry challenges, and what are the challenges for HFCS, sir, which you are adhering to, and what steps are you taking, to, mitigate this one, sir? Look, industry challenges, of course, know. Any industry always remains to have some challenges, you know, which is industry when I talk of industry, I'm talking from the operator's perspective. There are ROW issues. There are spectrum issues. There are various government litigation issues, which are the part of the business which continue all the while. From the manufacturers like us, issues would be semiconductor issue right now, there is a short supply of semiconductor. If there are issues with operators in terms of their rollout, ROW, those challenges we have processes. But, you know, those challenges we keep on mitigating, those are day to day issues. Now semiconductor, it just happened all of a sudden, all over the world. We can hardly do anything much to mitigate that. Know, then the worldwide supply has improved, then only that would be mitigated. But all the time what we do, whoever are our suppliers, we keep on pushing them, keep on pushing them every now and then to supply more to us, supply more to us. But, you know, they get that kind of push from everybody. So this semiconductor supply, that worldwide they have to improve, then only that would get mitigated. Otherwise, normal challenges, you know, issues of maintenance of quality, time, the supply, logistics, we keep on waiting and we keep on mitigating those challenges. Now in terms of innovation, of course, that always remains a major challenge that we have to be as part of technology. So I'd like to say fiber optic cable, where innovation, we are recruiting even international people, are in pursuit of recruitment of them to have a higher ability to innovate new kind of cable design. Similarly, are kind of with r and d houses, international r and d houses to design our products, you know, telecom products. Simultaneously, we are creating our own r and d team of highly qualified people, and of course, the newcomers also to design new kind of products. So you have to keep on taking that challenge of innovation, but you mitigate that challenge by having your own r and d resources as well as, you know, partnership with internationally acclaimed r and d houses to design your products. On the raw material availability and the integration part, how much is in house now and what would be the proportion going forward? And the and one more part is on the finance part finance cost part. That has increased, sir. So what should be the absolute number we should look forward? And thirdly, to it is the lower revenue quarter on quarter, sir. What would attribute to the lower revenue when our plants are running at the optimum levels? If you take the June quarter and the September But our revenue is not lower quarter to quarter. The revenue in the last two this quarter and the last quarter is almost the same. There's no reduction in revenue strategy. Sir, it was 1,100 crore for the June 21, and it is thousand crore for September 21. So there is a reduction. It's a small reduction. You know, that happens because of the season impacts of the rainy season. Significant decrease in revenue, it's a very low decrease in revenue and which is all seasonal minor impact. In terms of interest cost, it will keep on going down. It has already started coming down. They have already started coming down. This quarter, it is 10 crores lower than the last quarter. It will further come down because of that decrease in receivables, our borrowing will go down. And in fact, one of the things that I forgot to mention in my opening remarks, our borrowing has gone down considerably. In the June, in the last quarter, previous quarter, quarter one, our total borrowing was INR895 crores. Year ending 03/31/2021, it was INR920 crores. Today, now in the current quarter ended, our borrowing is only INR683 crores. So there is a considerable reduction in borrowing, so this is INR300 crores reduction in borrowing. That trend may continue also because of the increase. Interest cost is supposed to go down with a decrease in borrowing and also more efficient fund management and better negotiation with the banks in future borrowing may go down. So borrowing has gone down and interest cost has gone down. Right. Sir, I was just referring to the number This is very much important. 300 crores. That's why in borrowing in the current quarter. Right. Sir, what I was referring to the number of September 20 at 80 crore and September at 90 crore. So there is a 10 crore increase over the year when the receivables have also gone down, our cash flows have improved. But still the absolute numbers are up by INR 10 crore. I stand corrected. So on for a year as a whole, sir, last year, it was INR 125 crore, the finance cost, and we have already done INR 90 crore paid INR 90 crore for the first half. So the second half, with this improvement improvement in cash flows, that is that that would we can look forward for a number lower than $1.25? Yeah. Definitely, Sachik. It will be lower by, say, $15.20 crore as compared to previous financial year as a year as a whole. You. Sorry to interrupt you, Mr. Sarkis. I'll request you to come back in the question queue for a follow-up question. Thank you. The next question is from the line of Guru from Wood Group. Please go ahead. Hello? Yeah. Please go ahead. Can you hear me? Yeah. Yes. You're all ready, ma'am. Go ahead, sir. Yeah. Congratulations for posting wonderful figures. And I have a couple of questions. First is regarding the the satellite broadband, the Internet, which is in trend due to some of the Indian telcos also also have shown interest in that. So will it pose any risk to the wholesale business or the I mean, how how about that? And second question is BharatNet PPP model. So when can we expect revenue from that? Look. You know, satellite broadband is being talked about, and it is a good proposition to have, but it is not going to impact fiber optic cable because satellite broadband would be available only to limited number of people. For example, a Starlink has announced that in India, they will take only 200,000 subscribers because satellites have only finite amount of bandwidth which we can give, and it is mostly targeted to grow inaccessible areas where there's no terrestrial connectivity available, and it's going to be costlier also. So satellite broadband does not pose any threat to terrestrial communication, which includes fiber optic cable also. It will not have any threat on that because the number of subscribers also could not even cost a million or so. So it does not cause any any any threat, any significant or insignificant threat also. So that was your question. Yeah. Second what was your second question? Regarding this Bharat Bharat Nativity Bharat Nativity. Sorry. Submission Bharat Nativity, you know, they're extending the date twice because there has been some discussion on why we'll be getting funding whether this is the right number or the number looks to be increased or whatever. So that is under discussion. So I think it will take at least six months before BharatNet PPP model is finalized and awarded to people. Yeah. I think it is still six months. And then only and the revenue, we can look at it the net financial year only. Okay. And the last question is regarding the BSNL four g. I heard that, I mean, HFCL, along with some partner, could not continue with that. So some some I mean, do you want that? Yeah. Look. You know, it's not a question that we could not continue. We had we thought that we would be doing that for four gs for HarpNet, and we have applied for, you know, that validation. It's still not that we have said that we will not be doing. We have sought the core from TDox. TDox has said that we will be able to give you the indigenous code only after December. So we are waiting for that to happen. And whenever that happens, we will go back to BSN and ask for a retrial. And that has been the case with us, L and T and Techman, all three of us. Only TPS is continuing, but that also with a limited functionality. They are also not able to meet the entire specification, which we saw yesterday in some other newspaper report. Radios are not to the specification. So we instead of partner going there with the less specification or limited specification, we decided that we should wait and go back to them to put us on the full specification complete. Yes. Okay. Thank you. Thank you. The next question is from the line of Dharamesh Khand from AARD Ventures. Please go ahead. Hi. Sorry. The conversation was a very good set of numbers. Sir, can you throw some light on the amount of money which you are raising around $7.50 crores? What are the areas in which it will be applied to? As I said, shareholders and the board has given approval for raising up to INR $7.50 crores. But right now, we have not finalized how much is to be raised, when it is to be raised. Whenever we finalize how much and when, we'll come back to you with the applications also. Okay. Okay. Got it. Sir, time, in the phone call, you have given a guidance of around 50% to 50% on the revenue growth. So are we sticking to that for this financial year FY 'twenty two or there's some No, no, we are sticking to that. There should be around 15% of the revenue growth in the company in the current financial year. We are sticking to that, absolutely. And so margins are likely to stick around? I mean operating margins of 1515.5%? The margins are what we have done in first two quarters, it will continue. And there shouldn't be any problem in continuing that kind of a margin and profitability in the next two quarters also. Sir, that is all for me. Thank you so much, sir. Thank you. Thank you. Hello, Darmesh. Do you have any follow-up questions? No. I'm done with. Thank you so much. Thank you. The next question is from the line of Abhijit Mitra from ICICI Securities. So my question is on CapEx. On the first half, I could see that including intangibles, you could spend around INR 70 crore. What is your full year CapEx guidance? And which are the key projects that you'll be spending on this year? Till now, we have announced that we would be doing our crores of CapEx in the current financial year. And of course, as I told you, our shareholders have achieved further fundraising. But if it decides the fundraising and depending upon amount and rent, there may be change in this plan, depending upon the fundraising, whenever it happens and whenever we decide to do, depending on various options we are paying, this would definitely have the possibility of change. But right now, it is INR210 crores in the whole year. Okay. Okay. Got it. So the existing INR210 crores would be mainly to increase optical fiber, FTTH cable and the fiber capacity? Yes. It is optical fiber optical fiber cable and the defense manufacturing. And the defense manufacturing. And then R and D CapEx is included in that, that R and D CapEx, whatever you are guiding R and D CapEx is not included in that, that is subject to this. Okay. Okay. Got it. Thank you. That's all from my side. Thank you. Thank you very much. Ladies and gentlemen, we'll take that as the last question. I will now hand the conference over to the management for closing comments. Well, thank you very much to all of you for being on this call. And as I have been saying that we decided to start at least for the company, which is new products, new geographies. We are continuing very steady, firstly on that. We decided that we will be going into margin accretive products and services. We are on course to do that. We thought of increasing our exports. We are on course to do that. We thought of going for new product innovation. We are on course of doing that. So whatever strategic we have decided for the company, we are on course. And absolutely, very fastly going in that course and which would continue for next few years, which would see your company having better revenues and greater profitability with products which you will be able to sell worldwide. And our projections in terms of financials, which I have been giving in terms of possibilities of revenues and profitability on account of this strategy we have adopted, we are on course of maintaining that. I am sure that with the growth in market opportunity, which is very, very important, know, with the market opportunity, which are there in front of the company, we expect the future operations of the company and also the profitability to remain maintain this trajectory of growth which we are having at this point of time. Thank you very much to all of you. Thanks a lot. Thank you very much. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.