Ladies and gentlemen, good day, and welcome to the HFCL Limited Q2 FY 2027 earnings conference call hosted by Nuvama Institutional Equities. 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 investment or other decisions. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touchtone phone.
Please note that this conference is being recorded. I now hand the conference over to Mr. Achal Lohade from Nuvama Institutional Equities. Thank you, and over to you, sir.
Yes. Thank you. Good afternoon, everyone. On behalf of Nuvama Institutional Equities, we are glad to host the senior management of HFCL Limited to discuss the Q2 FY 2027 earnings. We have with us Mr. Mahendra Nahata, promoter and managing director; Mr. V.R. Jain, CFO; Mr. Manoj Baid, company secretary; and Mr. Amit Agarwal, head investor relations. We will start the call with the opening remarks from the management and then move to Q&A session. Thank you, and over to you, sir.
Thank you, Achal. This is Mahendra Nahata, managing director of the company. Good evening to all of you, ladies and gentlemen. I extend a very warm welcome to all of you on HFCL's earnings call for the second quarter and half year ended September 30, 2026, of the financial year 2026/2027. I trust you have had an opportunity to review the financial results, press release, and investor presentation, which have been uploaded on the company's website as well as on the websites of the stock exchanges. It is my privilege to present the best ever quarterly performance in HFCL history that marks a defining moment in our growth journey. These results reflect the increasing scale, strength, and momentum of our business and reinforce our confidence in HFCL's ability to deliver sustained growth and create enduring value for our stakeholders.
Let me begin with our outstanding performance for the second quarter and first half of FY 2027. Both profit before tax and profit after tax grew more than five-fold over the same period last year. Consolidated profit before tax in Q2 of FY 2027 reached INR 538.60 crores as compared to INR 106.34 crores in Q2 of FY 2026, rising 406.49% year-on-year and 62.46% quarter-on-quarter. Consolidated profit after tax in Q2 of FY 2027 rose to INR 394.22 crores as compared to INR 71.92 crores in Q2 of FY 2026, an increase of 448.14% year-on-year and 60.49% quarter-on-quarter basis.
On a half yearly basis, the PBT grew from INR 61.64 crore to INR 870.12 crore, up by 1,311.62%, while PAT grew from INR 42.62 crore to INR 639.86 crore, up by 1,401.31%. Consolidated revenue surged to INR 2,541.79 crores, increasing by approximately 143.62% year-on-year and by 32.73% over the previous quarter.
EBITDA increased to INR 658 crore, delivering growth of 223.55% year-on-year and 47.78% quarter-on-quarter. Equally significant, EBITDA margin expanded to 25.89%, improving by 640 basis points year-on-year and 264 basis points quarter-on-quarter. While PAT margin rose to 15.51%, gaining 862 basis points year-on-year and 268 basis points over previous quarter. Together, these numbers demonstrate the strength of our operating model and ability to translate rapid growth into sustainably higher profitability. The momentum we are witnessing today reflects the strategic initiatives taken and investment made by the company. We invested ahead of the curve in capabilities, capacity enhancement, backward integration, development of world-class technology products, and global market access with a clear focus on building a stronger and more scalable business.
These initiatives are now translating into meaningful business growth, which is also reflected in our export performance, representing a growth of approximately 493% year-on-year. More significantly, a growing business visibility across these strategic initiatives gives us strong confidence in our journey ahead. I want to assure you that HFCL is on track to maintain a growth trajectory of revenue and profitability ahead. Our focus is on sustaining the pace of execution and translating the opportunity into continued strong performance. Our order book stands at INR 28,900 crores, providing multi-year revenue visibility. Beyond this secured business, we also have a strong pipeline of orders and advanced stages likely to be converted into firm contracts in due course. Friends, I want to emphasize that we do not see this quarter as a peak, but as the sustained phase of strong growth.
Our confidence rests on robust order book, a strong pipeline, and long-term customer programs. Our customers include some of the world's largest financially strong technology companies with demand anchored in long-term agreements and firm commitments. As the pipeline converts into orders, we expect our order book to strengthen further. These relationships, together with our capacity expansion and growing share of advanced optical connectivity products, gives us strong visibility and confidence in sustaining and building on the current revenue and profitability trajectory. Demand continues to accelerate across AI infrastructure, hyperscale data centers, and telecom networks. Encouragingly, opportunities with hyperscalers and telecom operators across international markets are steadily converting into firm contracts, strengthening our order pipeline and providing revenue visibility for long term. Our sustained investments in technology, customer relationships, and manufacturing capacity position HFCL strongly to capture this long-term growth opportunity.
Friends, you will recall that we began FY 2027 with a revenue growth aspiration of approximately 20% over FY 2026. After the first quarter, I revised it to 40%. Today, when I present Q2 FY 2027 results to you, I am extremely pleased to share that based on our current expectation and business visibility, we expect revenue growth of at least 80% in this financial year. 20% to 40% to 80%. We had emphasized achieving INR 10,000 crore revenue by FY 2029.
Given the momentum we are seeing, I would not be surprised if we reach this milestone much before that. Friends, to support the next phase, our planned investment of approximately INR 1,800 crore across optical fiber, optical fiber cable, and preform manufacturing will expand capacities and deepen integration. Our advanced cable portfolio and data center connectivity capabilities are also progressing well, strengthening our ability to serve customers as their requirements grow.
Let me now turn to defense and aerospace sector, which we see as HFCL's next major engine of growth. We are very excited by the long-term opportunity in this business. Years of investment in indigenous technology products, product development, and qualification have created a platform that we are now translating into orders and deliveries. Our portfolio spans thermal weapon sights, surveillance radars, electronic fuzes, and multi-mode hand grenades. In September, we successfully delivered the second batch of thermal weapon sights for AK203 rifles to the Indian Defense Forces. We expect to complete the acquisition during the current quarter for aerospace business. Importantly, the aerospace business being acquired already has executed order book of approximately INR 1,600 crore, providing good visibility from the outset. At the same time, our ambition in this sector extends well beyond this acquisition, and we are actively working on several other large opportunities.
We remain on track towards our aspiration of approximately INR 500 crore of defense revenue in FY 2027. We are also setting up an ammunition manufacturing complex in state of Andhra Pradesh. As I have already informed you, that government of Andhra Pradesh has already allotted us 1,000 acre of land parcel to set up this complex. Construction of this site will start soon. Together with the ongoing aerospace acquisition, we further strengthen our defense and aerospace platform. With a strong pipeline expanding capabilities and increasing business visibility, we are confident that defense and aerospace can emerge as a sustainably larger contributor to the company's growth in the coming years. Friends, let me close with conviction. We believe both optical fiber cable, connectivity solutions, defense and aerospace business are on the cusp of enormous growth.
In optical fiber cable, continuing demand, a strong order book, and a pipeline and deeper backward integration support our confidence. In defense, our capabilities, deliveries, and strong pipeline are building the next leg of growth. We expect this growth momentum to continue. The opportunity we see extends over the next six to seven years and beyond. We are determined to convert it into sustained revenue growth, stronger profitability, and lasting value for all our stakeholders. Thank you very much for your continued trust in HFCL. I wish you and your families a very happy Dussehra and a very prosperous Diwali. We all now be happy to take your questions. Thank you very much, ladies and gentlemen, for sparing your time to joining this earnings call of HFCL.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Pranav Kshatriya with Emkay. Please go ahead.
Hello.
Yeah, please go ahead.
Yeah. Thanks for the positivity, and congratulations on a good set of numbers. I have two questions. First question is, your presentation mentions that you have around INR 18,500 crore of book for OFC and data center interconnect. Wanted to understand how much of that is coming from hyperscalers, and is there any concentration to specific hyperscaler in this order book? Wanted to get a customer risk profile, if at all it is there.
Well, Pranav, I cannot obviously give you the customer names and profiles. They have been-
Yes
-confidential and under NDA. But out of INR 18,500 crore, large portion could be from hyperscalers only. Large portion. I do not have the exact number, but yeah, maybe 70%. Maybe 70% could be from hyperscalers of the export orders. Now, indigenous local orders are from telcos, mostly from telcos. Data centers are yet to pick up in India. However, they pick up, we will be supplying to them also.
Okay. My second question is that you have given 80% + kind of growth and really good to see the acceleration, but I think your guidance seems very conservative because it seems like flat H2 or it may be slight decline compared to what you have done in this quarter. Is it because you are being conservative or there is a capacity constraint, or there is any preform supply challenges? Any color on that would be helpful.
Yeah, it is always good to be conservative. Give you a lower number and surprise you by better numbers.
Okay. Yeah, but basically that means that there is no supply challenges in terms of preform or anything like that?
Oh, no. Not at all.
Okay. Thank you. Good to hear that, and that is from my side. I wish you all the best for the future quarters.
Thank you.
Thank you. Our next question comes from the line of Ashutosh Kumar Jha with Balyasny Asset Management. Please go ahead.
Hi. Congrats on a great set of numbers, and thank you for taking the question. Just questions around the margin, particularly given the fact that we have already hit this 26% sort of margin level right now. I am assuming that the interconnect and connectivity solutions piece of the portfolio will be a higher margin business. How do you think about the margin trajectory for the business for this year and even going ahead over the, call it, next two years?
Look, margin profile again depends upon kind of customers, kind of cable, kind of solutions they want, because margin varies from product to product and solution to solution. On an overall basis, I would say margin profile is going to get better only. There is no chance I see of getting it worse or less. It is going to get somewhat better only because more orders are coming up for connectivity solutions. More orders are coming for higher capacity fiber cables, which are not so much in supply by many suppliers. The suppliers are limited. With the increase in volume, capacity, and also the kind of orders which we are receiving, there will be some increase in margin profile. There will be increase in margin profile.
Understood, sir. Sir, and my second question is around the sort of demand trajectory that you guys are seeing, because there is this whole noise around rates going up in the U.S., and that could cause a slowdown in the build-out of data centers. How are you guys seeing the demand? Is there any sort of slowdown that you guys are seeing in the near term, at least here?
I don't see any slowdown, because it is rates going up. You have to view data centers as a point of necessity. As the rates go up, at the same time, businesses wants to increase their efficiency. Efficiency now, AI has increased efficiency of the businesses by multifold. AI, rather than being a luxury or availability to the few, it has become a common requirement and necessity. With that kind of a necessity going around, I don't think more data centers coming up in future or the pace with which they are coming, I expect that to continue. But the second point is very important, which is right now you see the growth in North America, predominantly U.S.A. Now, growth has not picked up as much either in Europe or in Asia. I am not talking about China because I am not really aware what is happening inside China.
Very few people would be aware. This growth has to pick up in Europe and Asia also, including India. Middle East may be a different story at this point of time because of the political situation, but in rest of the Asia, Europe, this growth will pick up. So demand will come up from there also. Second most important thing people may be missing. Just one second. Sorry. Second most important point people may be missing is that demand from telcos are also going to increase. Because finally, telcos have not been buying much since last two years. Reason being simple, because the prices increased so much, telcos were not ready to absorb that shock. But finally, they have realized they also need to increase their fiber network because data has to be ultimately carried from the subscriber by the telcos only in most cases.
They are also going to start buying fiber. In fact, some telcos which had not come to the market are coming up now, and we are looking at a possibility of large orders from telcos also now. In fact, we have started receiving very concrete inquiries from those telcos. So, there will be, if at all, I am saying if at all, one or two companies slow down their data center requirement, the demand which will come up from Europe, from Asia, from Southeast Asia, from telcos, this is going to more than offset or rather increase the current level of demand.
Understood, sir. Sir, if I may just a last third question, which is around defense. If you can help us with how you see the evolution of this business going ahead. I think we have a fairly steady order book. You guys are building capabilities. How does the revenue from this segment look like over the, call it next three years?
Yeah, I can give a very short answer, a very long answer. So revenue this year, as I said, maintain INR 500 crores- INR 600 crores. Next year, we look at least INR 2,000 crores. And aspiration is to take it in three years timeframe to INR 5,000 crores. Around INR 5,000 crores. Now, if you look at the sector, geopolitical situation itself will tell you that every country is strengthening its defense requirement, including India. Because defense has to be strengthened. Particularly our country, the way the neighbors are, we really need to strengthen our defense capabilities. And government is doing that actively and promoting local industry. So what we have done, developed lot of equipment locally. Number of them which are currently under trial, in the last phase of trial. Like for example, radars. Certain radars we have developed a unique capability, like Foliage Penetration Radar.
One trial has already taken place, second trial is expected to happen another two weeks or so. First trial has been very successful. Second would also be successful because it is a different kind of a terrain. Those kind of radars. Then the Drone Detection Radar. We have already participated in a large tender for Drone Detection Radar in Chambaghat, where it is indigenously designed. Ground surveillance radar, indigenously designed, which we are expecting export orders also for that. These are the kind of technologies we have developed, which are indigenously developed and are going to be required by our armed forces, and maybe export purposes also. Second area is aerospace, which we have gone into through acquisition. There also, we have a pending order book of INR 1,800 crores. That acquisition is expected to be completed in this quarter itself.
That revenue also will get consolidated after acquisition being completed. That also has a very good export demand. These all orders are for exports, and we expect to receive large orders in this segment also in next few months timeframe. Overall, it should not be difficult for us to reach the INR 2,000 crore figure and a INR 5,000 crore figure. We are looking for many more opportunities, many more partnerships. Including this ammunition complex which we are creating in Andhra Pradesh, as I already told in my opening remarks. That should also start giving us revenue in about three years' time. We have already participated in a tender for 800,000 Multi Mode Hand Grenades, which would also be manufactured at this site only. We are pretty confident about defense and aerospace business. In fact, this provides us a second leg of growth in our business.
Hypothetically, five, seven years later, fiber market, if at all stabilizes, then this sector of defense will show us growth. There are two pillars of growth in the company, which stabilizes the revenue and sustainability of profit, or rather increases when the both of the sectors are going good. Defense and aerospace, we are very positive about.
Understood, sir. Thank you. Those were my questions.
Thank you. Our next question comes from the line of Chinmay Sapre with Schroders. Please go ahead.
Hi, sir. Thanks for the opportunity. Is it possible to give the split of revenues within telecom segment between conventional telcos and hyperscalers?
Say that again. I couldn't listen to you properly. Say that again.
Sir, the telecom segment, where we had about INR 2,300 odd crores of revenue, is it possible to give the split between conventional telcos and hyperscalers?
I would probably say it is something like 70/30. Something like, not exact number. Something more or less 70/30.
Got it. What utilization levels would this division be running at?
Look, fiber optic cable, let us divide in two parts, fiber and cable. Fiber runs 100% of the capacity. Again, when you ask 100% of capacity, it varies from kind of fiber you manufacture. If you manufacture 250 micron fiber, capacity is something different. 180 micron cable machines have to be slowed down. Capacity is something different. But the price realization is much higher. So it is more than the 100% capacity if it was 250 micron. Similarly, cable, depends upon who is buying cable. Somebody wants armored, somebody wants unarmored, somebody wants double-jacketed, somebody wants loose tube, somebody wants tight buffer, somebody wants IBR, somebody wants flat ribbon. So you have to have different machines for different kind of cables, and not that all the machines simultaneously run for everything.
Though capacity utilization is more or less 100%, but it may differ when the products are different and kind of products which are in demand. Like for example, data center products are in demand. It is running 24 by seven all time. Some telcos cable are less in demand. There may be some little bit less capacity. But overall, in terms of money terms, whatever capacity utilization we have invested, that is 100%.
Okay. The second question is on the cost front. What is the frequency of cost resets that we have in our contracts with our suppliers for preform? Just wanted to understand what kind of RM inflation are we seeing in preform and maybe it has not hit us so far, because of contracted nature. But, eventually, what sort of margin pressure could come from here?
Yes. Look, prices are determined on either a yearly basis or 18 months basis, depending upon contract to contract. Whichever have been our suppliers, which are yearly contracts or one and a half year, 18 months or 24 months contracts, there is no pressure on that. But whenever those contracts expire, of course, the price variation has to be there. But similarly, price is also increasing from the customers. With customers also, we have the similar situation. On the long-term contract, the price variation clause is there on the year-to-year basis. Year- to- year, we examine the prices and redo the prices. It can go down, it can go up. But nowadays, the time is, it is only going to go up. There is a price variation.
Got it. So margins, you think that you would be comfortable maintaining current level of margins?
Well, I am not only confident of maintaining, but I am confident of getting it better.
Got it. That's good to hear. Thanks for the opportunity.
Thanks.
Thank you. Our next question comes from the line of Rikin with Capri Family Office. Please go ahead.
Hello.
Come.
Hi, sir. Am I audible?
Yeah, you are audible.
Thank you so much for the opportunity, and congratulations for a very good set of results. Sir, the first question is, similar to the perspective you gave for the defense business from a three-year perspective, if you could share probably your three-year perspective on the optic fiber business, of where do we see ourselves in terms of business size over there? You did mention you are confident of improving margins also. If you could outline what could be, from a three-year perspective, the key drivers that will help you improve margins in the optic fiber business. One is the top-line perspective from a three-year point of view, and a perspective of how margins can improve in this business over the medium-term perspective.
First of all, our margins are pretty decent even now. There is a strong possibility of their improving. First let me come to the top line. Top line will definitely increase because we are increasing capacity. Fiber itself is going from 28 million to 34 million, and 34 million to 43 million. Cable is going from 34 million to 63 million fiber kilometers. This itself would mean increase in the top line because the capacity is going up. Then we are installing higher capacity for connectivity solutions, introducing more products than only the fiber-based products, but also the other products which are required inside the data center. That also we are introducing. Revenue would start coming maybe last quarter of the current financial year or maybe in the larger way, the beginning of the next financial year.
Anyway, this year itself, we have a connectivity solution revenue of about more than INR 800 crores we had projected, which may be better rather. Next year we have projected revenue INR 2,000 crores. Which was INR 800 crores this year. With the optical fiber cable revenue not going down, but increasing with the capacity increasing, there is every reason that we would see improvement in the top line. With the improvement in the top line, even if I maintain the current percentage of cost or the margin, the bottom line will also increase. But percentage of margin, EBITDA or PBT, you said, I expect somewhat increase in that also because of one, higher capacity, two, more backward integration. Preform, which we are introducing in next. This construction is going to start soon and late 2028, our own preform will be available. That would significantly increase our margin profile.
Also, one top line is definitely increasing because of increasing capacity and higher number of connectivity solutions getting introduced. Some of them are very unique. Then the second, margin is going to improve because one, higher capacity utilization or higher capacity available, and second, because of backward integration, third, because of connectivity solution.
Got it, sir. Thank you. That is very useful. Sir, the second question that I have is with regards to the defense business in terms of the way in which we see this business ramping up. You have started reporting the segmental numbers here for some quarters now. While we see that there has not been any meaningful scale-up as yet in that INR 40, INR 50 crores as of now in terms of quarterly run rate.
For that INR 500 crore, it seems that you will sort of at some point have to do about INR 200 crores of kind of a number a quarter. Can you help us with some visibility of what products have achieved some kind of approvals or scale which will help us, let us say maybe in Q3 or Q4, start doing a INR 200 crore quarter kind of a run rate for the defense business?
So look, one is electro-optic sights, which have started increasing in revenue, and that will increase the revenue. Number two, radars. For example, foliage penetration radar, that has almost been through approval, another couple of weeks. That will give us good revenue. The second most important is the aerospace business, which we have gone for acquisition and just getting completed within November. That has an order book of about INR 1,600 or INR 1,800 crores. So that will start giving us revenue from this quarter. All put together, INR 500 crore is not an issue. We will surely be able to achieve it.
Got it, sir. Thank you. Just one last question, sir. In the EPC business, we do see that this quarter also there was a loss in that segment. You did mention that with the O&M revenues, that should start seeing better profitability. Could you give us some sense on when do you start seeing that segment report positive numbers?
Yeah. I tell you why there has been loss. First you should understand that, and then I come to when.
Sure.
One, this Army's AMC contract is now in the final stage of approval. First year's AMC is going to be done by BSNL. It means they would give us the contract. Then next year onwards, it would be by the Army. BSNL is in final stage of approval, maybe a week or 10 days it will get approved and will get signed. That revenue would start coming in. That expenditure which is being incurred, large part of that would be offset by the revenue which come in because of AMC, which will be started coming to us. That is number one. Number two, last quarter we did a lot of work for BharatNet. But because there were some defined milestones in the tender, the expenses were incurred, but bills were not raised because the milestones are yet to be completed, verified, and you know the processes.
These engineers, what they call IEs, then the BSNL verification, then this BharatNet authority verification, all these long processes. File has to go through 25 different steps. One file, the 25th steps put some query, it goes back to step zero and then comes back step 25 again. Submission of bill because of milestone issues has taken a longer time. This quarter, those bills will be getting submitted. What had been debited as expense in the last quarter, against that billing will be done in this quarter. The loss which we incurred because of expenses incurred but not billed, that will not happen this quarter. I would say this loss, which you have seen INR 121 or some crores in the current quarter, next two quarters put together should not be more than INR 75 crores- INR 100 crores.
Got it. When do we see profits reported in this segment, sir? Next year?
I think first quarter of next year you would start seeing profit in this segment.
Got it, sir. Thank you so much for all the answers. Thank you.
Thank you. Our next question comes from the line of Manik with Balyasny Asset Management. Please go ahead.
Hi. Thank you for the opportunity, and congrats on a great set of quarter. I am just curious to understand on very high level about the India data center opportunity. We do hear from many other industry participants about the data center growth in India and how it is evolving, but is there any color you can share in terms of how the pipeline is evolving for you? What kind of engagement or traction you are seeing on that front?
Look, India data center government is putting a lot of emphasis, and a lot of incentives are also coming from government for creation of data center by state governments in terms of availability of water, availability of power, availability of land. A lot of facilities are being given. Current capacity in India, as much I understand, is about 1.6 GW for data centers. This is expected to become 6 GW by 2030. It is a very good increase, and it will generate reasonably good demand. But if you compare it to what is happening in U.S., it is minuscule in a sense that U.S. is already having 130 GW of capacity, and which they want to increase to 300 GW by 2030. So you can understand the difference. But it does not mean that India is lagging behind.
If you look at Europe is also in the same situation what India is. They are not, again, as advanced as what U.S. is. These countries will also come up. Like India in 4G came up all of a sudden, we became among the first five in the world in 4G, 5G. Similar thing is going to happen in data center also. In my personal opinion, the way the private investment is coming in data center, this 6 GW capacity would be more than 6 GW by 2030, maybe 10 GW still we got. That still is a good number. All the major industrial houses are working on data center, Reliance, Adani, Yotta, Mahindra, Tata. All of them are working on creation of new data centers. Government is also working on its own way of giving incentive to creation of data centers.
I am quite positive about India. But yes, compared to North American market, we have still a lot to catch up.
Got it. Thank you so much. Maybe my second question, just in terms of the FY 2029 INR 10,000 crore number that you have given seems extremely conservative given the kind of run rate that you are already delivering. Any way, in some way, if you can give us some guidance for FY 2028, both on top line and margins?
Manik, I would avoid giving any guidance for 2028. But I can say, this INR 10,000 crore number would be achieved much sooner than we projected in 2029 because you can see the run rate by yourself. 2028, again, it is too early to give a guidance, but yes, we should be doing better than what we are doing now, in the current quarter or the current year or the current half year. The reason is simple, we have order book to be fulfilled, and those orders have to be executed. With the execution of those orders, the revenue will definitely go up. Moreover, more orders are in pipeline. Capacity increase is taking place, most importantly. With increased capacity, of course, there will be increased supply also.
The revenue numbers and top-line numbers and bottom-line numbers, both are going to be better to the best of my expectation. Unless there is some global geopolitical thing happens, nobody can predict that. Business remaining business as such, I am pretty sure that numbers should be better.
Got it. Okay, that is helpful. Just lastly, with current revenue run rate, what kind of utilization levels would we be having at-
I already-
-from a financial standpoint?
Already answered this question. Fiber 100%. Cable also, as I said, different kind of cable are required by different class of customers. Depending who is giving order for what, capacity utilization depends. But you have to keep the machines for every kind of cable what customer requires. Any other different customers require. So sometime, a particular kind of machine may be working at 80% capacity or some other kind may be working at 100% capacity. But if you read then on the basis of revenue numbers, because machines have to be kept for every kind of a requirement. So on the revenue numbers, you will see we are achieving 100% of capacity.
Okay. All right. Thank you so much. Thanks for your time and thanks a lot. And congrats again on the great set of results.
Thank you.
Thank you. Our next question comes from the line of Kush Tandon with Ananta Capital. Please go ahead.
Good evening, sir. Many congratulations on numbers which are better than expectations again. Sir, I have two, three questions. The first is, out of this H1 revenue of INR 4,457 crore, how much will be revenue attributable to the $1.1 billion order that we had got from the hyperscaler? Will you be able to share that number with us?
Kush, I don't have that number in particular. Only thing I can say, we have already started delivering against that.
Okay. Apart from that hyperscaler, we have some other hyperscaler orders, sir? Just wanted to understand.
Yes. Of course, we have.
Okay. Understood. In the order book, we are seeing INR 5,000 crore of O&M order book.
Yeah.
I am sure that would be at a higher margin than the regular business. Would you be able to quantify again the margin profile of the O&M business that you are running, sir?
Well, Kush, it would be broadly the same. Some of them may be less also, some of them may be more. But broadly, margin would be same as we get in the normal turnkey contract. Normal turnkey contract margin could be about, let us say, EBITDA margin could be something like 15%-20%.
Okay. Also, sir, you mentioned about the EPC business. There was some possibility of restructuring or some thoughts on that. Any update on that subject?
We are already discussing that. The board committee which we had formed for restructuring, and we are some external advice also taking from E&Y, probably. Yes, E&Y. That committee is already on the just finishing line of making their recommendation. Once I receive the recommendation, I think maybe week or 10 days time, we would be calling for board meeting to discuss and take a decision on that. So another couple of weeks, I think we should be able to finalize whatever restructuring we finally do. EPC is, of course, one thing which is under active consideration.
Okay. And sir, obviously, we are under a CapEx program of around INR 1,250 crore is what I see in preform, and there may be some other CapEx. Early thoughts, sir, because of the cash flow generation, any deleveraging thoughts going ahead, sir?
Any?
Any?
Debt reduction plans.
Debt reduction, yes, it will happen. Already we are repaying old debts. We have taken some new debts for CapEx. But finally, the debt reduction will start in the current year.
You mean to say, sir, the March 2027 and March 2028 balance sheets, the debts will keep coming down?
Yes, it will substantially go down.
Okay. Sir, you have answered this question, but just wanted to understand, sir, in this quarter, again, this is business as usual, no high margin order, no one time event, nothing like that in this quarter either.
No, there is no such thing that there is very high margin business of any particular quarter. It will be as normal. As I have said, there may be some improvement in the margin. But there are no diamonds falling down from the sky.
Sure, sir. Congratulations, sir. Those are my questions. All the best.
Thank you.
Thank you. Our next question comes from the line of Khushi Soni with Nuvama Institutional Equities. Please go ahead.
Thank you for the opportunity, and congratulations, sir, on yet another excellent quarter. My first question is with regards to the preform facility. We have announced the CapEx to increase, and we have doubled our capacity from 300 metric ton to 600 metric ton. We have also moved up the commissioning timeline by almost 9- 10 months. I wanted to understand what would the progress be on this expansion, given that all global peers are also looking at capacity expansions on similar or larger scales. Do we see any headwinds in terms of supply chain issues or any machinery delay? Any of that, if you can help me, sir.
Look, there is no such significant delay. I cannot give you more details on that particular aspect because of commercial confidentiality, but we are going to have a midterm solution for our own preform starting from the first quarter of the next year itself, calendar year itself. That is one thing which is happening. Second, this 600 ton which you talked about, there is no headwind as such. But yes, machine supplies, there were two to three months delays experienced by us, which we have already taken into account when we say October 28. Because suppliers also got large orders. We get orders, they get orders. But there is no such headwind. And October 28 timeline which we have given, that would remain.
Oh, right, sir. Just a quick follow-up on that. Again, with the preform facility right now, since we are outsourcing preform, we do not really require germanium. But once the capacity comes in, do we have any contracts or how do we plan to ensure that we have adequate supply of germanium? And will we see any impact on margins or any utilization ramp-up or delays because of the availability?
Khushi, we are already talking to some of the suppliers for germanium. It is too early to finalize contract, but we are already getting in touch with a couple of suppliers for germanium, from whom we have received positive response.
Right, sir. Thank you, sir. My second question would be-
Prices, of course. But germanium percentage in the overall cost is so low, price would not be much impacted. But yes, supply, we have to tie up in advance. That is what we are working. We would be needing germanium two years from now. We are already working on that.
Right. Thank you, sir. My second question would be if you could provide some color on the quarter-on-quarter trends in terms of volumes and pricing, especially if you can give a sort of a bifurcation between telecom and data center, and how the data center segment has scaled up for us. So what kind of revenues we saw in FY 2026, then in Q1 and Q2, maybe a sense of the mix that we will see.
Khushi, quarter-on-quarter trend, I can only say the revenue which you have seen in the current quarter, there will be growth in that revenue. There will definitely be growth in Q3. That is my best estimation as on today, barring any absolutely something out of control happening, which is a geopolitical situation which cannot be controlled by anybody. But business going as such, there will be growth in next quarter. So quarter-on-quarter, there is a growth expected. Next year also, there is a growth expected because the very fact that which I have told two, three times on this call, capacity itself is going on and orders are there. So naturally, there will be growth in revenue also. There is no doubt about that. So growth in revenue and profitability, both are expected.
Right. So any kind of split in the data center and telecom that you can provide us with?
I would generally say anywhere between data center would be 65%-75%, telcos would be between 25%-35%. Somewhere it will vary between that.
This is in terms of revenue or volume?
In terms of revenue.
In terms of revenue. If you can just give a sense of the difference in realizations.
Pardon me.
Difference in pricing or realizations between data center and telecom.
Data center prices are a bit higher because they need a very specialized fiber. Telcos don't need that kind of a specialized fiber. Naturally, data center prices would be higher because of higher level of technology and the kind of fiber involved.
In Q2, we have had a revenue growth of 33%. If you can give us a sense of the growth mix or price mix, how much is DC more than telecom? Just a broad sense so we can understand what is the mix.
It's not comparable because the products are different. Whereas, telcos, most cases require D fiber, 650 DM, which is fiber price is, let us say roughly $15. Data centers require A2 fiber of 180 micron. The fiber price is $25, $26, $27, something like that, $25 maybe. So it's not comparable, because these are two different products. You can't compare the price of a car and an aircraft. It's something like that. So I cannot compare the prices between the two. But relative pricing, I can say yes, data center prices are costlier because that kind of a fiber you draw, you draw at a very less speed because it's thinner. It has to be more careful to draw the fiber because the geometries have to be maintained. So tight, clad fibers are there. So these are different products.
But in terms of when you talk of revenue, per meter revenue for a kilometer, let me say, for a data center cable is much higher than a cable required by a telco, because the products are completely different.
Right, sir. So, in Q2, have you seen any increase in the blended prices? I understand you mentioned that each of the fiber is different, and we cannot have a sense of each and every one. But on a blended level, have you seen prices go up or remain stable? What has the trend been like, if you can highlight on it?
Q2 have really gone up. I now see more or less stabilizing. But again, I may be completely wrong. I said this in the last quarter also that it looks to be stabilizing, but then it has gone up by some 20%. But if you ask my opinion, there may be some increase, but not as much as what you have seen in the previous quarters.
Thank you, sir. That's great. Thank you. Congratulations once again, and wish you much more luck for the rest of the year. Thank you.
Thank you.
Thank you. Our next question comes from the line of Debashish Mazumdar with Sagun Capital. Please go ahead.
Hi, sir. Good evening. Thank you so much for taking my question. Most of my questions have been answered. Just one thing I wanted to understand, this is also on the margin front. If I compare our telecom margin, which is at EBITDA level must be upwards of 30%. If I put that number for an Indian competition, who is, again, fully backward integrated, doing around 20%, and the global very large competition like Corning, who is again much higher attach rate or much higher connecting solution doing 30%. Just wanted to understand in a comparative landscape, we are doing around 32%-33% kind of EBITDA margin in the telecom business. Is it largely because of the product mix? Is it largely because of the hyperscaler mix? What exactly is benefiting us to do this kind of margin in this quarter?
Debashish, thank you.
But if we speak in Bangla, the others won't understand, sir.
No, that's why. I won't do the question in Bangla. Only Happy Bijoya to you.
Happy Bijoya.
Anyway, sorry for this little out of the context conversation. Debashish, I cannot comment on what somebody else is doing and how he is doing. It's not possible for me to know inside of anybody else's business. Only thing I can say what we are doing, and that is the thing I can explain.
Sure.
We are supplying mostly to data centers till now, but now starting for telcos also. Last quarter also, we supplied to telcos, particularly to Indian telcos, not international telcos. Now we are talking to international telcos also, where we think we will get some orders. Telcos are now increasing their demand. Obviously, as I said earlier, telcos have a different kind of cable requirement and data centers have a different kind of quality as well as quantity. Quantity is also different in case of telcos and data center, as I explained, 180 micron, 250 micron, G.652D fiber, G.657A2 fiber. It depends who is doing more business of what kind. If somebody is supplying more, of course, his revenue per kilometer may be lower. Somebody is doing more of a high-quality fiber, maybe revenue could be higher. It all depends upon who is doing what.
I cannot comment on what somebody else is doing. That's not for me to comment. Everybody does what he thinks is best, and they must be doing, whoever, their best.
Sure.
My good wishes to all competitors.
Sure. Understood. And sir, this almost. Yeah, sorry.
Treat competitors as competitors. I treat them as friends.
Sure, obviously. This INR 29-
Maybe some of them are listening to this call.
-possible, sir. This INR 29,000 crore order book that you are talking about, this will be delivered by what time, sir? This will be delivered, what is the timeframe to be delivered of this order book?
Look, some of them are four to six months, some of them are three years, four years. Mostly, up to four years contract, maybe.
Okay. But largely to be delivered on an average in a two years timeframe, considering that INR 10,000 crore number that
It's not
Yeah. Sorry.
Not necessarily. Some of them would extend to four years. Now we are talking of contracts of further four and five years. So that would be next five years.
Understood. Sir, third question is that 600 MT preform that we are putting in, is that sufficient for the 45 million fiber kilometers capacity that we will be having, or we need further input there?
No. That would be just half of that.
Okay.
The rest we will have to initially buy from outside. That is the preform we will have to buy, and our own preform would be roughly about half of the capacity. Rest of the preform, we have to buy from outside, for which we have some long-term contracts also.
Sure. Understood, sir. Thank you very much for answering my question, sir.
Thank you.
Thank you. Our next question comes from the line of Sagar Parekh with Renaissance Asset Managers. Please go ahead.
Yeah, sir. Hi. Thank you for taking my question, and congratulations for a great set of numbers. Just as you gave the defense revenue visibility for the next two, three years, your aspirations, can you also share how are you looking at your optical fiber cable business for the next two, three years? Do you have any aspiration in mind? What kind of scale do you want to reach to?
Look, as I already said, we are increasing our capacity on 34 million fiber kilometers to 63 million fiber kilometers. That itself would give us increase in revenues. Now, how much in monetary terms is very difficult to say at this point of time. It depends upon what kind of cable could be required, what capacity cable would be required. It is very difficult to say. But 34 million fiber kilometers to 63 million fiber kilometers , you can start doing your own calculations.
34 million fiber kilometers to 63 million fiber kilometers . Right. So let us assume that this year you will be about INR 8,000, INR 9,000 crore of revenue from OFC, so that would translate to about INR 16, INR 17 thousand crore.
I have not. Thousand crore. I have not said that. You have said that.
Out of INR 10,000, I think defense would be INR 500, and the rest, I think about INR 500. So INR 9,000 crores.
EPC is also there, telecom is also there. So all of them are there.
Acha. No, I was talking about tele-
Let us say any number, it does not matter. 34 million fiber kilometers will go to 63 million fiber kilometers. So any number you talk, INR 7,000, INR 7,500, INR 8,000, I am just not going into the numbers right now. But yeah, somewhere around that. Let us say INR 7,000, just as an example.
Right.
If it goes to 63 million fiber kilometers, you can do your calculation, but be very careful. When I say 34 million fiber kilometers is the total capacity, some part of the capacity for the telcos, for example, they need loose tube cable. They may not be buying at this point of time, so they may be lying idle. So 34 miilion fiber kilometers is the theoretical capacity, but finally, the numbers are important. What kind of numbers you achieve. That determines your capacity. Because not all kind of cables are manufactured at every point of time.
Right.
Generally, you can say the utilization will get better because we are now expanding the capacity of cable which are currently in demand, like data center cables. Overall, it will increase only. But you can do your own calculations on that.
Right. My next question was basically on the visibility, because you just said that your order book is INR 28,000 crores and average about four years is what you said, right? So that if I divide just by four, you have about INR 7,000 crores of annual revenue run rate, whereas you are talking about maybe even slightly less than double in two years. So it seems that we don't have any visibility beyond that INR 6,000-INR 7,000 crores for now. Is that the right way to assume or
No. There are four years you are talking. More orders are going to be received. Do you think that I am going to be sitting idle, not taking more orders? Many more orders are in pipeline. So delivery will happen, orders will come. Like when I met you last time, I think order book was INR 26,000 crore, if I'm not wrong. Now it has given INR 28,900 crores, almost INR 29,000 crores. So it has increased. Though we have delivered at INR 2,500 crores, but order book has gone up. So INR 25 crores + INR 3,000 crores, if you look at that.
Right.
So it means we have INR 5,500 crores or more orders. We will keep on receiving more orders. I think orders will be more than the supply we do.
No, that I understand. I understand that you will keep getting orders. My only point was that as of now, we have INR 6,000-INR 7,000 crores of visibility in terms of revenue per year. Beyond that, the more
No.
No?
Again, you are wrong. It is not evenly distributed over four years.
Okay.
It is not evenly distributed.
Right. Okay.
More orders will come. They would get added. More orders are coming. So more capacity is being added. That is on the basis of order pipeline and orders in hand. You cannot say there is a INR 28,000 crore order book and that will remain at INR 28,000 crore and supply would be made out of that only. I am giving you one example. In one quarter, INR 26,000 crore has become INR 29,000 crore, whereas there has been a supply of INR 2,500 crore.
Right.
Against INR 2,500 crore supply, you have received orders of INR 5,500 crore.
At any point of time, do you have visibility for the next two years?
At any point of time, do you have any visibility for the next two years in terms of revenue?
No. As I already said, capacity is increasing 34 million fiber kilometers to 63 million fiber kilometers. Last question, I answered this to Khushi.
Right.
Defense revenue, I have already said we have to do INR 2,000 crores and possibly INR 5,000 crores in next two years. That should give enough visibility that there is going to be a reasonable growth in revenue and bottom line growth.
Perfect. Thank you so much for answering my questions. Thank you.
Thank you.
Thank you. Our next question comes from the line of Rishubh Vasa with Indsec Securities and Finance Limited. Please go ahead.
Yeah. Hi, sir. Thank you for taking my question, and congratulations on a good set of numbers. My question pertains to the defense segment. We did around INR 80 crores of revenues in the first half, and we are aspiring of around INR 500 crores in FY 2027. I just wanted to understand this gap. How much of this gap-
Hello? Hello?
The current participant seems to have dropped from the queue. We will proceed to the next participant. The next question comes from the line of Akshat Mehta with Seven Rivers Holding. Please go ahead.
Hello. Congratulations on a great set of numbers. I just have one broad level industry-related question, sir. For the next few years, you have roughly INR 30,000 crores of order book, right, which will drive the growth, plus you will get more orders from there. Post, let us say, FY 2029, what kind of CapEx from hyperscalers, from AI data centers do you need to maintain a 14%-15% growth rate from there on?
CapEx, we have already announced that our pending CapEx is INR 1,800 crores.
No, not from your side, sir, from the-
Okay
-consumers.
Well, what I have heard of, I do not recollect the number, but I think they have been talking $35 billion, something like CapEx for growth of data centers in U.S. alone.
Currently, it is around $800 billion for this year.
Yeah. Well, I may be wrong on those numbers. Do not hold me on that number.
Yeah.
It may be very different number, but it is in billions of dollars. I do not have that number in my mind right now.
Okay. And sir, I also want to understand that you are targeting INR 800 crore of connectivity revenue in this year. What will that number be in Q2?
You are talking about
Connectivity.
Okay. Q2, I do not have the right number. Total is INR 800. Q1
Hello?
Just one second. I will try to get the number for you.
Yeah.
I think you should take another INR 200-INR 300 crores, something like that.
Okay. Is it Q1 or Q2, sir?
No, I am talking about this Q2.
Okay.
It should be about INR 300+ crores . I think INR 300 crores should be there.
Okay. Thank you, sir.
Thank you. Our next question comes from the line of Smit Gala with RSPN Ventures. Please go ahead.
Thank you for the opportunity and congratulations on a strong set of numbers. Most of my questions have been answered, but one question I would like to have clarity on is on the interconnect revenue in quarter two, as well as quarter one FY 2026 and what we expect for the full year FY 2027.
I have already answered this question, that INR 300 crore is our expectation for quarter two. INR 800 crore is our expectation for the whole year.
And quarter one?
Quarter one was nil. There was no quarter one. Quarter one was-
Okay. That was helpful. Thank you. That is all from my side.
Yeah.
Thank you. Our next question comes from the line of Dhruv Sitlani with Viomera Capital. Please go ahead.
Congratulations on the stellar set of numbers, sir. I had just two questions. My first question is from Q1 to Q2, you had around 40% quarter-on-quarter growth. How much of the growth came from the volume increase versus realization increase? In this, going forward in Q3 and Q4, do you expect further realization increase or not? Is there any capacity for more volume growth in next two years?
Look, this growth came from volume and price both. It is not only price, not only volume. It came from both of the things. Production also increased, and our prices also became better. The same trend is going to continue in future also. It would come from both sides, volume and pricing both. How much would be volume, how much would be price, very difficult to say. The price, how much it will become better or remain stable is very difficult for me to say now because different cables have different prices, different customers have different prices, different type of cables and fiber is there. It is very difficult to say like that, but overall, there would be growth, that much I can say.
Okay, sir. That is great, but it would be better if I can get some ballpark number by any chance.
Ballpark number-
More than 50, like let's say 50/50, 60/40 or 70/30, that would be great.
Cannot give you a ballpark number. If I give, that would be an incorrect statement though.
Okay, sir. No problem. Sir, my second question is on how much was the revenue from connectivity in Q2 that you answered rightly, and what is the trend that can we see going forward?
I've already told that three times in this call that expect INR 800 crore this year, INR 2,000 crore next year.
Okay. Thank you.
Thank you. Our next question comes from the line of Tej Patel with Niveshaay. Please go ahead.
Yeah. Thank you so much for the opportunity. Am I audible?
Yeah.
Yeah. Congratulations on a good set of numbers. Sir, I know a previous participant had asked a question probably on volume, value mix, but we of course get it, there is volume growth coming from the new cable capacity going live. But just wanted an understanding on pricing terms. When you say, sir, the prices have increased, let's say, by 20%-25% quarter-on-quarter, because these are prices of market, right? But then we have entered into contracts which are long-term in nature. So are we able to pass on this complete 20%-25%, given our contracts are long-term, or is there a certain extent to which only this pass on happens?
Tej, one thing. First of all, when I say 20%-25%, it is not for every raw material. I am talking about fiber.
Yeah.
20%-25% fiber is there. There are other raw materials also. Gases are there. Plastic products are there. Jelly is there. There are many other products. Not that every product has gone up by 20%-25%. That is one. Second, whenever their price increase, there is a negotiation between the buyer and seller, and some equilibrium is always reached, so that neither their purchase price is affected too much in percentage, nor our profit margin is impacted.
So there is a price reset clause in most of the cases. Most of long-term contracts, there is a price reset clause. Short-term contracts of four to six months, there is no reset clause. So in those cases, if prices of raw material go up, we have less margin. But in those contracts which are four to six months, the price is always higher than there would be a five-year. So all these things get balanced out finally.
Superb. Got it. Sir, initially in between, you said you are probably having a midterm solution for our own preform starting from first quarter. If you could elaborate on this, what exactly is this solution?
I can't elaborate. This is a trade secret.
Okay. No problem, sir. My last question is. Sorry. Yeah.
There is a midterm solution, but I can't elaborate more on that.
Okay. Sir, does this reduce cost? Is it something related to process or something, or is it some sourcing strategy?
Well, I would only say that it would reduce cost.
Okay. Superb. And sir, one last question is, when you say we are probably putting up a facility for connectivity as well, and we are guiding good numbers towards connectivity as well. All this business of connectivity, is it all of scale across, that is, between the data centers and within the campus? We are yet to sell a solution or make a product for completely that goes inside the data center, right? Because we will be needing separate certification for that, right? Is that understanding correct?
Look, you know what connectivity we are doing? It is inside the data centers, and that certification is already there. That is why we have started supplying and generating revenue out of that. Now, when you talk of certification, every data center does not require same kind of connectivity solution. If somebody else requires a different kind of a connectivity solutions, he would definitely do his own testing and qualification again. Not again. For the first time, maybe he will do that because they are different kind of a connectivity solution. So there is an ongoing process which always continues, because cable also same thing. People require different kind of cables, so if they buy a particular kind of cable for the first time, then qualification will have to happen. That is a continuous process.
Superb. And sir, last question. In the presentation, we have put up stating margins of, let us say, greater than 27%. But today, just wanted to get your views, not on margins, but a broader scenario. Today, a lot of our margins, a lot of it has to do with the prices which optic fibers are currently at, right? But let us say a lot of these global players have announced capacity increase of almost 40%, 50%.
We ourselves are almost doubling our capacity, same as with our peer. So two, three years down the line, the preform capacity also would be coming in. I am just trying to get an understanding on your views on the prices, let us say, would get impacted because of the supply. How are we probably thinking on margins when today we are saying we will be able to maintain 27% margins two, three years down the line?
I tell you, preform prices will have to come down. Right now, the preform, if you want to buy from market, we are not buying from market because we have a pre-done contracts, so we have no issue. If you try to buy from market, they are insane prices. Insane. That has to come down. It cannot continue. They have gone up by 600%. I don't have to suffer because of that, because I have a predetermined contracts and these are being supplied. That's insane, because that's something non-availability. They have to come down. This $300 [inaudible] cannot continue, but now per kgs are not returned. It cannot continue. They will come down. Once the capacity increases, they have to come down to reasonable level which is equivalent to the prices of the fiber which is available at this point of time.
Those prices, current prices are insanity, and it is a factor of non-availability. If somebody asks you what is the price of something like X, which is not even available, then you quote any price. How does it matter? That price right now is insanity. It has to come down, and that what it means, that there is a very less capacity than what is required. That capacity is required. It has to come up. That would not mean any dent on the profitability of company like ours, because we don't have to pay $300 in any case. It has to come down because it has to come down to realistic level. These are the prices of non-availability.
Perfect. Great, sir. I have a few more questions. Would love to connect offline. Thank you so much.
Sure
All the best.
Anytime.
Thank you. Our next question comes from the line of Saket Kapoor with Kapoor Company. Please go ahead.
Yeah. [Non-English content ] Nahata Ji.
Kapoor Sir. [Non-English content]
Thank you, sir. Sir, just to continue on the aspect which you were just alluding to, particularly with respect to the preform availability and the insane prices. Taking into account the cyclicality factor, sir, what according to you are the key risks currently associated with our business in terms of OFC pricing and this non-availability of the key raw material that has contributed to the improved realization? Sir, how will you summarize particular-
Look, I tell you.
Yes.
First of all, raw material availability, we need germanium after two years. We have already started talking to suppliers for germanium. My preform suppliers at this moment have not talked to me of any less availability of germanium. It means germanium is available to them. If it is available to them, it will be available to us also. I don't think there is such a short supply that it would inhibit production of preform in a great quantity, because it is available from several companies. Country to country, there are export restrictions, but it's not that these are not available. In two years' time, we will definitely need it, and we have already started talking to suppliers. Right now it is not impacting us. I do not have any knowledge about how it is impacting others. I have no knowledge of that.
But from two years from now, geopolitical situation may be completely different. The shortage or so-called shortage is geopolitical, not really the shortage of raw material for any natural reason.
Right, sir. That only what would actually factor it into the pricing also for the end product.
Yeah.
Do you think that this is the sustainability of these margins going ahead? Secondly, with the type of cost of finance that has gone up, especially for the U.S. market and a lot of the data centers being funded through debt, how will these two scenarios put pressure on the viability of even the data centers going ahead? Then the entire story that has been planned out for four to five years. Just to have an understanding from you people as you are the veteran in the industry. Sir, just to hear your thought on the same.
As data centers are concerned, people have a rational mix of debt and equity of the large hyperscalers I am talking about. Large hyperscalers like Google, Meta, Microsoft, OpenAI and all that. If you look at the orders which companies like NVIDIA with GPUs, which are primary suppliers for data centers, if you look at their demand, there is a huge demand they cannot fulfill. It means data centers are coming up. Even if there is some percentage less of data centers come up because of cost of capital increase, who are heavily reliant on debt, which obviously the major hyperscalers are not. In that situation, as I have already talked, there will be demand coming up from Europe and Asia, which has not yet started in a meaningful manner.
That will offset that particular less capacity expansion of the data centers which are heavily reliant on debt only. Rest, who are not heavily reliant on debt would continue because the companies are strong companies. Then the demand for data center emanates from more data is being generated, which AI is generating. Now, if you say, what happens if AI does not happen? Well, I cannot comment on that, but I do not think that there is any reason that AI will not happen. Some restriction may be there on use of AI for nefarious purposes, but AI is so much beneficial to humanity that it will keep on increasing its utilization and therefore data will keep on growing.
I do not foresee any big risk out of this interest rate change, except there may be some closures, some less expansion in heavily debt-reliant companies, but that would be offset by Asia, Europe, and demand of telcos, as I have already said.
Thank you. Ladies and gentlemen, we will take that as our last question for today. You may get in touch with Mr. Amit Agarwal for any further queries. I would now like to-
I think, all questions that can be there have already been answered. Any further question would only be repetition only. Still, any of you have any further query which is left unanswered, please send a mail to Amit Agarwal and we will immediately reply that. But the last question.
Thank you. On behalf of Nuvama Institutional Equities, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.
Thank you very much, gentlemen. Thank you very much, ladies and gentlemen, for being on the call, and I really appreciate your presence. Again, give you my lookout for the business, that business is going to remain positive, business cycle is good, and there will be sustainability in the revenue and profitability of the company. Thank you very much.
Thank you.