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    HFCL Limited

    HFCL
    Telecommunication·17 Oct 2025
    Management Summary

    HFCL Limited reported a strong sequential recovery in Q2 FY26, with revenue reaching ₹1043.34 crores and EBITDA margin expanding to 19.49%. The company returned to profitability, driven by improved OFC realizations and strategic focus on high-growth areas like defence and digital infrastructure. Management reiterated its 20% revenue growth guidance for FY26 and highlighted significant progress in capacity expansion and export orders, despite some challenges with chipset supply and state government payments for EPC projects.

    Highlights

    5

    • Revenue for Q2 FY26 increased to ₹1043.34 crores from ₹871.02 crores in Q1 FY26, indicating a strong sequential recovery.

    • EBITDA margin significantly improved to 19.49% in Q2 FY26 from 4.93% in Q1 FY26, driven by better OFC realizations.

    • The company returned to profitability with a PAT of ₹71.92 crores in Q2 FY26, compared to a loss in the previous quarter.

    • Secured export orders exceeding ₹650 crore for Optical Fiber Cables, to be executed by April 2026, strengthening global footprint.

    • Strategic divestment of 15.19% stake in Nivetti Systems Private Limited for ₹52.51 crore to sharpen focus on core strengths.

    Concerns

    3

    • Revenue for Q2 FY26 at ₹1043.34 crores was slightly lower than Q2 FY25 revenue of ₹1093.61 crores.

    • 5G product revenue was lower in Q2 FY26 due to a chipset supply problem, though management stated it has been rectified.

    • EPC projects for UP Jal Nigam face non-payment issues from state government authorities, slowing execution.

    Key financials

    Single quarter

    05 metrics
    1. 01Revenue₹1,043.34 Cr-4.6%YoY
    2. 02EBITDA₹203.37 Cr+18.4%YoY
    3. 03EBITDA Margin19.5%
    4. 04PAT₹71.92 Cr-1.9%YoY
    5. 05PAT Margin6.9%

    Segment breakdown

    Telecom Products
    51.4% Revenue Share₹536.69 Cr Revenue
    List

    Order Book

    high confidence

    Total Value

    ₹ 9,981 crores

    as of 2025-09-30

    quantified
    -4.8% QoQ

    Pipeline

    other

    Additional orders for routers under BharatNet project for West Bengal Circle and participation in two additional circles. Expect meaningful order inflows.

    "The company's strong financial results reflect the robustness of its business, with a clearly defined journey by innovation, diversification, and execution excellence."

    Source:
    Prepared remarks

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    Capex disclosed

    Debt

    0.3x EBITDA

    M&A

    Nivetti Systems Private Limited

    divestment · announced · Consideration ₹NaN (undisclosed)

    Guidance & targets

    13
    CategoryTargetPriority
    Revenue
    Revenue Growth
    20%
    		High
    Revenue
    Defence Revenue
    ₹200+ crores
    		Medium
    Revenue
    Defence Revenue
    exceed ₹500 crores
    		Medium
    Revenue
    Passive Connectivity Solutions Revenue
    ₹400 crores
    		Medium
    Revenue
    Passive Connectivity Solutions Revenue
    4 figures (₹1000+ crores)
    		Medium
    Revenue
    Hosur Defence Facility Revenue Capability
    ₹400-500 crores
    		Medium
    Profitability
    EBITDA Margin
    18% to 20%
    		Medium
    Profitability
    O&M Contract Margin
    20% or so
    		Medium
    Capacity
    Total OFC Capacity
    42.36 million fkm per annum
    		High
    Capacity
    High Fibre Count Cable Manufacturing Capacity
    19.01 million fkm p.a.
    		High
    Product Development
    Electronic Fuzes Testing Completion
    completed
    		High
    Product Development
    Drone Detection Radar Production
    enter production
    		High
    Product Development
    UBR Point-to-Multipoint Development
    start development
    		High

    What to watch in Q3 FY26

    5

    Electronic Fuzes Testing Completion

    November 2025
    CurrentIn final trial stages
    TargetCompleted

    Why it matters

    Successful completion of trials is crucial for large-scale production and securing significant defence orders.

    I expect that within the month of November, the testing would be completed. And I'm very sure that our fuzes will pass those tests. And I expect a very, very good demand coming up for those electronic fuzes, not only from India, but from many other countries.

    Risks & concerns

    3
    RiskSeverity

    Impact of US tariffs on exports

    Management stated minimal impact due to legal mitigation procedures. — Analyst downplayed

    low

    Chipset supply problem affecting 5G product revenue

    A supply problem from a chipset vendor impacted Q2 FY26 5G product revenue, but it has been rectified. — Management acknowledged

    low

    Non-payment by state government for EPC projects (UP Jal Nigam)

    Non-payment by state government authorities for UP Jal Nigam projects has slowed execution, but the Chief Minister has promised funds. — Management acknowledged

    medium

    Q&A highlights

    8

    “There's nothing misdeclaration or nothing illegal about it, very legal procedures. With relevance to certain U.S. court decisions and customs ruling, we have been able to minimise a tariff impact on HFCL, that much I can say. So there is very minimal impact on HFCL's exports, which is mostly optical fiber cable to United States.”

    Analyst sought clarity on a potential geopolitical risk, and management provided assurance of minimal impact through legal mitigation.

    asked by Abhishek Jain

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Shift and Capacity Expansion

    HFCL is undergoing a strategic shift from 'Make in India' to 'Innovate in India,' focusing on cutting-edge products for domestic and global markets. A key milestone is the planned expansion of high fibre count Cable manufacturing capacity from 1.73 million fkm p.a. to 19.01 million fkm p.a., with full operationalization expected by June 2026. This expansion will increase HFCL's total OFC capacity to 42.36 million fkm per annum, positioning it among top global manufacturers and enabling it to meet rising demand driven by AI and cloud applications.

    02

    Defence Business Momentum

    The defence business is gaining significant momentum, with subsidiary HTL Limited securing a ₹101.82 crore contract from the Indian Army for Tactical Optical Fiber Cable. HFCL also secured a ₹50 crore order for Thermal Weapon Sights, with execution underway at the Hosur facility. Electronic fuzes are in the final stages of trials, expected to complete by November, and a state-of-the-art drone detection radar is anticipated to enter production within the current financial year, reflecting strong market interest.

    03

    Digital Connectivity Programs and BharatNet

    HFCL continues to play a critical role in India's digital connectivity programs, including BharatNet. The company has received additional orders for routers under the BharatNet project for the West Bengal Circle and expects meaningful order inflows from other circles. This reflects HFCL's growing relevance as a technology-driven solutions provider for telecom, enterprise, and broadband applications, with plants operating at full capacity utilization.

    04

    Q2 FY26 Financial Performance

    For Q2 FY26, HFCL reported a revenue of ₹1043.34 crores, an increase from ₹871.02 crores in Q1 FY26. EBITDA significantly improved to ₹203.37 crores, resulting in an EBITDA margin of 19.49%, up from 4.93% in the previous quarter. The company returned to profitability with a PAT of ₹71.92 crores, compared to a loss of ₹29.30 crores in Q1 FY26. Telecom Products contributed 51.43% of the Q2 FY26 revenue.

    05

    OFC Market Dynamics and Pricing Improvement

    The global Optical Fibre Cable (OFC) market is experiencing a strong revival, driven by demand from hyperscalers and data center operators. HFCL has seen an improvement in fiber optic cable realization, with prices increasing by approximately ₹100 per kilometre, from ₹850 to ₹950. Management anticipates this positive demand trend and pricing improvement to continue for the next three to five years, supported by continuous increase in demand and the company's expanded capacity.

    06

    Divestment and ESG Focus

    HFCL has strategically decided to divest its entire 15.19% stake in Nivetti Systems Private Limited for ₹52.51 crore, aiming to sharpen its focus on core strengths in telecom and defence. The company also demonstrated an unwavering commitment to sustainable business practices, improving its ESG rating from 63 to 65 (Strong) by ERAIL and achieving a rating of 73 by CFC Finlease in October 2025, reflecting strong environmental stewardship and governance.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.