HFCLNSEQ4 FY2022May 06, 2022

HFCL Limited

9,098words
119turns
8analyst exchanges
4executives
Management on call
Mahendra Nahata
PROMOTER & MANAGING DIRECTOR
V. R. Jain
CHIEF FINANCIAL OFFICER
Manoj Baid
COMPANY SECRETARY
Amit Agarwal
HEAD RELATIONS INVESTOR
Key numbers — 40 extracted
INR 600
ecurity Council Secretariat was a pivotal acknowledgement from the Government. Capital raise of INR 600 Cr through QIP and release of 100% of the pledged shares further demonstrated the trust and belief
100%
tal acknowledgement from the Government. Capital raise of INR 600 Cr through QIP and release of 100% of the pledged shares further demonstrated the trust and belief by our stakeholders. Setting up o
INR 5000
rade to A with stable outlook from CARE Ratings. We closed FY2022 with an order book of more than INR 5000 Cr. From R&D standpoint, development of Wi-Fi -7 enabled access points and point to point and po
43%
ould also like to mention the Company has been able to increase its product revenue to a level of 43% in FY2022 as against 27% in the last financial year. This trend is expected to be even better i
27%
the Company has been able to increase its product revenue to a level of 43% in FY2022 as against 27% in the last financial year. This trend is expected to be even better in the next financial year.
INR 2055
trend is expected to be even better in the next financial year. The product revenue of FY2022 was INR 2055 Cr as against last year's product revenue of INR 1205 Cr. The export revenue of the Company also
INR 1205
ial year. The product revenue of FY2022 was INR 2055 Cr as against last year's product revenue of INR 1205 Cr. The export revenue of the Company also increased significantly in the current year. As again
INR 201
The export revenue of the Company also increased significantly in the current year. As against INR 201 Cr of export in the financial year ended on March 31, 2021 the export in FY2022 was INR 363 Cr.
INR 363
ainst INR 201 Cr of export in the financial year ended on March 31, 2021 the export in FY2022 was INR 363 Cr. We expect to double our export revenue in the current financial year again
22 million
roved the expansion of our optical fiber as well as optical fiber cable manufacturing capacity to 22 million fiber kilometers and 34.75 million fiber kilometers per annum respectively. With an estimated cap
34.75 million
al fiber as well as optical fiber cable manufacturing capacity to 22 million fiber kilometers and 34.75 million fiber kilometers per annum respectively. With an estimated capex of INR 425 Cr, this round of e
INR 425
kilometers and 34.75 million fiber kilometers per annum respectively. With an estimated capex of INR 425 Cr, this round of expansion would see our fiber and OFC capacities to go up by 120% and 40% respec
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Guidance — 20 items
Mahendra Nahata
opening
“Now zooming into the Indian context, our healthy growth rate and forex reserves coupled with steadily improving exchequer collections and forecast of a good monsoon shall help us deliver another year of world-leading growth in FY2023 for the Indian Economy.”
Mahendra Nahata
opening
“These products will be compatible to 5G networks in terms of their throughput capacity.”
Mahendra Nahata
opening
“We expect to double our export revenue in the current financial year again towards the end of Q4 FY2022, the Board has approved the expansion of our optical fiber as well as optical fiber cable manufacturing capacity to 22 million fiber kilometers and 34.75 million fiber kilometers per annum respectively.”
Mahendra Nahata
opening
“Laying of optical fiber cable in the state of Jharkhand under BharatNet Project got completed during the last quarter.”
Mahendra Nahata
opening
“We engaged Ingram Micro as distributor for our Wi-Fi and UBR line of products, with an aim to leverage their stronghold in channel distribution in India and SAARC countries.”
Mahendra Nahata
qa
“Similarly demand of our kind of telecom infrastructure will increase significantly because network rollout would happen by operators and it will be completely large extended new rollout for 5G networks.”
Mahendra Nahata
qa
“Now when the 5G network grows accessory equipment like Wi-Fi, like Wi-Fi 7 for example which we are also developing, Wi-Fi 6 which is already under our product range, backhaul radios for Wi-Fi backhaul, broadband connectivity, all this will grow significantly, then the transport products for 5G routers, switches, demand is going to grow significantly.”
Mahendra Nahata
qa
“We are designing router, switches, so all this put together you will find we are getting ready for the new kind of products which will be required for 5G networks which is to be laid out by the operators who take 5G spectrum.”
Mahendra Nahata
qa
“Now 15 lakh kilometers of fiber optic cable will be required for linking all the villages which are to be linked in BharatNet earlier it was gram panchayat now it is villages over fiber optic cable to give broadband connectivity.”
Mahendra Nahata
qa
“This INR 361 Cr is probably going to be somewhere around INR 800-900 Cr that is the target we have fixed up for ourselves, so worldwide the demand of fiber optic cable and associated equipment is increasing significantly.”
Risks & concerns — 4 flagged
Friends, as the threat of pandemic recedes, we still remain vigilant about new COVID variants that can pose challenge to the economy.
— Mahendra Nahata
However, the margins in Q1 may remain somewhat under pressure because of global increase in input costs.
— Mahendra Nahata
The increase in input costs including optical fiber, plastics and semiconductors and logistics during last quarter has put pressure on operating margins.
— Mahendra Nahata
Our sale prices are also showing increase because as we have input cost so new orders we are taking at increased prices also so all put together this would balance out in the Q2 but Q1 there might be some impact of this situation.
— Mahendra Nahata
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Q&A — 8 exchanges
Q
Good evening gentlemen. Sir, thanks for presenting the result. Sir my question was regarding FY2023 and if we extrapolate it and go to even FY2024 what opportunity we see for our company and where we are ready and you be as a company and as a leader, where you see the opportunity for our company.
Mahendra Nahata
Thank you Mr. Shah and good question. FY2023 comes up with multiple opportunities, India and worldwide, why I am saying Worldwide also because we are focusing to a large extent in the export market also. In terms of opportunities, in the current financial year as you all are reading in newspapers today that 5G auction is going to be held very soon, possibly in June. Now with the 5G auction being held and networks to be expanded by operators who take 5G spectrum, there is a large growth in demand of fiber optic cable and also very wideband radios both are which would be required to connect the
Q
Sir thanks for the opportunity so my first question was what is the R&D development in the 5G area as we were developing some hardware, which is supposed to cater to the 5G technology so where are we on that side Sir?
Mahendra Nahata
Well in 5G you know we have two different kinds of equipment. One is 5G radios and transport equipment. In the radio equipment, we are designing small cells and macro cells of different kinds system. Small cells is for indoor or some outdoor application also, but macro cells is for large scale application for what we call the base stations of the towers you see for massive communication capacity. Now these designs are already happening. We have tied up with the world leaders in this arena to give us software stacks and designing capabilities and these are going to be our own design where our R
Q
Thank you for giving me an opportunity. Nahata ji thanks for giving the clear idea about HFCL products and the kind of demand it will have going forward. I have got a couple of questions like my first question is regarding this NDU that is the non-disposal undertaking of equity shares? So, after releasing the pledged shares so just wanted to have some clear idea about the purpose.
Mahendra Nahata
Let me first explain and answer you this question. A pledge has been released non-disposal undertaking is there from the promoter’s part of promoter share that while the bank loans are existing promoter should not sell it share and run away. That is a non- disposal undertaking bank take that till the time bank loans are existing you know the promoter should not sell significant part of his shares and run away and leave the banks high and dry. That is the kind of protection bank takes from everybody so out of the total number of shares 54 Cr of the promoter shares 24 Cr equivalent shares non-di
Q
Namskar Sir and thank you for this opportunity. Sir firstly out of the total order book how much is skewed towards the export part Sir?
Mahendra Nahata
Export orders are always coming in bits and pieces. They are not out of INR 5000 Cr you will not find that there are some thousands of crores, but I think the total export order available in hand is about INR 225 Cr against a total export target we have about as I mentioned we wish to increase this by 2.5 times of the INR 360 of all the exports we had in the current year so INR 225 Cr of order which is to be supplied next couple of months is a good number if you look at our current export target. We will be able to fulfill without any problem. Sir what have been our capex for FY2022 including
Q
Good evening Sir. Most of my questions have been addressed but one of my questions is in 5G telecom equipment how is the competitive intensity? Who else is likely to supply those products?
Mahendra Nahata
I would differentiate in two parts. One is local manufacturers and another is international. Now international all the large companies which you hear the names Ericsson, Nokia, and Samsung would be there. Chinese would also of course not be there because in India Chinese are no longer being allowed. In Indian companies in 5G radio equipment, Tejas would be there which is now a TATA company. We would be there and I do not know if any other company is working on 5G radio network development. I do not know any company which is being to a large extent maybe I heard of a Sterlite earlier but I do n
Q
Thanks for taking my question. I have few data questions. So Firstly on your product revenue for the quarter and for the full year, how much of it is contributed by fiber optic cable for the quarter and how much is it access products if you can break it up?
Mahendra Nahata
I can explain you, just give me a moment, of the financial year ended 2022, the total revenue has been INR 2055 Cr for products out of which INR 1800 Cr is by optical fiber cable and balance is by different products. Balances by different products which include which engineering products? Access products, Accessories and all those kinds. This does not include any defence products as of yet? Not at all. As I explained in the beginning itself I have not taken any sales of different products even in the current year also in our AOP. We are all targeting for the next year because the testing and a
Q
Thank you for taking my up my question. Sir, just one question on the debt side, I heard during the call we are doing a capex of around INR 500 Cr during the year correct Sir, so how are we going to fund that?
Mahendra Nahata
Look two things one, we have raised equity, so out of the funding will be through equity and part would be debt, and also internal accruals. Any debt equity ratio that we have planned out? It will remain below 0.5. Okay and this capex will be largely towards our 5G hardware related products or is there any? Capex largely is one expansion of optical fiber capacity, two optical fiber cable capacity, three R&D expenses on design development of products, the capex related to that so these are the three major heads of capex. Okay, thank you Sir. That helps. Thank you.
Q
Thank you very much to all of you for attending this conference call of HFCL and as I said we continue on our path of growth three mantras we had given, new products, new customers, new geographies and we are very well working towards that. Second thing we have told that we will continue to increase our revenue from products in terms of percentage we have improved significantly 27% last year to 43% we will keep on growing on that path. Third we have said that we are going to increase our exports, so which as we have seen that we have increased our exports from INR 125 Cr to INR 361 Cr and we e
Management
Speaking time
Mahendra Nahata
49
Saket Kapoor
18
Abhijit Mitra
16
Moderator
10
Hardik Vyas
7
Guru
4
Shivam Vashi
4
Sanjay Shah
3
Saral Seth
3
V.R. Jain
3
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Opening remarks
Abhijit Mitra
Thanks operator and good evening to all the participants and thanks for joining in. We are here to discuss Q4 and FY 22 results for HFCL Limited. Management is presented by Mr. Mahendra Nahata, Promoter & Managing Director, Mr. V.R. Jain, CFO, Mr. Manoj Baid, Company Secretary and Mr. Amit Agarwal, Head IR. So without further ado, I hand it over to Mr. Nahata for his opening remarks. Over to you Sir!
Mahendra Nahata
Thank you Abhijit and good evening ladies and gentlemen and a warm welcome to HFCL’s earning call for Q4 FY2022. Thank you for your continued interest in HFCL and making to this call. The results presentation and press release are available on the website of the Company as well as on the stock exchanges. I am sure you had a chance to glance through them. Friends, as the threat of pandemic recedes, we still remain vigilant about new COVID variants that can pose challenge to the economy. The recent Russian-Ukraine conflict poses new geopolitical challenges not just for India but also for the world. While quite a few sectors were, beginning to show signs of recovery, we could still be staring at an uneven path of recovery given the changing dynamics. All this coupled with the pace of technological transformation, call for the need to be vigilant and agile for leaders across nations and organizations. Now zooming into the Indian context, our healthy growth rate and forex reserves coupled w
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