HFCL Limited (HFCL) Q2 FY23 Earnings Concall Transcript

HFCL Limited (NSE:HFCL) Q2 FY23 Earnings Concall dated Oct. 20, 2022

Corporate Participants:

Mahendra Nahata — Managing Director

Analysts:

Aman Vij — Astute Investment Management — Analyst

Hardik Vyas — Economic Times — Analyst

Sanjay Shah — KSA Shares & Securities Pvt. Ltd. — Analyst

Balasubramanian A. — Arihant Capital Markets — Analyst

Pranav Khandwala — Khandwala Securities Ltd. — Analyst

Sahil Sanghvi — Monarch Networth Capital Ltd. — Analyst

Unidentified Speaker —

Dipesh Sancheti — — Analyst

Swapna Kamath — NFFO VENTURES, LLP. — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Ladies and gentlemen. Good day, and welcome to the HFCL Limited Q2 FY23 Earnings Conference Call, hosted by ICICI Securities Limited.

We have with us on the call Mr. Mahendra Nahata, Managing Director and Promoter; Mr. V R Jain, Chief Financial Officer; Mr. Manoj Baid, Company Secretary; Mr. Amit Agarwal, Head, Investor Relations.

[Operator Instructions] I now hand the conference over to Mr. Mahendra Nahata. Thank you. And, over to you, sir.

Mahendra Nahata — Managing Director

Good evening, ladies and gentlemen. A warm welcome to HFCL’s earning call for Quarter 2 of financial year 2023. I truly appreciate and express my gratitude for making it to HFCL’s earnings call for second quarter or first half of financial year 2023. I’m sure that you’ve got a chance to go through our financial results, press release and investor presentation, which are available on the website of the company and also on the website of stock exchanges.

Financial year — Quarter 2 of financial year ’23 has turned out to be quite promising. We were able to continue on our sustainable growth path, fueled by some key product launches including world’s first open-source WiFi 7 access points, 5G 8T8R Macro Radio Unit and 5G lab-as-a-service during India Mobile Congress 2022, South Asia’s largest digital forum. As a technology-driven enterprise, here is significant thrust on innovating future 5G products, for which we have collaborated with industry leaders like Qualcomm. This will create huge opportunities for our new products based on 5G technologies like 5G 8T8R Macro Radio Unit, 5G Indoor and Outdoor Small Cell, and 5G Millimeter Wave Fixed Wireless Access, Customer Premise Equipment in the domestic and global markets.

The other strategic priority during this quarter was on expansion in key global markets, including United States and Europe, to further support our strategic direction to become a product-led global player in optical fibre cable and telecom products and solutions space. By winning some key orders from Reliance Retail, BSNL RailTel, we have been able to close Quarter 2 of financial year ’23 with an order book of more than INR5,200 crores.

The global macro-environment continues to be challenging and dynamic. However, with the advent of 5G, the opportunity landscape for manufactures in the telecom and technology industry looks promising and has grown many fold. It has also given rise to a spike in demand for optical fibre cables and telecom and networking products. The deployment of a robust 5G infrastructure in the next couple of quarters will enable enterprises is to embark on the digital transformation journey across the sectors. The current global demand for optical fibre cable is 600 million fibre kilometer equivalent cable. Since over 95% demand in witnessed in global markets and given the competitiveness of our portfolio in optical fibre cable, equipment and end-to-end network solution, we aspire to more markets and more customers.

The development of revolutionary yet indigenous technology and products has positioned Indian companies like us in the forefront of global technology leadership. We have already established a successful and strong footprint in 30 plus countries serving 80 plus clients globally in optical fibre cable and telecom products. We have our employees in Dubai, France, Germany, England, U.S., Kenya to further widespread our presence and deepen our customer reach. Apart from this, we have also appointed dealers and distributors in many countries to cater global demand. Over the next few years, we aim to build upon our global customer relations and export footprint expeditiously, and emerge as a large global player in this space.

Our export revenue has grown by 88% in Quarter 2 of financial year ’23 on year-to-year basis. In this half-year of financial year ’23, export revenue stood at INR376 crores compared to INR171 crores in H1 of financial year ’22, showing an increase of 120%. We are all — well on our mission to double the export revenue during the current financial year. This trend is expected to continue in coming years as well.

Zooming into the Indian context, in order to create a strong 5G network infrastructure in India, the telecom industry will witness an investment of INR3.5 lakh crores to INR4 lakh crores in next five years to facilitate 5G services rollout. Indian Telcos are estimated to spend between $1.5 billion to $2.5 billion on optical fibre cables alone in the next three to four years. The domestic optical fibre cable market environment continues to be strong and the current market demand of optical fibre cable produces 35 to 40 million fibre kilometers per annum, which is expected to grow significantly over the next few years on account of creation of 5G network across the country, expansion of existing 4G networks, deployment of fibre-to-the-home networks, implementation of BharatNet projects, which will lead to all the villages of the country being connected by optical fibre cable, and creation of multiple datacenters across the length and breadth of the country. In India, BharatNet alone will lead to an opportunity of length 16 lakh kilometers of optical fibre cable translating almost 50 million fibre kilometers.

There is tremendous opportunity in global markets as well. We have witnessed the requirements of leading economies, including United States, United Kingdom, Germany, and Europe are investing heavily on building robust fibre connectivity for the deployment of 5G networks and FTTH networks. The global market demand of optical fibre cable is about 600 million fibre kilometer per annum. And it is estimated to grow to 1,000 million fibre kilometer per annum over the next five years. We also see immense opportunities for telecom and networking products and system integration across the global – globe as part of 5G rollouts, especially in markets like Europe and U.S. We have identified Europe and U.S. to be the key markets to focus on for further deepening our global footprint.

During this quarter, we also entered into a crucial partnership with Qualcomm for design and development of 5G Millimeter Wave fixed wireless access Customer Premise Equipment products and 5G Outdoor Small Cell product development. All these initiatives and significant alliances will enable HFCL to expad its 5G product portfolio by launching various products gradually for India and global markets, and these production enhance 5G user experience and contribute for efficient utilization of 5G spectrum.

Another significant highlight in our participation and the India Mobile Congress this year, the largest digital technologies forum in South Asia is our Honorable Prime Minister inaugurating the larger 5G the event. The world witnessed every key telecom and technology player showcasing their latest and most innovative solutions. HFCL took this opportunity to launch some significant new offerings, including world’s first opensource WiFi 7 access points. With its launch, your company the world’s first and first OEM in India to launch opensource WiFi 7 designed to deliver extremely high throughput, generating speed of more than 10 gigabits per second. With a strong background of R&D, our line of WiFi 7 products is bound to enable telecom operators to deliver better user experience than earlier, being a step closer to Metaverse.

At the India Mobile Congress, we also launched the first product for 5G product family, 5G 8T8R Macro Radio Unit, which is modular in design and can be easily customized to support any sub frequency band to address the global markets. 5G is bound to accelerate adoption of virtualization and cloud-native technologies. Our next-generation Radio Unit combines the power of V-Ram based on open standards to accelerate 5G deployment.

5G lab-as-a-service was another significant launch the Indian Mobile Congress. HFCL is one of the few companies in the country to launch 5G las as — Telecom operators are adopting multi-vendor networks based on cloud-native technologies for faster and cost-effective rollout of 5G services, and for improved user experience. Our lab-as-a-service situated in Bangalore will provide an automated test environment for the private sector, academia and environment to work together on product innovation, from concept to reality, thereby accelerating rollout of 5G solution and services in both India and globally.

I would also like to mention that HTL Limited, our material subsidiary has established a state-of-the-art Polymer Compounding facility as backward integration at its Hosur plant in Tamil Nadu for manufacturing of Polyolefin based compounds of various grades and colors which are required as raw material for manufacturing of optical fibre cables. With our optical fibre capacity expansion coupled with the robust opportunity landscape, this backward integration will enable us to improve our profitability, and with the availability of multiple grades of polymer, it will further help us to tap more customers in domestic and global markets.

Let me now brief you on key performance metrics of Quarter 2 of financial year ’23. Revenue of Q2 financial year ’23 stood at INR1,173 crores as compared to a INR1,051 crores in Q1 financial year ’23 and INR1,122 crores of Q2 of financial year ’22. EBITDA for the quarter at INR175 crores is as compared to a INR130 crores in Quarter 1 and INR173 crores in Quarter 2 of FY22. EBITDA margin stands at 14.88% for the Quarter 2 of financial year ’23 as compared to 12.35% of Quarter 1, and it stood at 15.44% in Quarter 2 of FY22. For FY — for Quarter 2 FY23 profit after tax stands at INR84 crores as compared to INR53 cores for Quarter 1 of FY23 and INR86 crores for Quarter 2 of FY22. PAT margin stands at 7.18% in Quarter 2 as compared to 5.05% in Quarter 1 of FY23 and 7.66% in Quarter 2 of FY22. Segment revenue of telecom products during the quarter stood at INR671 crores as compared to INR620 crores.

From our financial performance, you would kindly appreciate that please on the backdrop of easing supply chain disruption and improvement in input costs, we, have been able to demonstrate healthy growth in our revenue and margins over the last quarter. We believe that our revenue and margins will continue to grow with all initiatives taken in last few quarters. We have also applied for designing incentive scheme for telecom and networking products, and are committed to invest a sum of INR425 crores over a period of four years. We expect to receive the approval from the government anytime now, and this investment will support various stages of development and deployment of futuristic range technology production and solution.

With a major focus on the 5G revolution, HFCL is witnessing the transformation towards emerging as a high-tech global enterprise and integrated next gen network solution provider. As a result, the leader in telecom optical fibre cable manufacturing in the country, we will continue to offer more robust and high-tech solutions with open source technology. To conclude, I would like to say that as we are already witnessing a strong demand for our 5G products, optical fibre cables and integrated metal solutions both in India and globally, we will continue to leverage our capabilities and continue with our strategy of tapping new customers, new geographies and new products.

Thank you once again for your participation. With this, I conclude my opening remarks and open the floor for question-and-answer session. Thank you very much.

Questions and Answers:

Operator

Thank you, very much. [Operator Instructions] The first question is from the line of Aman Vij from Astute Investment Management. Please go ahead.

Aman Vij — Astute Investment Management — Analyst

Good evening, sir. I — my question was, you have built a very good defense portfolio, so my questions are on that part of the business. If you can talk about — little bit on the electronic fuses and electrical optical devices. What is the order book like, where we are in terms of scaling that business? That would be helpful.

Mahendra Nahata — Managing Director

Yeah, Aman, thank you, very much. Very good question. In fact, as you would know, defense equipment developed and being put in operation takes a lot of time because of the very rigorous testing going on. In terms of our electronic fuses, we have already offered to the Indian Army for testing, and they’re testing work is still in progress. It has not ended. There have been certain issues in testing which the Indian industry has gone back to government and told them to redo the testing because of certain issues.

So those work is in progress, results are not yet out. And, I expect good business to emerge from electronic fuses, not only in India but abroad also, because we have IPR of this. But yes, there are no orders available at this point of time because this testing and all that takes long amount of time in different sources. And same stands for electro-optic devices where we have got a small order from Northern Command which is under execution, but larger orders, we have participated in tenders which are, results are not yet out. So it will take certain amount of time still.

As I have been telling earlier also, we expect revenues to start from defense products in the next financial year, that is ’23,-’24. This is the time for development and testing. Revenues will start flowing in from ’23-’24.

Aman Vij — Astute Investment Management — Analyst

Sir, a little bit clarification, so…

Operator

Sorry to interrupt, Mr. Vij, the audio is breaking from your line, sir. Please check.

Aman Vij — Astute Investment Management — Analyst

Yeah, is it better?

Operator

Yes, sir please proceed.

Aman Vij — Astute Investment Management — Analyst

Yeah. I just wanted more clarification, sir. We had mentioned that we had bid for 5 million fuses. So that order is canceled or what has happened to that order?

Mahendra Nahata — Managing Director

No, no, testing is in progress. Testing is in progress. There have been certain issues by — for the all the Indian private companies who had participated, and we have gone back to government and asked them to do — redo the testing part of it, redo the testing part. And that is under consideration in government. It has still not been finalized. Neither the order has been finalized from anybody, nor the financial bids have been executed.

Aman Vij — Astute Investment Management — Analyst

Okay, sir. And you have mentioned in the presentation that this, say for example, electronic fuses, can be $0.39 billion in FY25. Sir, in this year, what is the current size of the market, current — in FY22-’23?

Mahendra Nahata — Managing Director

In the current financial year, no orders have been placed on the private industry. Government is buying from the PSUs only. So we don’t know the real size of the market. But yes, from two years, ’25 and all that, whatever we have mentioned in the presentation, that holds good.

Aman Vij — Astute Investment Management — Analyst

And, how much market share do you think we can gather out of that $0.39 billion market size, and how many private players have bid for the same tender, if you can talk about that.

Mahendra Nahata — Managing Director

Three private players have bid for that, three private players. And it’s very difficult, I mean, at the moment to say market size because you know, the tender would be awarded to one company or maybe government later on decides to multiple companies, we do not know. So it’s very difficult to predict that how much market share we will have. But yes, numerically, I think we should expect some 20%, 25% market share at least.

Aman Vij — Astute Investment Management — Analyst

And if you can mention the names of the other players who have bid?

Mahendra Nahata — Managing Director

Other players have been, apart from us, I think HBL from Hyderabad is there and there is one more company from near Delhi which I don’t remember the name, but yes, there is one more company. There are three private companies.

Aman Vij — Astute Investment Management — Analyst

Is it, sir, A.N. Enterprises?

Mahendra Nahata — Managing Director

I don’t remember the name, Aman. I don’t remember.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. That helps. So, on the fuses side, there are different kind of fuses. On your website, you have maintained proximity fuses and all those things. So we have developed all these products in house?

Mahendra Nahata — Managing Director

These are all developed by our own company with help from some foreign partners who are R&D contractors. The IPR completely rests with the company. So you can it an in house development.

Aman Vij — Astute Investment Management — Analyst

Okay. But you had mentioned in the presentation we are the only Indian company to do it. So the other two players, don’t…

Mahendra Nahata — Managing Director

One company, yes, one company, at least, I know. They’ve got a foreign collaboration. The company near Delhi. The HBL, I do not know, very sure that whether it’s their own development or whether they have got any partnership. I’m not too sure. But at the time when we said this in the presentation that this, all these fuses have been developed by us, it was true. But HBL, I do not know at the moment that whether it is a — there is a partnership or local development.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. And you mentioned next year you expect some revenue. So if you can quantify how the scaling can happens, say, FY24, what kind of revenue…

Mahendra Nahata — Managing Director

This all depends upon when the tender is opened, Aman.

Aman Vij — Astute Investment Management — Analyst

Okay, but do we expect a, say, INR100 crores, INR200 crores kind of…

Mahendra Nahata — Managing Director

If there are more questions, you can come back in the queue, Once — I think, there are too many questions. You can come back in the queue.

Aman Vij — Astute Investment Management — Analyst

Sure, sir.

Mahendra Nahata — Managing Director

But what is your last question? You can ask.

Aman Vij — Astute Investment Management — Analyst

Yeah, sir, my last question was on the electro-optics part. So the market is quite big, you have mentioned $3 billion, but we are only developing, say for example, one product. I don’t know how many products we are developing. Say, night vision goggles, we are developing, as per your presentation.

Mahendra Nahata — Managing Director

Not goggles. not goggles. It is not a goggle, it is a night vision sight mounted on a rifle or a machine gun. It’s a night vision sight, not a goggle.

Aman Vij — Astute Investment Management — Analyst

Yeah, sorry, my mistake, sir. So, you’ve mentioned electronic fuses, maybe you can, maybe get 20% or 25% market share, but electro-optics are much bigger market…

Mahendra Nahata — Managing Director

I am again, expecting, I’m not sure whether it will be 20%, 15% or 50%, but that is what are expectation is. In terms of electro-optic devices, there are multiple players in the country, there are six, seven different players in my opinion. So again, one should expect some 10%, 15% market share on a numerical basis. But then, it will depend upon tender to tender, how much you will.

Operator

Thank you. Mr. Vij, may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Hardik Vyas from Economic Times, please go ahead.

Hardik Vyas — Economic Times — Analyst

Good evening, sir. Sir, we have been talking a lot about the 5G opportunity and things seem very…

Operator

Mr. Vyas, sorry to interrupt you, please use the handset mode. The audio is…

Hardik Vyas — Economic Times — Analyst

Yeah, I am on the handset. Can you hear me now? Hello?

Mahendra Nahata — Managing Director

Hardik, please speak little loudly.

Hardik Vyas — Economic Times — Analyst

Yeah, so do we, when do we see the execution for the 5G products happening, and the 5G services that we are laying down of the network for various network operators and of course the BharatNet happening? How soon do we see the execution happening for 5G?

Mahendra Nahata — Managing Director

No, you know, BHaratNet and 5G are two separate issue. BharatNet is not envisaging any 5G. BharatNet, you know, government is very keenly working on this at present, as I understand. And they are looking at model of — EPC kind of a model, where they will select companies out of a tender to build this BharatNet Network which is connecting every village of the country through fibre optic cable. Now, the cable will to some center point of the village, but from there on, I think government would ask operators to give connectivity to different households on a commercial basis. So what this project enters is laying down fibre optic cable and related equipment to all these villages. So this does not contain 5G. 5G may come later on in this area.

Now, coming to the 5G products, as I said, we have, we will be putting it in the operators’ networks on a trial basis starting two to three months from now. And when the trials are over, if operators require some change, we will have to do that. But that is the normal issues because different operators have different software and graphics user interface issues which will be changed — may require a change as per their requirement. And we expect revenue to start coming up in the beginning of Q1 of the next financial year.

Hardik Vyas — Economic Times — Analyst

Okay. So as I understand it right, in the current revenues and up to now there has not been any 5G component. It’s been a regular business apart from 5G.

Mahendra Nahata — Managing Director

Yes, yes, yes. You’re absolutely right. There’s no 5G component at the moment. We have launched the product just recently. It has to go through the field trials and the operators’ networks, and then the production and then the revenue. It’s a bit of a few months’ cycle. But we are very well on…

Hardik Vyas — Economic Times — Analyst

Okay. And, sir, my second question is on the software-defined radios. How big is the opportunity, and when are we likely to tap it in terms of revenues, and — so when do we see it in numbers?

Mahendra Nahata — Managing Director

The software-defined radio is for the army. And that development is in progress, and we had to submit samples in sometime in December to Indian Army after development. So — and then the sample would still tried and tenders would be there. So, I think reasonably, if you say, that major market opportunity for the software-defined radio in 24%, 25%. But the market size is very large, in a sense that majority of the radius of Indian, maybe all of them will be switched down to the software-defined radio in few years time. The total market opportunity, if I remember well, it’s not less than INR40,000 crores.

Hardik Vyas — Economic Times — Analyst

Okay. Okay. So we — so the next year is going to be 5G-heavy in terms of execution and revenues and margins, and everything will be driven on the back of exports and 5G, more or less, if I’m understanding it right.

Mahendra Nahata — Managing Director

Look, in the next year, we expect good amount of revenue to come from not only 5G but other products also, telecom products which we here.

Hardik Vyas — Economic Times — Analyst

Yeah, yeah, yeah, yeah, so, the current business plus 5G.

Mahendra Nahata — Managing Director

Yeah, current business and the new products which we are also doing right now within the routers, switches, those are also the products which are required in 5G and non-5G applications also, in all kind of networks. So those products coupled with 5G, and then of course, our current range of products will bring in revenue for the next year.

Hardik Vyas — Economic Times — Analyst

And BHaratNet would be — BharatNet as well would contribute to the revenues and profitability in the next year, right?

Mahendra Nahata — Managing Director

Look, you know, while doing our internal projections for next year, we have not taken into account BharatNet as yet. Once the BharatNet comes, it may be, we may be able to improve our internal projection. But as yet, we have not taken that into accounting.

Hardik Vyas — Economic Times — Analyst

Okay. Thank you so much. That is all from my side.

Mahendra Nahata — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Sanjay Shah from KSA Securities. Please go ahead.

Sanjay Shah — KSA Shares & Securities Pvt. Ltd. — Analyst

Yeah. Good evening, gentlemen. Sir, congratulations, again, on the exciting presentation and explanation. Sir, my question was more regarding towards the opportunity on rail networking, which we have not highlighted in your comment. That was number 1. And second was, I wanted to…

Mahendra Nahata — Managing Director

Please repeat, which networking?

Sanjay Shah — KSA Shares & Securities Pvt. Ltd. — Analyst

Rail, rail, rail.

Mahendra Nahata — Managing Director

Oh, rail network, okay.

Sanjay Shah — KSA Shares & Securities Pvt. Ltd. — Analyst

Yeah. And connecting to that…

Mahendra Nahata — Managing Director

Yeah, important…

Sanjay Shah — KSA Shares & Securities Pvt. Ltd. — Analyst

Yeah, my question was regarding that you throw out some [Technical Issues] doing a capex of INR425 crores with some government. Can elaborate on that? Do we need to understand on that, sir?

Mahendra Nahata — Managing Director

Okay. So on the railway network, good question, Mr. Shah. In a few minutes’ presentation, I could not highlight every opportunity…

Sanjay Shah — KSA Shares & Securities Pvt. Ltd. — Analyst

I understand.

Mahendra Nahata — Managing Director

But that’s one area we are doing good business. In fact, as I’ve been saying, we are implementing couple of networks abroad. In India also, we are working on six or seven different railway projects, which are subcontracted to us by the key — turnkey players. But now, directly we are implementing the metro network of — telecom network of the metros also, Kanpur and Agra. This is directly awarded to HFCL for INR200 some crores, 200 — INR230 crores or so. of that particular railway network. We have also participated directly for Surat and Ahmedabad metro rail networks telecom – metro telecom networks. So we are going to participate in a couple of more such opportunities. So, I’m sure this revenue from railways, telecom networking, should result in giving us a reasonable revenue every year, something like INR500 crores or so. I think reasonably expect, with so many tenders we have participated, so many more opportunities are there, we should be able to get a reasonably good amount of revenue. And government is going to modernize telecom and signaling network of entire railways in any case. So, there will be more such opportunities coming up. And we are developing this business, and we have emerged as one of the leading company in the country which is doing such kind of a networking for railways, which is, as I’ve said, multiple places, we are doing in India, couple of places we are doing abroad.

Now, coming to your second question, INR425 crores, this, of course, includes expenditure on R&D also. This is, as per the DLI scheme, Design-Led Equipment Manufacturing Incentive scheme which government has announced, and we have projected the investment of INR425 crores, which includes R&D investment because the DLI scheme allows R&D as an investment, as a part of the overall incentive scheme. So some INR425 crores in R&D and the new infrastructure which we’ll create for manufacturing telecom projects, it’s worth, put together it’s INR425 crores. This DLI scheme is under consideration of government. And I understand, whatever discussion I had with the government officials during India Mobile Congress, we are expected to announce finalization of this scheme, I think monthly within next one month, they should announced it, that is what I expect, and I expect that HFCL will be — definitely be a part of it.

Sanjay Shah — KSA Shares & Securities Pvt. Ltd. — Analyst

That’s great. So, sir, we are entering into an exciting period, as you cited, was the 5G, defense, rail, this DLI scheme, then what incremental capex we need for next two, three years? And how we line-up that?

Mahendra Nahata — Managing Director

Look, you know, some of the capex which we are implementing in projects right now, this fibre optic cable manufacturing capacity expansion and the fibre manufacturing expansion, part of the money, we already raised in the last QIP, and the balance is being funded through the debt from the banks. And the next phase of expansion, when we do, of course, we have not decided the numbers as yet, but it is under consideration. But whenever we do, it would be a mixture of debt and equity.

Sanjay Shah — KSA Shares & Securities Pvt. Ltd. — Analyst

So will debt be a major capex needed for that — to participate in the growth story?

Mahendra Nahata — Managing Director

Well I don’t know at the moment, the current, what amount of capex will be required. But it will not be so big that it outnumbers the size of the company. It would be the reasonable numbers.

Sanjay Shah — KSA Shares & Securities Pvt. Ltd. — Analyst

Understand, understand. Right, sir. Thank you. Thanks for explanation. It was really helpful. Thank you, sir.

Mahendra Nahata — Managing Director

Thank you. Thank you.

Operator

Thank you. The next question is from the line of Balasubramanian from Arihant Capital Markets. Please go ahead.

Balasubramanian A. — Arihant Capital Markets — Analyst

Hello?

Mahendra Nahata — Managing Director

Hello, yeah, Mr. Balasubramanian, good morning. Please go ahead.

Balasubramanian A. — Arihant Capital Markets — Analyst

Sir, I am audible? Sir, I have few questions regarding the R&D. Past few years, we have spent around INR123 crores. Right now we are focusing around INR150 crores target. So, apart from INR140 crores, we have to spend the remaining amount for capex, right, sir, for this year? So what kind of quantum we make for next six months?

Mahendra Nahata — Managing Director

This is — expenditure on R&D is INR150 crores, we have estimated, and that is what this the bond rate is at this point of time because we are doing R&D in multiple areas, as I’ve explained. WiFi, UDR, 5G, routers, switches, software-defined radios. Some of the R&D is being done by totally by our team, some of the place where R&D is being done by the contract R&D players, which are working for us and designing equipment for us with our own IPR. So all this put together is the amount of expenditures we have talked about.

Now when you say that — If you’re asking a question of INR425 crores, how it is going to be spent, as I said, part of that would be R&D, part of that would be capital infrastructure.

Balasubramanian A. — Arihant Capital Markets — Analyst

Okay, sir. Sir, I’m looking into capex plan. Right now, they are into 10 million fibre kilometer for optic fibre capacity, so it is mentioned around 22, the target, million fibre kilometers. So, so, what is the timeline for that?

Mahendra Nahata — Managing Director

I think that expansion is going to happen in Hyderabad, in our current facility, and the timeline or the work is already starting. I think it should take about 12 months to complete, about 12 months. Give or take a couple of months here and there, but about 12-months.

Balasubramanian A. — Arihant Capital Markets — Analyst

Okay, sir.

Mahendra Nahata — Managing Director

Because the construction time and delivery time of fibre manufacturing equipment is very, very high at this moment because of the worldwide demand which has happened. The delivery time machines, it takes almost nine months to a year. And then the installation commissioning and the construction of building will itself take a long because 45 meter high towers and all that, it takes a lot of time, but within 12 months, we should be able to commission it.

Balasubramanian A. — Arihant Capital Markets — Analyst

Okay, sir. Okay, got it. Sir, in terms of Defense exports, the market size is around INR12,500 crores to INR13,000 crores, and it is expected around INR42,000 crores by FY25. It’s almost more than 3x. But we are focusing on growing double x. So we can expect more or it is sufficient?

Mahendra Nahata — Managing Director

No, no, I think — I think we’re talking of two different things. We are not talking of growing exports in defense. We are talking about growing exports in fibre optic cable and telecom equipment. If you really look at how our exports have gone up, it’s a good question but in a slight different way I can answer. Export, we have been putting a lot of emphasis. Our export, if you look at, in year ending March ’21, financial year ’21 was just INR193 crores. It increased to INR353 crores in 2022, financial year ’21-’22. Now, in this year itself, in the first six month itself, we have crossed that. We have reached to INR376 crores.

So as I’ve been saying, we nearly doubled our exports this year from the last year’s INR353 crores. We are on the track but first six month itself we have gone to INR376 crores. So we have absolutely no reason to say that we will not be able to grow to over 100% from the last financial year. So we are working on a target of INR750 crores. Our run rate is very, very much within that target, and we should be able to double our exports. We have a high thrust on exports, which is cable and equipment. Right now, it is more of [Indecipherable] but from the next year onwards, we will start exporting our equipment also. Some export started this year, but major export will happen in the next year. So with increase in export of fibre optic cable and then the export of the telecom equipment, we expect to continue this trend of increased exports every yet from our company.

Balasubramanian A. — Arihant Capital Markets — Analyst

Okay, sir. Sir, you were talking about that Polymer polythene based manufacturing plant for backward integration. Could you please throw more light on that?

Mahendra Nahata — Managing Director

Yeah, sure. We use this plastic compounds for manufacture of fibre optic cable, like like HDPE. We — all our factories put together, we have about conjunction of 2.5 crore kgs of this HDP polymer for manufacturing of cable. Now, you get natural color, this HDP compounds from the refineries. Now earlier, what we used to do, there are people who do the compounding, making it in a different colors, because in fibre optic cable, different people want different colors and different tubes have got different color. So, you need different colors.

So, we used to buy it from different people who would do the compounding and then sell it to us. So, there were intermediaries. So we did the economics and we said like if we do ourselves, this compounding, we will save a lot of money, roughly about INR6 a kg, about INR6 a kg, we we would be saving by doing the compounding ourselves. This means on 2.5 crores kg, we would be saving something like, INR18 cores, INR19 crores, INR15 crores to INR18 crores, INR6 to INR7 a kg per year by doing the compounding ourselves. Whereas the whole project cost are INR17 crores and INR18 crores, something like that.

So, by investing about INR17 crores, INR18 crores, we would be saving INR15 crores, INR16 crores every year. So the ROI is just one year. So this saves us money and gives us better profitability and better competitiveness. And this production has already started in Hosur, in our plant which is owned by HTL, our subsidiary. And this manufacturing has already started.

Balasubramanian A. — Arihant Capital Markets — Analyst

Okay, sir, okay. Got it. Thank you, sir. That’s it from me.

Mahendra Nahata — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Pranav Khandwala from Khandwala Securities. Please go ahead.

Pranav Khandwala — Khandwala Securities Ltd. — Analyst

Good evening, sir. Congratulations for the fantastic results, Sir, two questions prima facie, would like to understand the latest news which came on HFCL and Qualcomm. Like, what is the opportunity for HFCL, and if you could give us some fair bit of idea in terms of this 5G Outdoor Small Cell development, and how that will benefit HFCL and Qualcomm, this entire 5G network opportunity?

Sir, and the second question is if you could give me some fair bit of idea on the order book. And in the presentation you mentioned that there is some USD breakup given, and the export market. So if you could give me a clarity on that, please.

Mahendra Nahata — Managing Director

Yes, thank you, Pranav. First of all, let me come to the 5G product development. We have done two agreements with Qualcomm, not one, two. One is, of course, this 5G Outdoor Small Cell, and secondly, 5G Fixed Wireless Access Terminal. Now, let me explain both the products. Outdoor Small Cell is required to fill in the gaps in the network. When you do the, when the telecom operators do their networking and install large cells, there are gaps in between where the fillers are not able to reach. Particularly in 5G, the spectrum use is of a higher level. In 2G, 3G, we were using up to 2.3 gigahertz in 3G — 4G, for example. But here, it has become 3.5 gigahertz.

So there are gaps in the — holes in the network at various places, or wherever the capacity requirement is high, operator will start putting small cells instead of large cells. It has happened at quite a large scale in 4G networks also, a huge amount of small cells have been put by the operator. Requirement of outdoor small cells in 4G would be even higher. So, we are going to manufacture — design and manufacture this 5G small cells for outdoor applications using this Qualcomm platform. Qualcomm platform, we will be designing and manufacturing the small cell. And market is expected to be very, very high, India and abroad both, because 5G networks are being implemented all over.

The second the product, which we have done, is the fixed wireless access CPE, again using the Qualcomm platform. Now, FWA CPE is required in the places where you need fibre like speeds at home or at office, without fibre, where what would happen, this FWA CPE would be acting on the 5G network, would installed at home, taking throughput from 5G network, it will give a fibre-like connectivity at home. So operator FTTH as well as, they would do also no FWA also. Now, FTTH, they would do at a place where the dense requirement of fibre optic connection is required, there they would lay down fibre. Wherever the requirement is not so big, few people would want fibre-like connectivity in homes or offices, where it is not economical to lay down fibre network, there they would be using up FWA where without laying the fibre-like, fibre optic network and 5G network still, you will be getting high speed connectivity at home or enterprise.

And the market of FWA CPE is expected to be very, very high all over the world, billions of dollars of market is expected of FWA CPE. This is our second partnership, we have done with Qualcomm. We expect to launch this product from the beginning of the — we expect to put in the field trials with the operators in the beginning of next calendar year, revenue expected from the first quarter of the next financial year. So we were the…

Pranav Khandwala — Khandwala Securities Ltd. — Analyst

So, what would be the revenue opportunity on a quarter-on-quarter basis or year-on year basis for HFCL?

Mahendra Nahata — Managing Director

For these two products?

Pranav Khandwala — Khandwala Securities Ltd. — Analyst

Yes.

Mahendra Nahata — Managing Director

It’s very difficult to target — to give you a number at this point of time, but I can say that it would be hundreds of crores, it would be hundreds of crores.

Pranav Khandwala — Khandwala Securities Ltd. — Analyst

Okay, okay.

Mahendra Nahata — Managing Director

And your second question was on exports. Now, as I said in the answer to my previous question of the gentleman, that we have been putting a lot of emphasis on exports because if you look at the world market and the Indian market, Indian market is probably — though, it’s a big market, but probably 5% of the fibre world market whether it is fibre optic cable or telecom equipment. 95% of the market sits outside our country.

So, while putting lot of effort and emphasis on the Indian market, we need to go out of the country to access this 95% of the market also. So if we are able to explore or get into this — see, a small percentage of this 95% market, we are able to increase our sales. Now, particularly when you have your own products, your own technology, your own IPR, you are free to go in market anywhere, if your technology is at par with other manufacturers.

So what we have seen, we just started with fibre optic cable for example, and as mentioned in the figure, we are doubling — almost doubling every year. ’21 financial year, the INR193 crores, ’22, it became INR353 crores, this half-year itself, it has has become INR376 crores. So we are on path to reach to INR750 crores like I talked about in my last presentations also. And we expect to continue this trend in future also because there will be increase in export of fibre optic cable as well as then there would be export of equipment also. So export is something which we are putting a lot of emphasis because that’s the 95% of the world market.

Pranav Khandwala — Khandwala Securities Ltd. — Analyst

Okay. And if you could give me a slight break-up in terms of your order book currently?

Mahendra Nahata — Managing Director

Yeah, current order book is about 5,000 — about INR5,300 crores. And this comprises of government and non-government both. Almost 55% is government, 45% is non-government. And we are getting regularly repeat orders from our customers. We keep on getting INR100 crores, INR200 crores, INR50 crores, INR40 crores, INR60 crores, we keep on getting orders. Orders are — however, they are slow. But the current order book, as I said, INR5,280 crores.

Pranav Khandwala — Khandwala Securities Ltd. — Analyst

Okay. Thank you so much, sir. Thank you.

Operator

Thank you. The next question is from the line of Sahil Sanghvi from Monarch Networth Capital. Please go ahead.

Sahil Sanghvi — Monarch Networth Capital Ltd. — Analyst

Yeah, good evening, sir. Am I audible?

Mahendra Nahata — Managing Director

Yeah, you are audible, Mr. Sanghvi.

Sahil Sanghvi — Monarch Networth Capital Ltd. — Analyst

Yes, congratulations, sir, on a very fine set of financial, and the opportunity ahead looks very encouraging. I just wanted to understand two things. One, on the order book that you have announced, how much is that coming from exports like, current order book from export?

Mahendra Nahata — Managing Director

In exports, you don’t get larger orders in one shot. Orders keep on flowing in. The current order book from of INR5,300 crores should be about some crores or so. But they keep on flowing, orders — you keep on supplying, orders keep on coming, and we are well within our target to reach to INR750 crores as I was explaining just recently. So orders orders keep on flowing. So, it should be well over INR300 crores at this point of time.

Sahil Sanghvi — Monarch Networth Capital Ltd. — Analyst

And this will be largely OFC orders?

Mahendra Nahata — Managing Director

Yeah, this is largely OFC at this point of time.

Sahil Sanghvi — Monarch Networth Capital Ltd. — Analyst

Okay, okay, okay, got it, sir. And secondly, sir, I mean, we have some pledged shares right now. And I just wanted to understand two things on that front, sir. One…

Mahendra Nahata — Managing Director

No, no, there are no pledged shares at this moment, Mr. Sanghvi, there are no pledged shares, zero. This is only a non-disposable undertaking institutions. When you take loan from the financial institutions, they take a non-disposable undertaking from the promoters that promoter should not sell the shares and walk out without informing the institution and taking their approval. That’s a normal procedure. So, it’s a non-disposable undertaking. There is no pledge at all, zero pledge.

Sahil Sanghvi — Monarch Networth Capital Ltd. — Analyst

Okay, okay because on the — on an exchange how it shows up is it shows up as a pledged share. So, we are not liable, right, in any ways, in debts of any…

Mahendra Nahata — Managing Director

No, there is no pledge. It is a non-disposable undertaking. There is no pledge.

Unidentified Speaker —

It is otherwise incumbered, sir, because exchange does not permit us to — whether it is pledged or otherwise incumbered, there is only one column. So, it is basically not pledged, it is otherwise incumbered, that’s all, by way of non-disposable undertaking.

Mahendra Nahata — Managing Director

It is non-disposable undertaking. There is on pledge at all.

Sahil Sanghvi — Monarch Networth Capital Ltd. — Analyst

Got it, got it. Thank you, sir. Thank you, sir, and all the best.

Operator

Thank you. The next question is from the line of Dipesh Sancheti from Manya Finance. Please go ahead.

Dipesh Sancheti — — Analyst

Hello, can you hear me? Yes, sir, we can hear you.

Mahendra Nahata — Managing Director

Yeah, yeah, Dipesh — Mr. Sancheti, you are very loud and clear. Please, go ahead.

Dipesh Sancheti — — Analyst

Yeah. Sir, a question regarding the fund raising which we had, on 2nd September we had mentioned about [Technical Issues] of about INR650 crores, but after that, there has been no update [Technical Issues]

Operator

Mr. Sancheti, sorry to interrupt you, the audio is breaking from your line.

Dipesh Sancheti — — Analyst

I’ll repeat again. Do I need to repeat?

Mahendra Nahata — Managing Director

Yeah, please. Please go ahead.

Dipesh Sancheti — — Analyst

I said that on 2nd of September [Technical Issues] mentioned to the exchanges that we are going to raise about INR650 crores. But after that there has been no updates. Like, we gave warrants to promoters and non promoters [Technical Issues] approval of [Technical Issues] INR650 crores. When is that expected?

Mahendra Nahata — Managing Director

Yeah, Mr. Sancheti, warrants have been issued to promoters and scheme — the key management personnel also subscribe to the warrants, which speaks of confidence promoters and the key leadership team of the Company has been the performance of the company. So that has happened.

The next question of yours, whether the fund raise is going to happen and when, we are all in the planning stage at this point of time, what are the kind of capex required, which are kind of extension or backward integration we have to do. Once it is finalized, of course, we will come back to you.

Dipesh Sancheti — — Analyst

Is it expected to happen in this financial year?

Mahendra Nahata — Managing Director

It is under consideration, Mr. Sancheti I will not be able to say more than that. It is under consideration. The final decision has to be taken by Board, but it is under consideration at this point of time.

Dipesh Sancheti — — Analyst

Okay, okay. And — thank you, thank you so much. If there is any other question, I’ll get back in line. Thanks.

Operator

Thank you. The next question is from the line of Swapnath Amath from NSFO. Please go ahead.

Swapna Kamath — NFFO VENTURES, LLP. — Analyst

Yeah, Good evening, sir. Sir, my question is on, so as I understand, we want our company to be more a products-driven company and less of these turnkey contracts, and as we have seen that this part of the revenue has been coming down consistently, and that is what is our objective as per your previous calls. So — but I just wanted to get a sense on where do you see these numbers stabilizing on the turnkey contracts that then we will see that this amount of the revenues will continue steady state and because we are doing some products works, so this much of turnkey will be part of this overall business, or how should we look at the business as such?

And also on the capital employed that is deployed in a turnkey contract, so that is substantial. So, do we see some amount of cash getting released from there which can be used for capex et cetera which might be blocked, because of few debtors?

Mahendra Nahata — Managing Director

Yeah, Swapna, very good very good two questions, and I’ll answer each of them. We — I have been saying from the beginning that — last two calls you would have heard that we want to be more of a product company, less of a project company. And that, what we decided to go in a manner, it has really happened in that way. If we look at numbers in financial year 31st March — ended on 31st March ’21, our revenue from products was 27%, and from the projects was 73%. Now, if 43% from products and 57% from projects in financial year ended on 31st March ’22. So products became 27% to 43%. Now, if you look at this year, in the — year-to-date, the first six months, if you look at, our revenue from the product has been 58% and project is 42%. Now, just go back and compare. What was 27% in 2021 year ended 31st March is 58% now. And the project revenues at 73% is 42% now. These are remarkable change. And we expect to continue on this thing and further increase our revenue percentage from products in the next financial year because of these different products of 5G, WiFi, UVR, switches, coming in production. This trend is going to continue and our revenue from products will further increase.

But I’m not saying that we will not do projects. We will do projects but which are not highly cash negative. We wouldn’t do such projects which are highly cash negative, because doing such projects makes us — heavy burden on the cash flows of the company. So that’s all, we have gone for more revenue from the products which has fructified that approach and less on the projects.

Now, coming to the second question. Yes, we have a very reasonable good amount of money. I will expect that delayed in project, but it is only the projects, different projects which we are implementing. We still have a receivable of more than INR1,000 crores. Now, we have started implementation, switching on of various part of this network and the money has started flowing in. This used to be — this INR1,000-plus crores today, used to be more than INR1,500 crores about a year ago. Now it has come to INR1,000 crores or INR1,100 crores. And we expect that by March — end of March this financial year, full network will be switched on. Two more parts of the network, we are switching on within next 15 days, two have been switched on, two more would be switched on in this — maybe been less than a month. So by March, we expect to complete, and then reach major part of this money within next four to six months’ time. So this is major release of this money, which is about INR1,000 crores or so, lot of money would flow-back into the company which will decrease the pressure on working capital and release more money for capex also.

We are right on track, you have a good question, but yes, there is a delay in payment for this particular project, not because of any fault of the company but because of customer did not do it’s own part of work, which is construction of infrastructure on which we were to install equipment and various other reasons related to customer, nothing to do with the company. This delayed the payment, but now, we are on track and I think by March, major, major portion of this money would be realized, which will increase the cash flow of the company, which will make the money available for more working capital as well as for capex.

Swapna Kamath — NFFO VENTURES, LLP. — Analyst

Sure, sir. Thanks a lot for the detailed answer. And sir, I really appreciate that point, and it’s pretty commendable that our telecom products revenue run rate is now almost INR671 crores — quarterly run rate. That’s pretty significant from where we were. So, but sir, if you can just give me an idea as to this turnkey. You said you will continue doing these contracts, but I mean where — I mean, if you have — if we say that this is this is the number, if we are projecting this particular segment, then how do we look at it? Like, I mean what is the — what is it — like, number we should look at in the overall pie? Like a 25% or like 15% of the overall revenues?

Mahendra Nahata — Managing Director

Look when I say we will continue, we will continue to do which are not cash negative.

Swapna Kamath — NFFO VENTURES, LLP. — Analyst

Okay.

Mahendra Nahata — Managing Director

For example, I will tell you, the private operators naturally are implementing — like, for Jio what we are doing? It’s not major cash negative, payments within 30 days and there is absolutely no issue of cash use. We will — there is no reason why we cannot continue to do that. Maybe profitability could be low, but since working capital investment is not there, there is no reason why we should not do that.

Now, we are also looking at some contracts of this nature in export market, in European market. And maybe, we would be some small contract in — very, very soon in one of the major European countries, and we intend to increase our presence in international market in implementation, because that is highly profitable and they’re very quality-conscious people, so they don’t give projects to small companies. And the profitability is much better. So we intend to increase our presence in the international market in project implementation. And international, when I say, we’re talking of developed countries like West European countries or America, such kind of countries.

And also government, wherever the projects are funding is poor, we will not participate into that. But wherever the funding is ensured in a manner that while implementation is going on, large percentage of capex is made available to us within that implementation period, we would look at such projects only. So, I would say in terms of percentages, you can say that 25% or so revenue would keep on coming from the project sites which are less involvement of working capital and more profitable.

Swapna Kamath — NFFO VENTURES, LLP. — Analyst

Understood. And sir, lastly, one last question on the defense side. You mentioned about the opportunity, competition, et cetera, could you give a ballpark idea as to what kind of margins — would they be similar to what we earn in the telecom products or are they different in the electronic fuse and electro-optics, et cetera?

Mahendra Nahata — Managing Director

I think, if you say the market is — whichever place you go, defense or otherwise, the market is always competitive. There is no cakewalk kind of a market. So, I would say the margins would be similar to what you get in normal telecom business, maybe couple of percentage, 2%, 3% extra because not anybody and everybody can enter into this market because of very strict entry conditions and the quality and performance conditions. So it could be 2%, 3% extra, some 20%, 30% higher than what you get into the normal telecom business. But yes, market is competitive, but yes, a bit of a — 20%, 30% extra percentage, you can get as a profit.

Operator

Thank you. Miss Kamath, may we request that you return to the question queue for follow-up questions.

Swapna Kamath — NFFO VENTURES, LLP. — Analyst

Yeah, thank you. I’m done.

Operator

The next question is from the line of Anand Jain, an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Thanks for the opportunity, sir, and congratulations on very good set of numbers. My questions are also on the defense opportunity that you have listed because that’s a very exciting part and the kind of entry barriers that it has, I’m certain that it must have taken us a very long time. I just want to understand what kind of capex have we done in order to be where we are right now. That’s my first question.

The second question is on the fuses price side, what I have come to understand is that it requires approval by ARDB, Which is like a, this is like a part of DRDO. So do we have the ARDB approval for all the three types of fuses that we are looking to make? That’s my first question. I will ask further questions.

Mahendra Nahata — Managing Director

Look, we have spent about INR50 crores or so in development of these fuses and electro-optic devices. This is R&D expenditure, you can call it the capex, and we have spent about INR50 crores on that. Now, coming to this fuses, of course it requires the approval ARDB, and also, not only that, DGQA also. This is Directorate General of Quality Assurance in the Indian Army. And as I said, the testing has been going on and there are certain issues which are happening in which whole Indian industry has protested that testing has to be redone, and that is under consideration of the government. It has still not been totally decided, so it is under consideration. The tender is yet to be opened, and let us see when they decide and when they open.

Unidentified Participant — — Analyst

No, so the questions here — because I have been tracking this has a very long time because 10 years back also these tenders that come and then you had all ECIL kind of colluding with MOD and then there is a South African company which used to come in and supply this fuses to ECIL. So are the issues political in nature or technical in nature, that is my another question. And the last question — because last time it was clearly — I don’t want to call it on a con call…

Mahendra Nahata — Managing Director

No, no, I would not use the word colluding or political or all that. That’s not in my domain to comment. But yes, there are technical issues. I would definitely say there are technical issues. Earlier, the supply was being made by ECIL, of course with the participation of the South African company. And then of late, BEL has also coming into picture in participation with an Israeli company. But ours is a total owned development. But yes, the issues are being faced are technical, not — I wouldn’t call it political or colluding. These are not the words I would use, but yes, technical issues are there which are being sorted out with the Army, whether and DGQA or ARDB or — multiple agencies are there in Army who try. It’s not DGQA or ARD alone. The user trials are there, users themselves try. So there are multiple levels of testing which is really taking time and the entry barrier we are experiencing ourselves.

Unidentified Participant — — Analyst

Last one question on the same thing is that other issues only limited so our company or like other competitors that we have, are they having different set of issues or are the issues common for all of us? And finally, what I’ve come to understand from HBL is that there is a tender for grenade fuses, in which they say that they are clear to go. What is our positioning there?

Mahendra Nahata — Managing Director

Look, the issues are — technical issues are common to all the companies, all the private sector companies, they’re more or less common. If there are 100 deficient technical parameters, somebody will have two, somebody will have three, but almost common with all in private sector. The grenade fuses, we are not part of that. I have not taken part into any grenade fuse kind of a situation. We are not there at all.

Unidentified Participant — — Analyst

Okay, great, sir, and wish you all the best.

Mahendra Nahata — Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Mahendra Nahata for closing comments.

Mahendra Nahata — Managing Director

All right, thank very much gentlemen, for – and the ladies, for attending this earnings call of HFCL. And as I’ve said, company is on the right part of growth, right quarter progress. It has become a technology-led telecom equipment products and fibre optic cable manufacturing company. There’s a lot of backward integration to increase the profitability. Again, with an emphasis to go into the export market, we our increasing our revenue from that side of the business. With the increase in exports of fibre optic cable and equipment in the next year, we further expect to increase our market share in export market. We are on the right track to become a product-led company, which I have shown by the data that how we have increased our revenue from products. We are on the part of the expansion of our product range and also on the size of our fibre optic cable and fibre manufacturing facility.

All that would lead to — continue to lead the Company in the growth phase, which is happening today in the country with the 5G rollout, FTTH rollout. Not only India, all over the world these kind of things are happening. So, opportunities are exciting, market is big, opportunities are exciting, and the Company has taken all the right steps to take part in this opportunity and grow with the market growth. The company also expects to grow in the coming financial years. Thank you very much, gentlemen. Thank you very much.

Operator

[Operator Closing Remarks]

Mahendra Nahata — Managing Director

Thank you.