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HFCL Ltd
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Ladies and gentlemen, good day, and welcome to the HFCL Limited Q2 FY '23 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]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Mahendra Nahata. Thank you, and over to you, sir.
Good evening, ladies and gentlemen. A warm welcome to HFCL's earnings 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 and stock exchanges.
For HFCL quarter 2 of financial year '23 has turned out to be quite promising. We were able to continue on our sustainable growth part, which are fueled by some key product launches, including world's first open source Wi-Fi 7 access point, 5G 8T8R macro radio unit and 5G lab as a service during India Mobile Congress 2022, South Asia's largest digital firm. As a technology-driven enterprise, 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 premises equipment products in the domestic and global markets.
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 product-led global player in optical fiber cables and telecom products and solutions space. By bringing some key orders from Reliance Digital, BSNL and RailTel, we have been able to close quarter 2 of financial year '23 with an order book of more than INR 5,200 crores. The global macro environment continues to be challenging and dynamic. However, with the advent of 5G, the opportunity landscape for manufacturers in the telecom and technology industry looks promising and has grown manyfold.
It has also given rise to a spike in demand for optical fiber cables and telecom and networking products. The deployment of the robust 5G infrastructure in the next couple of quarters will enable enterprises to embark on the digital transformation journey across the sectors. The current global demand for optical fiber cable is 600 million fiber kilometer equivalent cable. Since over 95% demand is witnessed in global markets and given the competitiveness of our portfolio in optical fiber cable increments and end-to-end network solutions to aspire, to cater to more markets and more customers. The development of evolution with 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 times globally in optical fiber cables and telecom products. We have our employees in Dubai, France, Germany, U.K., U.S., Kenya and further wide spread 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 3 years, we aim to build upon our global customer relations and export footprints expeditiously and emerge as a large global player in industry space. Our export revenue has grown by 88% in quarter 2 of financial year '23 on a year-to-year basis.
In this half year of financial year '23, export revenue stood at INR 376 crores compared to INR 171 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.
Driven into the Indian context in order to create a strong 5G network infrastructure in India, the telecom industry will witness an investment of INR 3.5 lakh crores to INR 4 lakh crores in the next 5 years to facilitate 5G service rollout. Indian telcos are estimated to spend between $1.5 billion to $2.5 billion on optical fiber cables alone in the next 3 to 4 years.
The domestic optical fiber cable market environment continues to be strong with the current market demand of optical fiber cable products like 35 million to 40 million fiber 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 fiber-to-the-home network, implementation of BharatNet projects, which will lead to all the villages of the country being connected by optical fiber cable and creation of multiple data centers across the length and breadth of the country.
In India, BharathNet alone will lead to an opportunity of 16 lakh kilometers of optical fiber cable, translating to almost 50 million fiber kilometers. There is tremendous opportunity in global markets as well. We have witnessed that the governments of leading economies, including United States, United Kingdom, Germany and in Europe are investing heavily on bringing robust fiber connectivity for the deployment of 5G network and FTTH network.
The global market demand of optical fiber cable is about 600 million fiber kilometer per annum. And it is estimated to grow to 1,000 million fiber kilometer per annum over the next 5 years. You also see immense opportunity for telecom and networking products and system integration across the global, growth 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 special partnership with Qualcomm for design and development of 5G millimeter wave, fixed wireless access, customer premises equipment products and 5G outdoor small cell product development. All these initiatives with significant alliances will enable HFCL to extend its 5G product portfolio. We are launching various products gradually for India and global markets, and these products shall enhance 5G user experience and contribute for efficient utilization of 5G spectrum.
Another significant highlight in our participation at the India Mobile Congress this year, the largest digital technologies forum in South Asia with our Honorable Prime Minister inaugurating the launch of 5G at the event, the world witnessed every key telecom and technology players showcasing their latest and most innovative solutions. HFCL took this opportunity to launch some significant new offerings, including world's first open-source WiFi 7 access points. We launched [indiscernible] company is the world's first and first OEM in India to launch open source WiFi 7 access points designed to deliver extremely high throughput, generating 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. We look at, expect closer to metaverse.
At the India Mobile Congress, we also launched the first products of our 5G product family. 5G 8T8R macro radio unit, which is modular in design and can be easily customized to support any Sub-6 gigahertz frequency band to address the global markets. 5G bound to accelerate the adoption of virtualization and cloud native technologies. Our next-generation radio unit combines the power of vRAN based on open standards accelerate 5G deployment.
5G lab as a service was another significant launch at the Indian Mobile Congress. HFCL is one of the few companies in the country to launch 5G lab as a service. Telecom operators are adopting multi-vendor networks based on cloud-native technology, so faster and cost effective rollout of 5G services and for improved user experience. Our lab as service situated in Bangalore will provide an automated test environment for the private sector, academia and government to work together on product innovation from concept to reality, thereby accelerating rollout of 5G solutions and services, 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 and backward integration at its Hosur plant in Tamil Nadu, for manufacturing of polythene-based compounds of previous grades and color which are required as raw material for manufacturing of optical fiber cables. With our optical fiber capacity expansion coupled with the large opportunity landscape, this backward integration will enable us to improve our profitability and with availability of multiple grids of polymer, which will further help us to tap more customers in domestic and global markets.
Let me now review on key performance metrics for quarter 2 of financial year '23. Revenue of Q2 financial year '23 stood at INR 1,173 crores as compared to INR 1,051 crores in Q1 of financial year '23 and INR 1,122 crores for Q2 of financial year '22. EBITDA for the quarter at INR 175 crores as compared to INR 130 crores in quarter 1 and INR 173 crores in quarter 2 of FY '22. EBITDA margin stands at 14.88% for the quarter 2 of financial year '23 as compared to 12.35% of quarter 1. And we stood at 15.44% in quarter 2 of FY '22.
For quarter 2 FY '23, profit after tax stands at INR 84 crores as compared to INR 53 crores for quarter 1 of FY '23, and INR 86 crores of quarter 2 of FY '22. PAT margin stands at 7.18% in quarter 2 as compared to 5.05% in quarter 1 of FY '23, and 7.66% in quarter 2 of FY '22. Segment revenue of telecom products during the quarter stood at INR 671 crores as compared to INR 620 crores.
From our financial performance, we would kindly appreciate that on the backdrop of even 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 the initiatives taken in last few quarters. We have also applied for design linked incentive scheme for telecom and networking products and are committed to invest sum of INR 425 crores over a period of 4 years. We expect to receive the approval from the government any time now. And this investment will support various stages of the development and deployment of futuristic range of technology products and solutions.
With a laser focus on the 5G revolution, HFCL is reflecting a transformation towards emerging as a high at global enterprise and integrated next-gen network solution provider. As a result, the leader in telecom required optical fiber cable manufacturing in the country. We will continue to offer new robust and high-tech solutions with open source technology.
To conclude, I would like to say that as we are already witnessing strong demand for our 5G products, optical fiber cables and integrated network 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 keen participation. With this, I conclude my opening remarks and open the floor for question-and-answer session. Thank you very much.
[Operator Instructions] The first question is from the line of Aman Vij from Astute Investment Management.
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 a 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.
Yes, Aman, thank you very much for a good question. In fact, as you would know, defense equipment being developed and being put in operation takes a lot of time because of the very rigorous testing going on. In terms of our electronic features, we have already offered it to the Indian Army for testing and the testing is still in progress, it has still 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 from the electronic fuses, not only in India, but abroad also because we have IPR object. But yes, there are no orders available at this point of time because the testing and all that takes a 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 results are not yet out. So it will take a 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 only. This is the time for development and testing. Revenues will start flowing in from '23, '24.
Little bit clarification.
Sorry to interrupt you, Mr Vij, the audio is breaking from your line sir, please check.
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?
No, testing is in progress. There have been certain issues but 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 on anybody nor the financial bids have been as yet opened.
Okay, sir. And you have mentioned in the presentation that this, say for example, electronics fuses can be $0.39 billion in FY '25. Sir, in this year, what is the current size of the market in FY '22, '23?
In the current financial year, no orders have been placed in the private industry. Government is buying from the PSUs only. So we don't know the real size of the market. But yes, from 2 years [indiscernible] and all that, whatever I mentioned in the presentation, that holds good.
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 vendor, if you can talk about that?
Three private players have bid for that, three private players. And it's very difficult, Aman, at the moment to say the market size because the tender would be awarded to one company or maybe government later on defense 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.
Sir. And if you can mention the names of the other players a bit?
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 there is one more company, there are few private companies.
Is it, sir, AAM Enterprises?
I don't remember the name, Aman. I don't remember right now.
Sure, sure. That helps. So on the fuses side, there are different kind of fuses. On your website, you have mentioned proximity fuses and all those things. So we have developed all these products in-house?
These are all developed by our own companies, a bit help from some strong foreign partners who are R&D contractors and the IPR completely rest with the company. So you can call it an in-house development.
Okay. But you have mentioned in the presentation, we are the only Indian company to do it. So the other two players...
Yes, one company at least I know they have got a foreign collaboration, the company near Delhi. But HDL, I do not know, whether sure that whether it's their own development or whether they have got any partners. I'm not too sure. But at that time when we said this in the presentation then all these kind of fuses have been developed by us, it was true. But HDL, I do not know at the moment, whether it is, there is partnership or local development.
Right. And you mentioned next year, you expect some revenue. So if you can quantify how the scaling can happen to FY '24 or still can continue.
This all depends upon when the tender is open, Aman.
But do we expect, say, INR 100 crores, INR 200 crores kind of...
More questions. You can come back in the queue once -- I think there are too many questions. You can come back to that sense. What is your last question you can ask.
Yes. Sir, my last question was on the, say, electro optics part, so the market is quite big. You have mentioned 3 billion but we are only developing, say example, one product. I don't know how many products you are developing. The night vision goggles we are developing at...
Not goggles -- it is not goggles. It is a night vision -- sorry, to mount it on a rifle or a machine gun.
It's a night vision site, not a goggles.
Yes. My mistake, sir. So you have mentioned electronics, previously, we can maybe get 20%, 25% market share, but electro optics is a much bigger market?
I'm again expecting, I'm not sure whether it be 20%, 15% or 50% and that is what the reasonable expectation is. In terms of electro optic devices, there are multiple players in the country, there are 6, 7 different players in my opinion. So again, one should expect some 10%, 15% market share on a numerical basis. But then it would depend upon tender to tender how much you bid.
[Operator Instructions] The next question is from the line of Hardik Vyas from Economic Times.
Sir, we have been talking a lot about the 5G opportunity and Q2...
[Operator Instructions].
Yes. So do we -- when do we see the executions for 5G products happening and the 5G services 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?
BharatNet and 5G are two separate issues. BharatNet is not envisaging in 5G. BharatNet, government is very keenly working on this at present as I understand. And they are looking at a model of EPC kind of a model, where they will select companies out of the tender to build this BharatNet networking which is connecting every village of the country through fiber optic cables. Now the cable will link to some center point of the village. But from there on, I think government would ask operators to get connectivity to different households on a commercial basis. So what this project enter is laying down fiber 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 operator networks on a trial basis starting 2 to 3 months from now. And when the prices are over if operators require some change, we'll have to do that. But that is a normal issue because different operators have different software and graphic user interface issue, which will be required or changed as per their requirement. And we expect revenue to start coming up in the beginning of the Q1 on the next financial year.
Okay. So as I understand it right, in the current revenues and up to now, there has not been any 5G component it means a regular basis apart from 5G?
Yes, you're absolutely right. This is no 5G component at the moment. We have launched the product just recently. We have to go to the field trials on operators networks, and then the production and then the revenue is a bit of a few months cycle. But we are really well on this few months later.
Okay. Sir, my second question is on the software-defined radio. How big is the opportunity? And when are we likely to tap it in terms of revenues and when do we see it in numbers?
In the software defined radios for the Army, that development is in progress. And we are to submit samples in some time in December to Indian Army after development. And then the sample will be field tried and tenders will be there. So I think it is reasonably to say that major market opportunity for the software-defined radio is in '24, '25. But the market size is very large, in a sense that majority of the radios of Indian Army, maybe all of them will be shift down to the software-defined radio in a few years' time. The total market opportunity, if I remember well, it's not less than INR 40,000 crores.
Okay. So the next year it's 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?
Look, next year, we expect good amount of revenue to come from not only 5G, but other products also telecom products, which you have. The current business and the new products which we are also doing right now putting the router and switches. Those are also the products which are required in 5G and non-5G applications also or in all kind of network. So those products, coupled with 5G, and then, of course, our current range of products will bring in revenue for the next year.
And BharatNet as well would contribute to the revenues and profitability in the next [indiscernible]
Look, while doing our internal projections for next year, we have not taken into account BharatNet as yet. When BharatNet comes, it will be -- we will be able to improve our internal projections. But as yet, we are not taken that into account.
The next question is from the line of Sanjay Shah from KSA Securities.
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 one. And second was, I wanted to...
Which networking?
Rail, rail. Yes, my question was regarding that you throw out some doing a CapEx of INR 425 crores with some government. Can you elaborate on that? We need to understand on that, sir.
So on the railway network -- good question, Mr. Shah, in a few minutes presentation, I could not highlight every opportunity. But that's one area we are doing good business. In fact, as I've been saying, we are implementing a couple of networks abroad. In India, also, we are working about 6 or 7 different radio projects, which are subcontracted to us by the key players. But now directly, we are implementing metro network of telecom network of the metros of Kanpur and Agra. This is directly awarded to HFCL INR 230 crores or so of that particular railway network.
We have also participated directly for Surat and Ahmedabad metro rail network telecom networks, so where 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 -- gives a reasonable revenue every year. something like INR 500 crores or so. I reasonably expect with so many tenders we have participated seeing more opportunities out there. We should be able to get a reasonably good amount of revenue. And the government is going to modernize telecom and signaling network or entire railways in any case. So there will be more such opportunities coming back, 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 said, multiple places we are doing in India couple of places we are doing abroad.
Now coming to your second question, INR 425 crores. This, of course, includes expenditure on R&D also. This is a DLI scheme, design-led manufacturing incentives government has announced, and we have projected investment of INR 425 crores, which improves R&D investment because the DLI scheme allows R&D as an investment as a part of the overall incentive scheme. So some INR 425 crores is R&D and our new infrastructure, which we will create for manufacturing telecom products, it's worth INR 425 crores. The DLI scheme is under consideration of government. And I understand what ever discussion I had with the government officials during India Mobile Congress, we are expecting to announce finalization of this scheme. I think mostly within next 1 month, they should announce it, that is what I expect and I expect that HFCL will be definitely be a part of it.
So sir, we are entering into an exciting period as you cited, was the 5G, defense, rail, the DLI scheme, then what incremental CapEx we need for next 2, 3 years? And how we line up that?
Look, some of the CapEx, which we are implementing projects right now, this fiber optic cable manufacturing capacity expansion and the fiber manufacturing expansion. Part of the money we already raised in the last Q-o-Q, and balance is being funded through the debt from the banks. And the next phase of expansion, when we do, of course, we are not deciding the numbers as yet, but it is under consideration. But whenever we do it, it would be a mixture of [debt equity].
So will that be a major CapEx needed for that to participate in the growth story?
Well, I don't know at the moment, the current -- the what amount of CapEx will be required, but it would not be a these outnumbers the size of the company. It will be using the reasonable numbers.
The next question is from the line of Balasubramanian from Arihant Capital Markets.
Sir, I have a few questions regarding the R&D. Past few years, we have spent around INR 125 crores. Right now, we are focusing around INR 150 crores target. So apart from INR 150 crores, we have to spend the remaining amount for CapEx, right, sir, for this year. So what kind of quantum we make for next 6 months?
Look, this year's expenditure in R&D is INR 150 crores we have estimated, and that is what is the [indiscernible] ratings at this point of time because we are doing R&D in multiple areas as I have explained, Wi-Fi, UBR, 5G, routers, switches, software-defined radios. Some of the R&D is being done by only by our team, some of the places R&D has been done by the contract R&D players, which are working for us and designing equipment for us with our own ideas. So all this put together is the amount of expenditure we have talked about.
Now when you say that if you're asking a question of INR 425 crores, how it is going to be expense, either part of that would be R&D, part of that will be capital infrastructure.
Okay, sir. Sir, I'm looking into CapEx plan. Right now, we are into 10 million fiber kilometer for optic fiber capacity. So it is mentioned around target 22 million fiber kilometers. So what is the timeline for that?
I think that expensing is going to happen in Hyderabad in our current facility. And the time line of the work is already starting. I think it should take about 12 months to complete this, about 12 months, give or take a couple of months. [indiscernible] time and delivery time of fiber manufacturing equipment is very, very high at this moment because of the worldwide demand which has happened, the delivery time on machines, it's almost 9 months to a year and then installation commission and the construction of building the [indiscernible] long time because per 5-meter high towers and all that. So it takes a lot of time, but within 12 months, we should be able to commission it.
Okay, okay. Got it. Sir, in terms of defense exports, the market pace around INR 12,000 to INR 13,000 crores, and it is expected around INR 42,000 crores by FY '25. It's almost more than 3 years, but we are focusing on growing [indiscernible]. So we can expect more or it is sufficient?
No, no, no. I think we are talking in two different terms. We're not talking about growing exports in defense. We are talking about growing exports in fiber optic cable and telecom equipment. If you really look at our exports have grown up. It's a good question, but it's quite different we can answer.
Exports, we have been putting a lot of emphasis. Our export if you look at year-ending March '21 -- financial year '21 was just INR 193 crores, which increased to INR 353 crores in 2022 financial year '21, '22. Now in this year itself, in the first 6 months itself, we have crossed that is at least INR 376 crores. So as I've been saying, we doubled our exports this year from the last year INR 356 crores. We are on the track, the first 6 months itself, we have gone to INR [indiscernible] crores.
So we are absolutely -- no reason to say that we will not be able to grow to 100% from the last financial year. So we are working on a target of INR 750 crores. Our run rate is very much within that target, and we should be able to double our export. So we have a high touch on exports, which is stable and estimate. Right now, it is more uphill. From the next year onwards, we will start exporting our equipment also. Some export has started this year, but major export will happen in the next year. So with the increase in export of fiber optic cable and then the export of telecom equipment. We expect to continue this trend of increased exports every year from our company.
Sir, you are talking about the polymer or polythene based manufacturing plant for backward integration, could you please throw more light on that?
Yes. Sure. Look, if we use the plastic compound for manufacturing fiber optic cable like HDPE. All our [indiscernible] together, we have about convention of 2.5 crore kg of this HDPE polymer for manufacture of cable. Now you get natural color with HDPE compounds from the refineries. Now earlier, what we used to do -- there are people who do the compounding making it in a different color because in fiber optic cable different people want different colors and different tubes have got different colors. So you need different colors.
So we used to buy it from different people who will do the compounding and then sell it to us. So there were intermediaries. So we did the economics, and we said like if you do ourselves, this compounding, we will save a lot of money, roughly about INR 650 per kg, we are saving by doing the compounding ourselves. This means some INR 2.5 crores kgs, you will be saving something like you can say INR 18 crores, INR 19 crores, INR 15 crores to INR 18 crores, INR 6 to INR 7 per kg per year by doing the compounding ourselves. Whereas the whole project cost about INR 17 crores and INR 18 crores, something like that. So we're investing about INR 17 crores, INR 18 crores, we're saving INR 15 crores to 16 crores every year. So it's ROI plus 1 year.
So this saves us money and give 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.
The next question is from the line of Pranav Khandwala from Khandwala Securities.
Congratulations for the fantastic results. So 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 in 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 so, and the export market. So if you could give me a clarity on that, please?
First, 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 cells. And second is 5G fixed wireless access. Now let me explain both of them. Outdoor small cell is required for filling the gaps in the network. When you do -- when the telecom operators do the network to install large sense, there are gaps in between where the signals 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. 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.
Operators starts putting small cells in to large cells. It has happened quite a large scale in 4G networks also. A huge amount of small cells have been put by the operators. So the requirement of outdoor small cells in 4G will be even higher. So we are going to manufacture -- design and manufacture the 5G small cells. For outdoor application, using this Qualcomm platform, you will be designing and manufacturing the small cell and market is expected to be very high India and abroad both where the 5G networks are implemented allover.
The second product which we have done is a fixed wireless access CPE, again, using the Qualcomm platform. Now FWA CPE is required in the places where you need fiber line speed at home or office without fiber. What would happen is FWA CPE would be acting on the 5G network with installed at home, taking throughput from 5G network, it will give a fiber-like connectivity at home. So operators are doing FTTH as well as they would do FWA also.
Now FTTH, they would do at a place where the dense requirement of fiber optic connection is required, there they will lay down fiber. Wherever the requirement is not so big, there's part because a few people would want fiber-like connectivity in homes or offices where it is not economical to lay down fiber network. There they would be using FWA. There without laying the fiber optic network and 5G network it self you will be getting high-speed connectivity at home or enterprise. And the market of FWA in cities is expected to be very, very high all over world. Billions of dollars of market is expected over the [indiscernible] cities. This is our second partnership we are having with Qualcomm. We expect to launch this product from the beginning of the -- we expect to put in the field trial with operators in the beginning of the next calendar year, revenue expected from the first quarter of the next financial year.
So what will be the revenue opportunity on a quarter-on-quarter basis or year-on-year basis for HFCL?
For these two products?
Yes.
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. And your second question was on exports. Now as I said in the answer to my previous question on to a gentlemen, 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 size of world market, whether it is fiber optical cable or telecom equipment. 95% of the market sits outside our country. So while putting a lot of effort and emphasis on the Indian market, we need to go out of the country to access the 95% of the market also. So if you are able to explore or get into this few, small percentage of this 95% market, you are able to increase your sales.
Now particularly when you have your own products, your own technologies, your own IPR, you are free to go and market anyway, if your technology is at par with other manufacturers. So what we have seen, we started with fiber optic cable, for example. And as I mentioned in the figure, we are doubling -- almost doubling every year, '21 financial year, INR 193 crores, '22 it become INR 353 crores, this half year itself it has become INR 376 crores. So we are on path to reach to INR 750 crores, which 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 fiber 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 95% of the world market.
Okay. And if you could give me a slight breakup in terms of your order book currently?
Yes. Current order book is above INR 5,300 crores, which comprises of government and non-government both, almost 55% in government, 45% is non-government. And we are getting regularly repeat orders from our customers. So we keep on getting INR 100 crores, INR 200 crores, INR 50 crores, INR 40 crores, 50 crores, and we keep on getting orders or what is the average [indiscernible]. So the current order book, as I said, INR 5,280 crores.
The next question is from the line of Sahil Sanghvi from Monarch Networth Capital.
Congratulations sir, on a very fine set of financials 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?
Exports, you don't get large orders in one shot. Orders keep on filling in. So the current order book from export to INR 5,300 crores should be about something like INR 300 crores or so. But they keep on changing, orders keep on supplying, orders keep on coming. And we are well within our target to reach to INR 750 crores as I was explaining efficiently. So orders keep on changing, it should be well over INR 300 crores at this point of time.
And this will be largely OSE orders?
This is large OSE at this point of time.
And secondly, sir, I mean, we have some pledge shares right now. And I just wanted to understand two things on that front.
There are no pledge shares at this moment at the time, there are no pledge shares, zero. It's only a nondisplosable undertaking [indiscernible]. when you take loan from the financial institutions, they take a nondisplosable undertaking from the promoters that promotors should not sell the players and walk out without informing the execution and taking their approval. It's a normal procedure. So the non-disposal undertaking, there is no pledge at all, zero pledge.
Okay. Okay. Because on the exchange, how it shows up, it shows up as a pledge share. So we are not liable right in any way?
No pledge. It is a nondisposal undertaking, there is no pledge.
It is otherwise encumberment because actions does not permit us to whether it is pledged or otherwise encumbered, there is only one column. So it is basically not pledged, it is otherwise encumbered that's by way of nondisposal undertaking.
Nondisposal undertaking. There's no pledge at all.
The next question is from the line of Dipesh Sancheti from Manya Finance.
Regarding the fundraising, which we had on 2nd September, we had mentioned of about INR 650 crores. But after that, there has been no update...
Sir, the audio is breaking from your line.
I said that on 2nd of September, mentioned to the exchanges that we are going to raise about INR 650 crores. But after that, there has been no updates. Like we gave warrants to promoters and non-promoters [indiscernible] approval of INR 650 crores. When is that expected?
Yes, the warrants have been issued to promoters and key management personnel are also subscribed to the warrants, which speaks of confidence that promoters and the key leadership team of the company has in the performance of the company. So that has happened. The next question of yours was whether the fund raising is going to happen. When we are all in the planning stage at this point of time, what was the kind of CapEx required, which are the kind of expansion of equity integration we have to do. Once it is finalized, of course, we will come back to you.
Is it expected to happen in this financial year?
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.
The next question is from the line of Swapna Thomas from NSFO.
My question is on -- so as I understand we want the company to be more a products driven company and less of the 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. 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 revenue will continue steady state, and because we are doing some products works, this much of turnkey will be part of this overall business. How should we look at the business as such? And also on the capital employed that is deployed in the turnkey contracts. So that is substantial. So do we see some amount of cash that is released from there, which can be used for CapEx, et cetera, which might be blocked because of few debtors?
Very good two questions, and I answer each of them. I think things on the beginning that last 2 calls you would have [indiscernible]. We want to be more of a product, to be less of project company. And that -- what we decided to go in a manner, it has really happened in that way. If you look at the numbers in financial year ended on 31st March '21, our revenue from products was 27%. And from the projects was 73%. Now it became 43% on products and 57% on project 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 6 months, if you look at our revenue from the products 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 revenue is at 73% is 42% now. It's a remarkable change, and we expect to continue on this trend and further increase our revenue percentage in products in the next financial year because of these different products of 5G, WiFi, UBR, and routers, which is coming in production. This time it's 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 won't do such projects which are highly cash negative because [indiscernible] projects makes us a heavy burden on the cash flows of the company. So that's all we have gone for more revenue from the products, which have really certified that approach and less on the projects.
Now coming to the second question. Yes, we have very reasonably good amount of money. I did not see excess but getting delayed in projects, particularly the different projects which we are implementing, we still have a receivable of more than INR 1,000 crores. Now we have started implementation -- not an increment switching on of various parts of this network and now money has started flowing well. This used to be the INR 1,000-plus crores, today used to be more than INR 1,500 crores about a year ago. Now it has come to about INR 1,000 crores or INR 1,100 crores. And we expect that by March -- end of March this financial year, a full network would be chipped on. Two more parts of the methods we are switching on within next 15 days [indiscernible] as we chipped on to, in this, maybe within less than a month. So by March, we expect to complete and then reach a major part of this menu within next 4 to 6 months' time.
So with this major release of this one, which is about INR 1,000 crores or so, a lot of money would flow back into the company which has decreased pressure on working capital and need more money for CapEx also. We are right on track, a good question that, yes, there is a delay in payment for this particular project, not because of the fault of the company but because of customer did not do its own part of work which is construction of infrastructure on which we were to install equipment. And there you say the reason, it's related to customers, nothing to do with the company, this delays 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 more CapEx.
And I really appreciate that point and it's pretty commendable that the telecom products revenue run rate is now almost 671 quarterly run rate. That's pretty significant from where we were. 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 a number if we are projecting this particular segment, then how do we look at it? Like I mean what is it like a number we should look at in the overall pile like a 25% or like 15% of the overall revenue?
Look, when I say we will continue, we will continue to be in which are not cash negative. For example, I will tell you, the private operators naturally we're implementing. When I [indiscernible] what we are doing. It's not major cash negative, payments are received within 30 days. And there is absolutely no issue of cash flow. There's no reason why we cannot continue to do that. Maybe publicability could be low but this is the working investment is not there. There's 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 getting some small contracts 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 are very quality conscious people, so they don't give projects to small companies and our profitability is much better. So we intend to increase our savings in the international market in project implementation. And international, when I say I'm talking of developed countries like 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 figure, we would look at such projects only. So I would say in terms of percentages, you can say that 25% or so revenue will keep on coming from the project side, which are less involvement of working capital and more profitable.
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?
I think if you say the marketing, 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 a normal telecom business, maybe a couple of percentages, a few percent extra because not anybody and everybody can enter into this market because of very strict entry conditions and the quality and power on expansion. So it could be 2%, 3% extra, some 20%, 30% higher than what you get into the normal telecom business. So yes, market is competitive, but yes, a bit of a 20% to 30% extra, a few times you can get as a profit.
[Operator Instructions] The next question is from the line of Ananth Jain, an Individual Investor.
Congratulations on a 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 side, what I have come to understand is that it requires approval by ARDE which is like a part of DRDO. So do we have the ARDE approval for all the three types of fuses that we are looking to make? That's my first question. I will ask further questions once I get answers to this.
Look, we have spent about INR 50 crores or so in development of this fuses and electro optical devices. This is R&D expenditure, you can call it CapEx, and we have spent about INR 50 crores on that. Now coming to this fuses, of course, it requires the approval of ARDE and also not it has DGQA also, this is directed to the quality assurance in the Indian Army. And as I said, the testing has been going on, and there are certain issues which are happening, which a 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 open. And let us see when they decide and when they open.
The question here because I've been tracking this since a very long time because 10 years back also, these tenders had come and then you had all these ECIL kind of colluding with MOD and then there is a South African company, which used to come in and supply these fuses to ECIL. So are the issue is political in nature or technical in nature? That is my another question. And the last -- because last time it was clearly -- I don't need to call it on a conference call.
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 off-late [indiscernible] has also come into picture in participation with an Israeli company. But ours is the total own development. But yes, the issues are being faced are technical, not -- I don'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, either DGQA or ARDE, multiple agencies are there in the ARDE. It's not DGQA or ARDE 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 that we are experiencing ourselves.
Last one question on the same thing. Are the issues only limited to our company or like other competitors that we have, or they having different set of issues or are the issues common for all of us? And finally, what I have 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?
Look, the issues are -- technical issues are common to all the companies, all the private sector companies are more or less common. If there a 100 technical parameters, somebody will have two or somebody will have three, but almost common with all Indian private sectors. 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.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Mahendra Nahata for closing comments.
Thank you very much, gentlemen, for -- and the ladies for attending this earnings call of HFCL. And as I said, company is on the right path of growth, right path of progress. It has become a technology-led telecom equipment products and fiber optic cable manufacturing companies. There's a lot of backward integration to increase the profitability. Again, with the emphasis to go in the export market, we are increasing our revenues from that side of the business with the increase in exports of fiber optic cable and equipment in the next year, we further expect to increase our market share in the 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 on products. We are on the path of expansion of our product range and also on the size of our fiber optic cable and fiber 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 in India, all over the world these kind of things happening. So opportunities are exciting. Market is big, opportunities are exciting. And the company has taken all the right steps to take part of these opportunities and grow with the market growth. The company, of course, also expects to grow in the coming financial years. Thank you very much, gentlemen. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.