HFCL Ltd
NSE:HFCL
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
82.75
161.61
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
HFCL Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the HFCL Q4 FY '22 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference has been recorded.
I now hand conference over to Mr. Abhijit Mitra from ICICI Securities Limited. Thank you, and over to you, sir.
Yes. Thanks, operator, and good evening to all the participants, and thanks for joining in. We are here to discuss Q4 and Fiscal '22 results for HFCL Limited. Management is presented by Mr. Mahendra Nahata, Promoter and Managing Director; Mr. V.R. Jain, CFO; Mr. Manoj Baid, Company Secretary; and Mr. Amit Agarwal, Head, IR. So without further ado, I hand it over to Mr. Nahata for his opening remarks. Over to you, sir.
Thank you, Abhijit. And good evening, ladies and gentlemen. And a warm welcome to HFCL's earnings call for quarter 4 FY '22. Thank you for all of you the continued interest in HFCL and making to this call. The results presentation and press release are available on the website of the company as well as on the stock exchanges.
I'm sure you all have had a chance to glance through them. Friends, as the threat of pandemic recedes, we still remain vigilant of our new COVID variant that can pose challenge to the economy. Recent Russia and Ukraine conflict posses new geopolitical challenges, not just for India but also for the world.
Now quite a few sectors they are beginning to show signs of recovery could still be staging at an uneven part of recovery given the changing dynamics. All this coupled with the pace of technological transformation call for the need to be vigilant and agile for leaders across nations and organizations.
Now zooming into the Indian context. Our healthy growth rate and ForEx results, coupled with steadily improving [indiscernible] collection and forecast of a good monsoon shall help us deliver another year of world-leading growth in FY '23 for the Indian economy. The Indian telecom sector as well witnessed another year of revenue growth in FY '22-'23.
This happened on the back of rising data convention and tariff strength. Sectoral strengthening in the form of expanding networks, AGR relief and lowering of 5G spectrum prices shall have ignited the next level of growth for the industry.
For HFCL, FY '23 looks quite promising. However, the margins in quarter 1 may remain under somewhat pressure because of global increase in input costs. These are expected to get offset by the end of the quarter with increase in sales realization.
Government's trust on indigenous technology of telecom and [ defence ] equipment, healthy telecom revenues, feeding into continued network expansion and upgrade by telcos, quality support for design and manufacturing for telecom equipment under PLI scheme, Prime Minister's vision to connect all the brand franchise to optical fiber cable to provide affordable broadband connectivity are the key levers that will propel HFCL to greater heights of performance and profitability.
HFCL's march forward on the path of sustainable and profitable growth is fueled by continued expansion of capacity, product offerings, backward and forward integration, increase in customer base and enlarged global footprint. We continue to transform HFCL as a technology-driven enterprise that innovates and manufactures not just for India but also for the world.
The structural strengthening and sustained improvements in our performance in FY '22 has further strengthened our growth foundation, being recognized as a trusted source for National Security Council Secretariat as a pivotal acknowledgment from the government.
Capital raise of INR 600 crores through TIP and who is the 100% of the shares further demonstrated the trust and belief by our stakeholders. Setting up of a dedicated manufacturing facility for defence products and further expansion of optic fiber and cable facilities, strengthening of our global leadership teams and deepening of our new product and solution pipeline augurs well with structural growth.
Sustained growth and fiscal consolidation led to our credit rating upgrade to A with stabilizing from CARE ratings. We closed FY '22 with an order book of more than INR 5,000 crores. From R&D standpoint, deployment of WiFi 7 enabled access point from point to point and point to multi-point backhaul radios are in advanced stage.
These products will be compatible to 5G networks in terms of their throughput capacity. Development of 5G radio and transport products are also progressing well. And these products will result in company's innovation to reach to global markets. A new initiative has also been undertaken to produce new types of optical fiber cables for the export markets.
I would also like to mention that company has been able to increase its product revenue to a level of 43% in FY '22 as against 27% in the last financial year. This trend is expected to be even better in the next financial year. The product revenue of FY '22 was INR 2,055 crores as against last year's product revenue of INR 1,205 crores. The export revenue of the company also increased significantly in the current year.
As against export of INR 201 crores in the financial year ended on 31 March 2021, export in the FY '22 was INR 363 crores. We expect to double our export revenue in the current financial year again. Towards the end of quarter 4 of financial year '22, the Board has approved the expansion of our optical fiber as well as optical fiber cable manufacturing capacity to 22 million fiber kilometers and 34.7 million fiber kilometers to equivalent cable per annum, respectively, with an estimated CapEx of INR 425 crores.
This round of expansion will see our fiber and OFC capacities go up by 120% and 40%, respectively. The move is also aimed at narrowing the gap between fiber requirements and cable capacities in order to further strengthen supply chain and improve our margins.
Laying of optical fiber cable in the state of Jharkhand under BharatNet Project were completed during the last quarter. Providing connectivity to 1,789 gram panchayats through the GPON network, our teams laid out 7,765 of cable network. With this, Jharkhand has become the first state in the country to provide connectivity to all the gram panchayats under the state-led model of BharatNet program. We are proud that HFCL implemented this network.
Financial year '22 was also marked with HFCL forming several strategic alliances and associations. We joined O-RAN Alliance, a worldwide community of mobile network operators, vendors and research and academic institutions, operating in the radio access network industry.
Aim of this alliance is to build much more intelligent, open, virtualized and fully interoperable mobile networks. We'll focus on integrating and validating our 5G products and solutions with other O-RAN Alliance members and contributors. We formed a partnership with Aprecom, a leading artificial intelligence provider powered WiFi analytics technology provider.
The aim is to integrate Aprecomm's artificial intelligence powered solutions to our platform. Our entire WiFi and media product portfolio will now have seamlessly integrated AI-powered network analytics enhancing the experience of network service providers as well as end users. We chose CommAgility 5G new radio software for our 5G indoor small cell. CommAgility is a key technology partnering our own effort to bringing a complete portfolio for us for 5G radio access and transport network. We engaged Ingram Micro as distributor for our WiFi and [indiscernible] line of products with an aim to leverage their stronghold in channel distribution in India and SAARC countries.
Let me now brief you on key performance metrics for quarter and 12 months ended FY '22. Revenue for quarter 4 FY '22 stood at INR 1,183 crores as compared to INR 1,215 crores in Q3 of FY '22 and INR 1,391 crores in Q4 of FY '21. EBITDA for the current quarter stood at INR 154 crores as compared to INR 174 crores in quarter 3 of FY '22 and INR 187 crores in Q4 of FY '21. EBITDA margin stands at 13.02% for quarter 4 of FY '22 as compared to 14.32% for quarter 3 FY '22 and it stood at 13.44% in quarter 4 of FY '21.
For quarter 4 FY '22, profit after tax stands at INR 68 crores as compared to INR 81 crores of quarter 3 of FY '22, which stood at INR 86 crores in quarter 4 FY '21. PAT margin stands at 5.75% in quarter 4 of FY '22 as compared to 6.67% in quarter 3 FY '22 and 6.18% in Q4 FY '21. Segment revenue for telecom products during the quarter stood at INR 585 crores, which is 49% of quarter 4 of FY '22 revenue as compared to INR 388 crores, which was 28% of quarter 4 of FY '21 revenue.
The increase in input costs, including optical fiber, plastics and semiconductors and logistics within last quarter has put pressure on the operating margin. This will possibly get offset with increase in realization in the coming quarters. For the 12 months ended, 31 March '22, the company reported a consolidated revenue of INR 4,727 crores as against INR 4,423 crores in March '21.
EBITDA of INR 693 crores as against INR 585 crores in March '21. Profit before tax of INR 442 crores, as against INR 337 crores in March '21. Profit after tax, INR 326 crores as against INR 246 crores in March '21. From these numbers, for the financial year, we can know the progress made by the company and stronger performance shown by the company compared to last year.
The receivable cycle has also come down to 160 days in FY '22 from 214 days as compared to FY '21. Debt in absolute terms has reduced to INR 730 crores as of 31st March '22 from INR 922 crores as at 31st March '21, resulting in a debt-equity ratio of 0.26 only. Looking ahead, our drive continue innovating and widening our product offerings and expanding our global footprint shall further strengthen our growth foundation.
With continued shift in revenue mix, growth in our catalog of products innovation, we are confident to emerge as a name to reckon with across various markets. Thank you, once again, ladies and gentlemen, 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 Sanjay Shah from KSA Securities.
Sir, my question was regarding FY '23. And if we extrapolate it to and go to even FY '24, what opportunity we see for our company? And where we are ready and be as a company and as a leader, where you see the opportunity for our company?
Thank you, Mr. Shah, and good question. FY '23 comes up with multiple opportunities, India and worldwide. Why I'm saying worldwide also because we are focusing to a large extent in the export market also. In terms of opportunity, in the current financial year, as you all are reading in newspapers today that 5G auction is going to held very soon, possibly in June.
Now with the 5G auction being held and networks to be expanded by operators who take 5G spectrum, there is a large growth in demand of fiberoptic cable and also very wideband radios, both of which would be required to connect the different cell sites, which would be many more in numbers, because 5G has the coverage limitation because of higher frequency range, the demand of fiberoptic cables and wideband backhaul radios which grow up significantly, significant growth will be there in these 2 products demand.
Similarly, demand of our kind of telecom infrastructure will increase significantly because network rollout would happen by operators and it will be completely [indiscernible] for new rollout for 5G networks.
Now when the 5G network grows, accessory equipments like WiFi, like WiFi 7, for example, which we are also developing; WiFi 6, which is already under our product range; backhaul radios for WiFi backhaul; broadband connectivity, all this will grow significantly. Then the transport products of 5G routers, switches, they are also going to -- demand is going to grow significantly.
Good thing is that we have a huge capacity for manufacturing fiber, fiberoptic cables and that capacity is being extended, keeping the new -- the large-scale network expansion in fiberoptics cables to take place, we're inducting wideband radios, E-band radios in our product range.
We are having WiFi 6 and 7 and 7 is under design, of course. And also, unlicensed went backhaul radios for the same usage, we are designing router, switches. So all this put together, you will find we are getting ready for the new kind of products, which would be required for 5G network, which is to be laid out by the operators who take 5G spectrum.
Second big demand is coming from BharatNet. As you would have read in newspapers again, government has now decided to construct this network on EPC mode where contracts would be given to companies to implement the entire network. What we hear is, from different sources, that the total requirement of the fiberoptic cable is going to be more than 15 lakh kilometers in next 3 years, 15 lakh kilometers is a huge, huge demand opportunity. Now 15 kilometers of fiberoptic cable will be required for linking all the villages, which are to be linked BharatNet. Earlier it was grampanchayats, now it is villages, over fiberoptic cable to the broadband connectivity.
Now it would not only be fiberoptic cable, it will be a lot of different kind of equipment: transport equipment, access equipment, which would be required for this purpose. And total CapEx estimation in our estimation is going to be more than INR 70,000 crores, INR 75,000 crores, including installation and commissioning expenses.
Now fortunately, HFCL is present all these market segments. So this is, again, going to be a massive demand opportunity and your company has presence in all these areas with cable, equipment, installation and commissioning EPC capabilities. So you have second large level of new demand coming up, apart from normal expansion of network, which is going on anyway.
There is a third opportunity, since we are looking at export market, and as I mentioned in my initial presentation that we have been able to increase our exports from INR 125 crores-or-so to INR 361 crores in the current financial year, we are looking to make it about 2.5x of the current -- last year in the current financial year. This INR 361 crores is probably going to be somewhere around INR 800 crores, INR 900 crores, that is the target we have fixed up for ourselves.
So worldwide, the demand of fiberoptic cable and associated equipment is increasing significantly. The reason is with the large expansion of fiber-to-home network worldwide, whether it is North America, whether it is Europe, large scale expansion of fiberoptic cable network and FTTH network is taking place. We are also discussing with different operators in some countries to take contract for -- take business for establishing such networks for them and supplying fiberoptic cables in any case to many such operators. And that's where our increase in export potential comes up.
So indigenous demand for 5G network expansion, 5G network, BharatNet network, expansion of FTTH network worldwide, including that in India, and we are the largest implementor of FTTH network in the country. All this put together, there is a very huge demand opportunity, and we are fully geared up for that. So we have fiberoptic cable capacity, which we are increasing. We are rectifying -- we are designing new equipment which is available for sales, and we are going international also by increasing our sales capacities. So we are in a very good position to take advantage of this expansion in the market FY '23 and beyond.
That's really helpful, sir. Really helpful. Sir, my next question was, can you highlight something about our progress on our defense equipment side?
So defense equipment, there are 2 kinds of defense equipment. There's defense communication equipment and defense electronics. Now as you know, defense business takes time to get qualified and long-drawn trials and then eventual supply. So we are designing software-defined radio for defense, which will commence for validation sometime by the end of this year. We have designed electronic fuses, which are undergoing trial as we speak now. It is undergoing trial in different places right now, as we speak.
Night vision devices, again, they are undergoing trial, as we speak. So defense equipment, whatever design as we finished, they're undergoing trial. Software-defined radio is under design. And at the same point of time, we are working on a couple of other defense equipment, which would be required by the Indian Defense Forces in near future to design them and to manufacture them. Now -- and then as you would have, again, seen in media, government has decided that a large portion of defense equipment is to be procured indigenously by indigenous manufacturing. So this, again -- this is a great to our business model because in our business model in defense equipment, what we have done primarily to manufacture indigenously with a huge amount of local content, which makes us far more competitive.
So our whole policy for all strategy, from design locally and manufacture locally has proven to be very correct with the need of the time. So government is insisting local manufacturer, so large percentage of Indian components, which can only happen if we design in India and which is going to be helping us to generate more revenues for -- from defense products in the next few coming years. In the current year, in our annual operating plan, we have not taken into account any significant revenue from defense electronics, though defense communication revenue is going come, but defense electronic, we have not taken any revenue. We expect this revenue to start coming up from the financial year '24, which will further increase the revenues of the company.
[Operator Instructions] The next question is from the line of Saral Seth from Indsec Securities & Finance.
Sir, my first question was what is our R&D development in the 5G area, as we were developing some hardware which is supposed to cater to the 5G technology? So where are we on that side, sir?
Thanks, Saral. In 5G, we are -- 2 different kind of equipment. One is 5G radios and transport equipment. In the radio equipment, we're designing small cells and macro cells of different kinds of systems. Small cells is for indoor or for outdoor application also. But macro cells is for large-scale application for -- on what we call the base stations or tower CC for massive communication capacity.
Now these designs are already happening. We are tied up with a world leaders in this arena to give us software stacks and designing capabilities and these are going to be our own designs where our R&D teams will engage together with other engineering companies to design these products. And these designs are progressing very well for small cells, macro cells, all is progressing very well.
And sometimes within this current financial year, this -- later part of this financial year, these products will start coming on stream for showcasing with the customers in the current financial itself. Second leg of this products is fronthaul gateways which are the kind of routers from the cell side and access routers and distribution routers, they are also going to be in our production line sometime during this current financial year. So this is progressing well. And there is going to be a very large demand opportunity for this products because as the 5G networks come, everybody would be requiring these products because these are the large volume products, which will be required by all the operators, not only in India but export also.
So we are gearing for India and export. So I would like to reemphasize here the demand opportunity is massive, whether it is for 5G network equipment or whether it is for fiberoptic cable and associate optical transport equipment. And your company is totally geared up to take advantage of these opportunities by becoming more competitive than its peers because of its own design, its own manufacturing capabilities and also very competitive design because it has been designed in India and software also being designed in India, owned in India, so these are the massive competitive advantage we have for this equipment.
And also fiberoptic cable because the massive quantities we produce, we have a competitive advantage and also because of the backward integration of the optical fiber that gives us a further competitive advantage. Moreover, in terms of capability to put fiber in the ground, we have done highest amount of work in the country.
So we are, again, in a good position to take advantage of emerging opportunities in BharatNet. So there's a massive expansion taking place now. I find HFCL is in a never before good position to take advantage of the opportunities which are there in front of us because of these expansions, which I talked about.
For the optical fiber cable industry, what is the growth outlook? And how are we positioned to benefit from this growth? What steps are we taking to extract maximum opportunity in optical fiber cable.
Look, as I explained a little earlier to answer a question of Mr. Shah, demand of optical fiber cable increases coming month on 5G network as new network is being laid out. 4G network expansion, expansion of fiber-to-home network, I'm talking about India right now. And more importantly, BharatNet wherein more than 15 lakh kilometers of fiberoptic cable additionally will be required. So all this presents a huge demand opportunity and then coupled with increased exports from our side to different countries for backhaul as well as backbone as well as FTTH application of fiberoptic cable.
Now definitely, we would be needing higher capacities to fulfill the demand and that's why we are expanding our capacities to manufacture fiberoptic cable by about another 10 million fiber kilometers equivalent cable. We are expanding our capacity for manufacture optical fiber from 8 million currently, which is undergoing expansion to 10 million to the expansion of 22 million, which is an expansion from current capacity of 8 million to 22 million. So to fill up that gap between our manufacturing of cable and fiber. So naturally expansion is taking place with a cost of more than INR 400 crores to take care of this demand opportunity, which is there in front of us. So demand is increasing, so as we are increasing our capacity. And mind you, we have the highest market share within India for fiberoptic cable. We have the highest market share, and we expect to continue to maintain that with increase in our capacity and competitiveness.
The next question is from the line of [ Guru from Wood ] Group.
Nahataji, thanks for giving a clear idea about HFCL products and the kind of demand that you have going forward. I've got a couple of questions, like my first question is regarding this NDU which is nondisposal undertaking of equity shares of HFCL.
Sorry to interrupt you, Mr. [ Guru ], please use the handset mode, sir.
Hello? Can you hear me now?
Yes, go ahead, go ahead.
Yes, yes. My first question is regarding this NDU, nondisposal undertaking of equity shares. So after releasing the pledge shares, I just want to have some ideas here -- clear idea about the purpose of...
Yes. Let me first explain -- answer this question. Look, a pledge has been released, nondisclosure undertaking is there from the promoter's -- part of promoter's share that while the bank loans are existing, promoters should not sell its share and run away.
That's a nondisclosure -- non-disposal undertaking bank stake. Until the time bank loans are existing, promotors should not sell significant part of his share and run away and leave the bank high and dry. That's the kind of protection bank takes from everybody.
So out of the total number of shares of INR 54 crore of the promoter shares, INR 24 crores equivalent shares' nondisposal undertaking has been taken by the bank. It's no pledged, let me tell you, no pledge. It's only nondisposal undertaking that promoters will not sell INR 24 crores of the share out of INR 54 crore of the total holding till the time bank loan are existing. That's a very standard thing.
Okay. Fine. And my second question is, as for the last con-call, it was given to understand that out of the funds raised through QIP, about INR 150 crores will be pledged for the repayment of loans, if I'm not wrong. So any plans to go ahead with that?
So we have already paid. We have already done that. We have already repaid those loans.
Okay. Fine. And the last question is regarding Sterlite's patent infringement. We have seen some notification in BSE, but later on now there's no update on that.
Look, I will not talk much about that case which is already in court. But we've already informed the court -- we've already informed the Honorable Court that this is not correct. Infringement is not there, but stay was given on ex-parte basis without even hearing us.
This -- whatever they have claimed of the infringement of their patent for 2016, we have been producing that kind of a cable from 2013 or even before that, and we have been supplying to our customers. Our customers have given affidavit in the court that they have been buying this cable from us from 2013 and even customers have submitted their specifications also and our bills and their orders and everything have been submitted to Honorable Court. This is subjudiced, but I can tell you it's not -- there's no infringement in this case. It is just -- I don't know why there is not this -- and this stay taken ex-parte. But in the hiatus, court has given us permission to keep on exporting the orders we had. We give list to the court and export has been happening for us.
The next question is from the line of Saket Kapoor from Kapoor & Company.
Sir, firstly, out of the total order book, how much is skewed towards the export part, sir?
Export orders are always coming in different pieces. They are not -- out of INR 5,000 crores, you will not find that there are some thousands of crores, but I think the total export order available in hand is about INR 225 crores against the total export target we have about, as I mentioned, this is to increase by 2.5x of the INR 360 crores of all the export we had in the current year. So INR 225 crores of order, which is to be supplied in the next couple of months is a good number if you look at our current export target. We'll be able to fulfill without any problem.
And sir, what have been our CapEx for FY '22, including what have been the maintenance CapEx and what is our CapEx target for FY '23?
Yes. I will just check these numbers and come back to you. If you have any other questions...
Yes. Yes, sir, I have, sir, a couple of them. Sir, what is our net debt level [indiscernible] and what is our cost of funds?
Just 1 second.
Yes, sir. And also, sir, then coming on to the -- this turnkey services part segment, sir...
Sorry, sir, Mr. Kapoor, I didn't hear the question. Is it a question of R&D or CapEx?
Sir, the maintenance CapEx, R&D, both if you could give the breakup for FY '22 and this year?
In the current year, our target for CapEx, as I mentioned -- sorry, I missed your question, I thought you're asking R&D and you were asking about CapEx.
Sir, [Foreign Language]
[Foreign Language] in the current year because we are going for expansion of fiber and fiberoptic cable, current year's CapEx target is about INR 500 crores, including that of R&D, about INR 500 crores.
Okay, sir. For FY '23?
Yes.
And how much we have spent for FY '22?
FY '22, because there was some bit of CapEx and some bit of R&D. Total would have been around about INR 125 crores-or-so.
So from INR 125 crores, we are going up to INR 500 crores?
Absolutely. Because we raise capital also, if you recollect for the purpose of expansion only.
Yes, yes. Sir, last year, in some of the calls, you have also mentioned that [Foreign Language] and there was also some big income tax refund. Have those things materialized for the last year?
Yes, income has refund has already come. And subsidy -- part of the state subsidy already has been approved and the rest of the subsidiary for central government, that has also been approved, but the disbursement is yet to take place. We expect, in a couple of months, disbursement will happen.
And how much is the receivable, sir, on that front?
I think that should be about INR 45 crores or INR 47 crores, I think.
And sir, about the net debt number, sir? The net debt level as on -- after the capital raising exercise, what is our net debt?
It is INR 730 crores net debt level as against INR 920 crores from last year.
Okay. This is after raising INR 600 crores?
Yes.
And sir, and the other expenses part, sir, we have found that the other expenses have disproportionately gone up. So if you could explain the reason that -- in commensurate to the turnover, the other expenses are slightly higher. So any one-off item there?
Yes. So this has increased, one, because of the logistic costs. I mean the freight on logistic exports have increased. Then some R&D expenses has been [indiscernible] maybe around INR 5 crores or so. And then we have written off some of the debt, which is INR 2.5 crores and INR 2 crores of the provision has been made during this quarter against the -- as the ECL provision against receivables.
Okay. So this has gone up from, sir, if I take the number for March '21 from INR 47 crores to INR 78 crores, that is a significant INR 30 crore change.
If you total all that what has been explained some additional expenses on the export side because we have to increase our exports for the large volume, so we have increased export-related market development expenses and the other expense which Mr. V. R. Jain mentioned just now, so all total up, it would be this kind of number.
So sir, this will be -- this will continue going forward also because of the higher freight cost is still there...
This is freight cost -- listen, the significant question of it is a freight cost, higher freight cost when this happened in the recent past because of the logistical issues which the world is facing. Now whether this will continue or will go down that all depends on geopolitical situation. I'm not -- I cannot give any forecast on that because as you know, this is a completely different geopolitical situation, which will determine this kind of whether [indiscernible] further go up, who knows or it may go down also if the situation...
Okay. Sir, on the turnkey contract and services segment, we have seen degrowth in revenue, whether quarter-on-quarter or year-on-year, sir, how will you explain the reason...
No need of explaining. This is our strategy. I've been telling you from the very beginning that our revenue from products will go up and some EPC will go down. That has been thought out strategy of the company. And as you would see, product revenue is at 27% has gone up to 43%. So this is a significant shift and it is a well thought out strategy and it will keep on happening in the future.
But that has not commensurate to be profit, sir. If you take the profitability part, the profitability has gone down on an absolute number.
So profitability has gone down in the Q4 because of the increase in input costs.
As I mentioned to you, Mr. Kapoor, in the very beginning itself, that in Q4, all input costs have gone up, which is -- you would have seen everywhere. Plastics, which is major raw materials for fiberoptic cable, costs have gone up tremendously. Fiber, fiber, we used to purchase last year at a price of INR 248 per kilometer. Right now, we are purchasing at INR 430 per kilometer, INR 440 per kilometer. So input costs have increased significantly. If you look at the EBITDA margins, from an EBITDA margin, again, you will find that there has been a significant shift in quarter 4 because of this increased input cost, which is [indiscernible].
Right. And what are the current OFC prices, sir?
Wait a second, let me complete. But if you see on a year-to-year basis, year-to-year basis, this was a story of quarter 4. If you see year-to-year basis, in the March '21, the EBITDA margin was 13.23%; March '22, it is 14.66%. Had the things not bit different in the Q4, this would have been even better. But these are nothing to do with the company. These are geopolitical situation, freights have gone up, input costs have gone up, fiber price gone up, plastics price has gone up, semiconductors are not available. There is a worldwide shortage of semiconductor. So to get a ready stock you have to give higher prices, which you have done.
We're going to supply to our customers. So this is a temporary phase, which has happened, which may very well continue into Q1 also of the current year. But of course, 2 things will happen, we expect these things to ease out in Q2. But at the same time, now our new contracts or sale prices are also increasing. Our sales prices are also showing increase because as we have input costs, so new orders, we are taking at increased prices also. So all put together, this would balance out in the Q2. So Q1, there might be some impact of this situation.
The next question is from the line of Hardik Vyas from ET.
Most of my questions have been addressed. But one of my questions is in 5G telecom equipment, how is the competitive intensity? Who else is likely to supply those products to...
Listen, I would differentiate in 2 parts. One is local manufacturers and other is international. Now international, all the large companies, which you hear the names, Ericsson, Nokia, Samsung would be there. Chinese would also, of course, not be there with India and Chinese have no longer been allowed.
In Indian companies, in 5G radio equipment, Tejas would be there, which is now a data company. We would be there. And I don't know if any other company is working on 5G radio networks development. I don't know any companies doing a large extent. Maybe I heard of Sterlite earlier, but I don't know the latest status. But we are, of course, doing. So local companies have heard the name of Tejas. They are doing it, of course. We are doing it. And we will, of course, do it for small cell and large cell both. We would continue to do it. So financial companies will be there, local companies. But I'll tell you one thing.
Where we look at our competitive advantage? One, so all contracts which are BharatNet kind of contracts where, of course, radio equipment are not there, but all other equipment are there, including some of the equipments which are common used in 5G or optical network, they are all Make in India. So we always get a preference to supply such equipment if it is Make in India and ours is Make in India. Number two, our software cost and everything is local development, so the cost of development is much lower than others. Manufacturing in India is more competitive.
So overall, we find also more competitive in terms of competition with international players. And I would give you one example. WiFi and UBR Radio, which we have produced, we are very well able to compete with all international players and we've got a good market share in the beginning itself. We've got a very good market share, which are also radio products. So I'm sure -- taking advantage of our existing structures and good products, we shall be able to sell our products very well in the local market and on the international market also.
Sir, would you be able to quantify how competitive we would be as compared to Tejas because I believe that compared to the overseas players, definitely would be more competitive. But as far as Tejas goes, how...
Look, I wouldn't say that I would be more competitive or less competitive than Tejas, prices have to come out. But market is so big, so big that 2 or 3 or 4 players can coexist without any problem. You need not be cutting throat of each other in such a huge market opportunity.
Okay. And does it make sense to compare our pricing with overseas players like Ericsson or Nokia?
Yes. Well, we're still not seeing the prices of 5G products and all of these sales is to start in India. But in my personal opinion, we should be competitive to them by 20% to 30% margin level.
Okay. Okay. I get it. Sir, my next question was on our margins, you said that all the input costs have gone up in the fourth quarter. And are we looking at those things stabilizing in this quarter, end of this quarter and going forward, coming back to the earlier margins? Because our products...
I'll tell you 2, 3 things. For fiberoptic cable, for example, there are 2 major raw materials. One is fiber and another is what is based on crude, which is plastics, which is jelly and all those kind of things. Fiber prices looks like they have stabilized now. It has Increased significantly.
But last 1 month I'm seeing that prices are more or less stabilized. The supply position has become a little bit worse because of different reasons of lockdown in China. As we see about 87 cities are under lockdown. And so factories have suffered and also the [indiscernible] are not happening. So there has become a supply constraint.
We have been able to still fill on our factory to fill capacity because, one, half of our requirement of fiber we produce ourselves, half we import. So that half -- earlier we were in a very comfortable position, but now we have to really do a lot of things, organize and then only we're able to get fiber which is required by us. But fiber prices have started stabilizing. It should no longer increase. Now coming to plastics and all that kind of things. Now this is a very wide geopolitical situation with what is happening in the war, Ukraine-Russia war and all those kind of things. I cannot predict what would happen there because till the war continues with the same level of things it is continuing, then I think fuel prices will remain around that same, it will not increase.
So God forbid, this 2, 3 more countries get involved in the war, which we do not know, none of us can predict, none of us can have any influence in that. If such kind of things happen, then who knows crude prices may go up and then the plastic prices will go up. So this is completely a situation which none of us can predict, but I don't think it is likely to happen. If the Ukraine-Russia war continues at the same level, maybe crude prices will also be maintained around the same level, and there may not really increasing that plastics prices any longer because they've already increased quite a bit.
So I think giving very abnormal situation, the prices which have gone up should remain around the same kind of prices with some possible increase in the plastics. But what we are doing hedge against that. Now we are asking our customers to give new orders at increased prices, which our customers are also responding because they also know that prices of input have gone up, so output prices will also go up without any doubt. So we are now balancing it out in the current quarter.
Okay. And with 5G auctions happening, we would see turnkey services orders also flowing in with the products as well or we are not likely to take up any turnkey.
No, no, no. I'll tell you. We are not going to receive any order. With the 5G happening, BharatNet happening, more orders are going to come up, more orders will come up, our product system orders for EPC and turnkey also, both will happen. And if there are good orders with the good profitability margins in turnkey also, then need for us to receive. For example, Reliance, for example, or any other customer, is a good paymasters. And if the Jio, Airtel, anybody, if they expand their network and they're good paymaster and they give us order for turnkey also, so why not to take that? But on an overall basis, our product revenue will have a higher growth than the turnkey services and that is the strategy we have decided that product revenue should grow more rapidly than the EPC revenue.
Okay. That would also drive our margins better?
Yes, sure.
The next question is from the line of Abhijit Mitra from ICICI Securities.
I have a few bigger questions. So firstly, on your product revenue for the quarter and for the full year, how much of it is contributed by fiberoptic cable for the quarter? And how much is it access products, if you can break it up?
I can explain you, just give me a moment. Of the financial year ended '22, the total revenue has been INR 2,055 crores for exports, out of which INR 1,700-odd crores is by optical fiber cable and balance is by different products.
Balance is by different products, which includes -- which...
Access products and WiFis and all those kind of accessories...
Yes. But this does not include any defense products, as of yet?
No, no, no. Not at all. Not at all. As I explained in the beginning itself, I have not taken any sales of defense products even in the current year also in our EOB. We are all targeting for the next year because the testing and all that is going on.
For example, I'll tell you 1 example. Electronics field, right now, the testing is going on in two places, Balapur and [indiscernible]. Now this is not full fledged live testing or live firing, it is live firing with a low charge. After this is done, next level of testing will open in Pokhran and Sikkim in high altitude in the cold and very hot conditions. Then only tender will be opened up and evaluate and order will be placed.
So defense, Abhijit, takes long time. So we expect defense product revenue to come from next year only. Neither there was any revenue in the current year. I'm talking defense electronics. Defense communication definitely, we are rolling out the large defense network. But Defense electronics, any revenue would come from next year only.
Okay, okay, okay. So just to highlight here, the telecom products revenue for the full year was around INR 2,100 crores, out of which fiber optic is around INR 1,700 crores and the rest is access product. And this INR 1,700 crores would involve how much million kilometers of fiber as in fiber as in fiberoptic cable...
Fiber number of kilometers, I don't have that data at the moment, how many fiber kilometers. While we are in the call, I will try to get you the data because that is -- I can let you know.
Yes. Yes. No worries. No worries. In terms of access product revenue, the INR 300 crores of revenue that we have seen in FY '22, how is that expected to grow as per you?
Look, this revenue has fiberoptic cable and other things, which include accessories and access products and all that. Now current year, we are looking at starting export of these products also. Till now, we have not exported. So I think this revenue from this one fiberoptic cable product should be around INR 250 crores to INR 300 crores in the current year, INR 300 crores-plus -- sorry, INR 450 crores, INR 450 crores including exports should reach to about INR 450 crores.
Yes, INR 450 crores, including exports in FY '23, that's the expected numbers is what I could get. Okay. Okay. Got it. Got it.
My next question is regarding the state subsidies that we can see sitting in the other income almost to the extent of INR 15 crores, INR 16 crores, the subsidy under state incentive scheme.
Sir, if you can sort of break it up where exactly is it coming from? And how much can it increase over the course of next couple of years? Or what is it linked to, sir, if you can sort of just make it out for us?
I believe, it is INR 15 crore included in other income is towards interest in subsidies. The interest from the date you start commence the production in January '20 till March '22. So per quarter, it is coming around INR 2.4 crores, something like that. So it was related to earlier period and this approval came in March only, so it has been clubbed as other income.
Now henceforth, the interest will be lower by, say, INR 2 crores each quarter, henceforth. And then there is a capital subsidy also INR 30 crores. So our block of the fiber will be reduced to that extent. And depreciation will -- there will be lower depreciation going forward.
Okay. Okay. So these benefits are there for the new CapEx also?
Yes, this will be there for -- you're talking the current year's CapEx?
Yes. I think the INR 425 crores or whatever you are spending...
There will be another set of incentives, which we will come to know as we progress.
Okay, okay. And it would be spread across locations where you're expanding, right? It's not linked to one location.
There will be a lot of incentives and spread all for locations, absolutely.
Okay. Okay. But the formula and all is not yet known, that we will come to know as...
The discussion will probably be in the next couple of months.
Okay. Next couple of months. Got it. Got it. And my last question is on defense. You have shown a market opportunity of almost $3.5 billion. The sort of -- and that's the total addressable market. Now out of this $3.5 billion, how much do you expect to capture? And what's the timeframe and which of the products where you are most optimistic about...
Current year, we are not looking at any revenue from these defense products. Now future, of course, we are quite bullish. Market opportunities, which is electrooptics, which is in aggregate massive market opportunities, we are looking at that, one. Two, we have also participated in a couple of other market opportunities, which are defense related, and I would not like to talk too much about all those things because they are -- sometimes defense is not very happy about talking in public.
But for example, I can tell you, which is open, upgradation of our armored personnel, carrier BMP2, there also, we have participated in that opportunity. That's also a very large opportunity, upgradation of more than 600 vehicles of their night vision devices and control systems and all that is electronics, we have participated. So such kind of opportunities are there, we are working on, which is related to our area of work, night vision devices or fuses and all those kind of things. So for next year onwards, we believe that we will be able to start getting revenue from defense equipment also. And I expect next year, something like INR 500 crores to INR 700 crores range revenue we should be able to get from defense products -- electronic products. Communication apart, for defense electronics, INR 500 crores to INR 700 crores is next year, and then it will increase substantially, very substantially. Once we are in, then we start supplying. So it would...
Next year, as in FY '24, you mean, right?
Yes, yes. Yes, yes.
Okay. Okay. Got it. Got it. No, no, this is very helpful. And lastly, I...
I will tell you one thing. Opportunities in defense now are becoming like this communication equipment opportunities. It always takes time. Some time is taken in defense because testing itself is a huge -- it involves a huge timeframe because of -- defense has to go through those kind of tests and all that. So as you know what we are saying what we are doing.
Fiberoptic cable, now defense requires a technical cable, which is -- they need to lay on the ground in case of a war and all that, they keep on laying on the ground and keep on rolling it up and then taking it somewhere else. And it is so strong that even at 10 rows over that, it still does not break. So we are now starting to manufacture that cable also. So those would be, of course, not defense equipment as such, but yes, it is defense equipment -- it will be required for defense only.
All right, right. And I forgot to ask regarding the fiberoptic cable revenue, which was around INR 1,700 crores this year. How do you expect it to grow over the next couple of years? Sorry...
I expect in the current year, we should be able to reach to about, near about INR 2,200 crores. And year next to that, our estimation is somewhere between INR 2,600 to INR 2,800.
The next question is from the line of Shivam Vashi from Inga Ventures.
Sir, just one question from debt side. We -- I heard during the call that we're doing a CapEx of INR 500 crores during the year, correct sir? So what -- how are we going to fund that?
Look, 2 things. One, we've raised equity. So funding with this equity and part would be debt and also interim networks, interim networks...
Any debt equity ratio, sir, that we have planned out?
No. It will remain below 0.5.
Okay, sir. Okay. And this CapEx, sir, will be largely towards our 5G products or is there any...
I'll tell you, CapEx largely is, one, expansion of optical fiber capacity; two, optical fiber cable capacity; three, R&D expenses on design development of product, CapEx related to that. So these are the 3 major hits of CapEx.
[Operator Instructions] Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Well, I thank you very much to all of you for attending this conference call, earning call of HFCL. And as I said, to continue on our path of growth, 3 mantras we have given: new products, new customers, new geographies. And we are very well working towards that. Second thing, we have told that we will continue to increase our revenues for products. In terms of percentage, we have increased significantly 27% last year to 43% and we'll keep on going on that part.
Third, we have said that we are going to increase our exports. So which you have seen that we have increased our export of INR 125 crores to INR 361 crores, and we expect to be more than double in the current financial year. So we also said that we will be designing new products aggressively.
We are continuing on that path. We're designing new radio products like 5G radio products, WiFi radios. We are designing new transport products, routers, switches. We are designing new kind of fiberoptic cables, which is predominantly required in the export market. So all put together, we are proceeding on the path which we had charted out for ourselves as a strategy, and we are very well progressing as a company on that strategy.
So gentlemen, I expect exciting future for us with the growth in the market which is happening with 5G, BharatNet, exports and the opportunities which we are creating for ourselves keeping in view what is happening in the market going forward to that. And then the defense products, which is the diversifications we have taken, growth opportunity in that arena because of Government of India insistence for Make in India, we see great opportunities there also.
All put together, I'm sure we are there for an exciting future. So thank you, gentlemen, ladies, for being on the call. Thank you very much.
Thank you. Ladies and gentlemen, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.