Ladies and gentlemen, good day and welcome to Q2 FY22 earnings conference call of HFCL Limited, hosted by ICICI Securities. On the call we have with us today Mr. Mahendra Nahata, Promoter and Managing Director, Mr. V.R. Jain, Chief Financial Officer, Mr. Manoj Baid, Company Secretary, and Mr. Amit Agarwal, Head, Investor Relations. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to the management for their opening remarks. Thank you, and over to you. Hello. Ladies and gentlemen, good morning, and greetings from the festive season. Thank you for making it to HFCL's earnings call for the second quarter and half year of financial year 2022. For Quarter two of financial year 2022 results, press release and investor presentations are available on the website of the company and stock exchanges. Rapid vaccinations and responsible social conduct are appearing to help in the pandemic. I wish and hope that the country and the world is way past the worst. It is important still to keep the vigil up while we usher into more stable and prosperous future henceforth. For HFCL, our resilience and uncompromised focus on profitable growth, capability ramp-up, innovation, and expansion of product portfolio, as well as manufacturing capacities will serve well going forward. Our drive to emerge as technology-led enterprise that innovates and manufactures for the world is dipping at the right time. Digital connectivity and data security will be the twin foundations of the post-COVID world. Dense fiberization, high-speed data transmission, and secure transmission network would feature among the fastest growing economic themes right through this decade and right across the globe. HFCL finds itself in the right place to actively participate in this abundant growth opportunities to maximize stakeholders' value. Going by various global estimates, India is well on course to emerge as one of the fastest growing major economy from the next fiscal year of 2022-2023. I hold a firm conviction on the ensuing decade turning out to be India's decade. Opportunity landscape is brimming with better prospects, and we are entering into the golden phase of sustained economic growth. HFCL's opportunity landscape appears even much brighter. BharatNet phase II, associated FTTH demand growth, additional 4G spectrum allocations to telcos, 5 MHz 4G spectrum approval to Indian Railways, and subsequent rollout of 5G PLI scheme for Telecom and Networking products, Government's initiative in procuring indigenously developed defense products backed by Atmanirbhar Bharat and Make in India program are all going to propel HFCL into its next orbit in the coming quarters. The Bharat Broadband Network Limited has invited bid for implementations in PPP mode to roll out high-speed broadband services in the rural areas across 16 states. This network is projected to have demand of approximately 12 lakhs km of fiber optic cable, comprising of both overhead and underground cables. This massive demand of fiber optic cable, coupled with the demand of associated Transport and Access equipment like Wi-Fi and Optical Access Equipment, present tremendous business opportunity for the company, both in equipment and project segment. Currently, India has a fiber-based network spanning across 28 lakh fiber cable km, as against the target set up by the National Broadband Mission to deploy as much as 50 lakh km of cable by 2024. The recent allocation of additional spectrum for 4G wireless services to telcos will benefit HFCL with added demand for fiber optic cable and also transport projects. Union Cabinet approving 5 MHz 4G spectrum for Indian Railways in the month of June 2021 presents another huge opportunity for us. The project targeted to be completed in five years is estimated to cost over INR 25,000 crore. The project entails to provide secure voice, video as well as wire data communication services for operational safety and security applications for the National Transporter's Network. A 4G long-term evolution specific system to railways will be used for modernizing, signaling and [upgrading] train protection while also maintaining constant communication between loco pilots and cars. We see a huge opportunities from this modernization campaign of the Indian Railways. As you all know, trial spectrum for 5G has already been allotted to the telecom operators. Auction for commercial use of 5G spectrum is expected to happen in the beginning of 2023. Rollout of 5G networks will result in massive increase in demand of fiber optic cable. In addition to the related radio access network and other required equipment, this again presents an excellent market opportunity for the company. The c ompany will be present in a large number of equipment and services segment required for 5G networks. 5G network implementation presents a very attractive opportunity for the company, both in domestic and international markets. We have one of the largest capacities of manufacturing optical fiber cables, which will see huge upsurge in demand when 5G networks are implemented. We have started development of 5G Radio Access Networks, both for Macro Cells and Small Cells, which will be required in very large numbers. We are in process of developing transport network equipment like Routers and Front Hall Gateways, which are also required for 5G networks in large capacities. In order to capitalize these opportunities, it is imperative for HFCL to keep pace with capacity and capability buildup. We have made significant strides towards advancement of technological and R&D capabilities and ramped up our manufacturing capacities across our optical fiber and cable business. Upon completion of our ongoing CapEx, existing capacities of optical fiber, optical fiber cables, and FTTH cables shall increase by 20%-25%, and new capacity would also add new types of cables like Microduct, Micromodule, and Advance Ribbon Cable amongst others. Our newly commissioned R&D center at Bengaluru is shaping up well. This is our dedicated R&D center for 5G products and Wi-Fi products, w e remain committed to steadily investing R&D capabilities, innovate and remain nimble to capture the opportunities ahead. The PLI scheme has been introduced at the most appropriate time. The scheme will go a long way to make our country a global hub for telecom innovation. HFCL, through its wholly owned subsidiary, HFCL Technologies Limited, has also submitted its application under PLI scheme. We continue to consciously evolve our revenue mix towards enhanced share of margin-accretive products and capital-efficient projects. As of 30th September 2021, our consolidated order book stood at INR 5,822 crores. New orders for fiber optic cables and equipment are being received regularly by the company. Last week, we have received order worth INR 287.96 crores from RailTel Corporation of India to set up a secured network for Indian Air Force. The Board of Directors of your company has approved fundraising of up to INR 750 crores on 3rd September 2021, which was also approved by the shareholders at the Annual General Meeting held on 30th September 2021. We are happy to share that Infomerics Valuation and Rating Private Limited, a RBI and SEBI registered credit rating agency, has assigned A rating and with stable outlook for long term and A1 for short term banking facilities for the company. Existing credit ratings by CARE Ratings stands at A- for long term bank facilities and A2 for short term bank facilities. The Board has approved the allotment of 49,34,300 equity shares having face value of INR 1 each to HFCL employees on 15th July 2021 for implementing the benefits of HFCL Employees' Long Term Incentive Plan 2017, in lieu of the vested ESOPs granted to the eligible employees of the company. Friends, let me now brief you on key performance metrics of the quarter and half year. Revenue for quarter two of financial year 2022 stood at INR 1,122.05 crores as compared to INR 1,054.32 crores in quarter two of FY 2021, thus recording a year-on-year growth of 6.42%. EBITDA for the quarter stood at INR 173.20 crores as compared to INR 137.47 crores in quarter two of FY 2021. EBITDA margin increased by 240 basis points and stands at 15.44% for quarter two of financial year 2022. For quarter two of financial year 2022, profit after tax rose to INR 85.94 crores as compared to INR 53.32 crores for quarter two of financial year 2021, recording a growth of 61.18%. PAT margin also improved by 250 basis points to 7.66% in quarter two financial year 2022 as compared to 5.06% in quarter two of FY 2021. For the half year ended on 30th September 2021, the company reported consolidated revenue INR 2,328.92 crores as against INR 1,754.10 crores in September 2020. EBITDA of INR 360.74 crores as against INR 220 crores in September 2020. Profit before tax in this half year stood at INR 239.29 crores as against INR 104.60 crores in the half year ended in September 2020. Profit after tax stood at INR 176.63 crores as against only INR 74.60 crores in half year ended in September 2020. Segmented revenue for telecom products during the quarter under review stood at INR 503.92 crores as compared to INR 278.86 crores in the quarter two of financial year 2021, which is a significant increase from revenue of products. We expect revenue from products business to continue this uptrend. Our overall performance reflects sustained growth and strengthening our value proposition that we have achieved over the last few years. Looking ahead, our constant focus on innovation, steady expansion of our product bouquet, shift to margin-accretive product mix, alignment of our offerings with emerging and future market opportunities, deepening of our market engagement in export geographies, added contributions from our under-development capacities, and pursuit of new products and opportunities by our recently constituted dedicated 5G division shall keep fueling our journey towards sustained growth and profitability. We remain focused to achieve the targets we have set for next few years and remain confident on our growth momentum ahead. Thank you once again for your keen participation and wish you good health. With this, I conclude my opening remarks and open the floor for Q&A session. Thank you. Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Participants, you may press star and one to ask a question. The first question is from the line of Hardik from ET Now. Please go ahead. Good morning, sir. My questions were pertaining to services as a whole. We have seen the contribution from services absolutely has gone down in this quarter from roughly INR 750 crores in the last quarter and the last year of the same quarter to about INR 600-odd crores this time. So after the product contribution in the total revenue also has gone up as we had guided in the previous quarters concall. When do we see absolute growth also in services going forward? Is it directly linked to the 5G rollout? How do we go ahead from here on the services cut? Thank you for the question, Hardik. Basically, as I stated in my previous calls, our focus is in growth of revenue by products, not as much by services. Reason being, services payments are little elongated, and that puts stress on working capital. Our strategy is to increase revenue by products and which you have seen constantly. If you look at the whole year ended on 31st March 2021, the product revenue was 27% and services revenue was 73%. Yes. Now it is 45% for products, 55% for services, which has been my sort of assurance to all of you that we will reach to 45%-55% in the current year. We are on course maintaining that. Services revenue, of course, I'm not saying no to services revenue if the payments are in time. If, for example, BharatNet comes in PPP mode and it is implemented by reputed operators or companies where the payments are good, or 5G implementation starts where services are required and high-end value-added services are required, we are not averse to that. We would definitely go for that. My key consideration in that would be that it should not be linked to some performance by the customer and then it is linked to a milestone which is dependent on customer performance. If the customer performance is delayed, then my revenue and my payment is delayed. I don't want to go into that kind of a situation. If it is a simple services revenue not linked to any customer-related milestone, we would be very happy to do that. We are not averse to increasing revenue from services if that happens. Okay. This quarter we did about INR 600- odd crores in services. Are we likely to go back to INR 750, INR 800 crores for quarter kind of service revenue? I won't predict that, Hardik, at this point of time. Yes, we would like to maintain the balance at 45% for products and 55% for services at this point of time. Yes, if the good services contracts are available, we are not averse to that. Okay. Sir, on the products front, I had two questions pertaining to our facility coming up for optical fiber and Fiber to the Home. When are we likely to see production coming on stream and realizing revenues out of that? I think you are talking of expansion of capacity. Yes Fiber, for example, we are producing 8 million FTM per annum, which is slated to go up to 10 million. It will happen within this financial year. Before March, it will start. It is already under implementation. Machine orders have been placed. Now the delivery work and all that are going to start pretty soon and before end of this financial year, maybe February or so, we'll be starting production from the enhanced 2 million additional capacity. In terms of cable, part of that facility has already been commenced. It is under production. The completion would happen maybe under two months' time frame. It will be completely under production. We have targeted our revenues also from that facility, and which we will be able to achieve. It is partially complete. Production is already on. Completion would be another couple of months' time. Okay. My last question on the product front. Could you throw some light on the software-defined radio and ground surveillance radar for us, the opportunity is huge, but how soon do you feel that, okay, this will realize into certain amount of revenues or timelines for that? Look, in our revenue targets of the next financial year, we have not included any revenue from SDR or Ground Surveillance Radar. Because SDR development is going to be finished sometime mid of the next year, sometime mid of the next financial year. I would say something like August, September time frame. Okay. It would go through the qualification process of Army, which as you know, takes a pretty long time. We are not looking at any revenue from software-defined radio or radar in the next financial year. We'll be looking for revenue from them in the year next, which is FY 2023-2024, not in FY 2022-2023. Will you be able to quantify the kind of revenue you might get in 2023-2024 from these two? It is very difficult to predict that kind of a revenue. Because the demand is very significant, I think we should be able to get reasonably good revenue, and it should be somewhere in three figures. Exact number, I'm not able to say at this point of time. It could depend upon what tenders come from Army, time frame they take in finalizing those tenders. I would not predict. One thing I can say is SDR, where software-defined radio, is a huge opportunity. Majority part of Indian Armed Forces network is going to be shifted to SDR because of its high technology, high encryption, and less vulnerability to intrusion, these qualities. The demand is going to be massive in next five, six years. We will expect to get a reasonable market share out of that. It is our own development. It is Indian designed, Indian developed. It is Indian manufactured, it is going to be. Yeah. That's the way the requirement of Army is, and we are one of the shortlisted companies. I have very high expectations from this product, which is under development though. Sir, the same thing with optoelectronics as well for the Army? For Army, we are not doing any optoelectronics. We are talking of night vision devices. Night vision devices. Optoelectronics. I got confused, sorry. Okay. Electro optics, we have already started. Some small orders are under process, being received by us. It's not very big, but still it's a good beginning. More tenders we have participated. Those tenders are under evaluation. In fact, one of the tenders, which is very reasonably large one, we are submitting samples by, I think, another week or 10 days. We are submitting samples for the final evaluation by Army. Couple of more tenders we have participated, where samples will be submitted soon. Number of more tenders are in process where we will be participating. Optoelectronics, night vision devices, yes, that process has already started. For manufacturing this, we are going to build up a facility in Hyderabad, which I have already informed to all my shareholders in past. Land for that facility has already been allotted, possibly construction activities will start in another two weeks' time. Construction activity will start, it is expected that that facility would cost us INR 40-50 crores. It is going to be for two things, one for optoelectronics and second for electronic fuzes. In future, we might add more products out there. Okay. Thank you so much, sir. All the best for the future. Thank you. Thank you, Hardik, for your very good questions. Thanks a lot. Thank you. Participant, you may press star one to ask the question. The next question is from the line of Shivam Saxena from ICICI Bank Limited. Please go ahead. Good morning, sir. My question is on what is your view on optical fiber prices? What are they currently and what is your view it is going to, because it's a global commodity. What is your view on global optical fiber prices, and what are the prices right now? Look, in our quarter two, I can give you a number. It was average procurement price was about INR 267 per km. Okay? Now it has increased considerably. In case you can give in dollar per STM, if you can give. Dollar, I can't give you. $267, you can divide by 75. Okay. Dollar will be keeps on changing. I take the price which is reaching to my factory. Anyway, I can divide quickly. This is factory reaching price, we have to divide by that GP and all that. Roughly, I think it was $2.5, I think, $2.5. More than that, I think. Yeah, $3, $4, $3.5 for STM. With all that. It's at INR 267, okay? Okay. Now it is increasing. There's an increasing trend. I would say now this should go up more than INR 300. Right now, it is $3.5. If you take it, I think you have to do the multiplication. This INR 267, which is the cost right now, I expect it to go up to INR 300 very, very soon. Large tender has come up in China, which is going to be opened up on 14th of this month, 114 million fiber km. I think there will be upswing in the trend of the fiber prices, and it may settle around something like INR 330-INR 350. Okay. This is inclusive of all duties and everything, delivered in my factory. Okay. What has been the all-time high of this fiber pricing? No, this is not all-time high. What has been the all-time high in the past? $8 or $9. All-time high has been much higher. Okay. You don't see going to that level, right? No, not at all. I think INR 350 is the maximum it would settle. Okay. Thank you. Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Neerav Dalal from Maybank Kim Eng Securities. Please go ahead. Hello, sir. Thank you for the opportunity. A few questions from my end. One is, now that we are seeing the telecom products business pick up, what would be our exports, say, in the first half of this year? I think last year they were at about INR 200 crores. What would be the exports? That is my first question. Of the order book, is it possible to split it between telecom products and turnkey projects? If we could also share what has been the YoY increase in the two numbers. Okay. In terms of export, Neerav, this first half of this current year, our export is INR 171 crores. Okay. If you compare it to the first half of the last year, it was only INR 63 crores. INR 63 crores has become INR 171 crores. The full year, last year, it was INR 201 crores. Correct. Now this year, in half-year we sell INR 171 crores. We expect to reach at least INR 300 crores in the current year. At least INR 300 crores. Okay. The targets, I have defined two targets for the company. Very important. one, increase revenue from products and homegrown products, which are designed by us, developed by us, manufactured by us. Sure. Which will give higher margin. Second, exports. New products, new geographies. This is the mantra I have in my company now. To increase export, we are taking several steps, and these have shown results. For example, INR 200 crore would become INR 300 crore this year. For the team, I have set a much higher target for the next year. I have set a target of INR 500 crore for my team for the next year with the introduction of new products, and maybe a much higher target in the years to come. Targets are set, but we have to take appropriate steps to make sure that those targets are achieved. What are we doing in that aspect? One, as I told previously, we have appointed people in different countries to sell our products, France, Germany, England, Middle East. We are employing now more people to sell. These are the fiber optic cables. We are employing people to sell telecom products because technologies are completely different, you need different kind of people. We have already shortlisted two people for selling our products in Europe and a couple of other countries, Middle East and Africa. We are strengthening our sales force for selling products even before the products. Most of the products are yet to come in the product pipeline. They would come gradually from now to another one year. We are already strengthening our sales force, creating our sales team all over the world by people or by agents or by distributors who will be selling our products. These people who have been recruited, some of them are specialized in distribution network through distributors and agents. That's what we are doing right now to increase our export sales. One is innovation, new products. Number two, not only sales in India, but sales worldwide, and both the things. As I had committed to shareholders a number of times, one, my revenue from products would increase, which you have seen it has increased. Second, my revenue from export would increase, which is increasing. Our strategy, which we have decided, we are on the right path to implement that strategy. In terms of order book from, you said products and services, let me tell you one thing. Sorry. Product orders are never received in bulk. They are received in a constant fashion. They are kept on being received all the time. Fiber optic cable, sometimes it's an INR 50 crore order, INR 30 crore order, INR 60 crore order. Those type of orders we receive. In turnkey contracts, you receive orders as single large order. You would find there would always be a contradiction in terms of revenue and order book in terms of products and services. Service orders are received in large quantity at one go. Product orders are kept on being received, small pieces, one after another. Currently, the order book for products would be about 15%-17%, and rest would be that services. That doesn't mean the revenue would be in that percentage. Revenue, we are expecting to maintain a 45%-55% ratio, which we have done in this quarter. Sir, thank you for that. Just on the exports now, if I were to look at of your INR 800, INR 900 crores of revenue now, already INR 171 crores is exports. Is there a broad regional mix that you can share? The other part is all of these exports would be optical, right? What would be your ASP on the cable side in these orders? A broad number would be fine. What would be our USP? No, the average selling price. Oh, ASP. Okay. Yeah. So first of all, in terms of- Regional -breakup of revenue, it is over INR 147 crores from optical fiber cable, and it is mostly centered on Europe and Middle East. Europe and Middle East regions are the larger contributors to our export of optical fiber cable. Okay. The rest is rarely about INR 24 crore-INR 25 crore could be from railway projects, which we are implementing in Mauritius and Bangladesh. This would be the two revenue breakups of products and service, telecom products, as well as this optical fiber cable. Realization in terms of per fiber kilometer, I would say it would be around INR 1,100 per fiber kilometer, approximately. I don't have a right number at this moment, but it would be somewhere around INR 1,100 per fiber kilometer, would be the average realization from export revenue for cable. Okay. That is about $14.5, $15. That is good. Yeah, whatever it comes to INR 1,100. Yeah. Okay. It would be correct to assume that obviously exports would have better margins than domestic products. I can't generalize that. Some of the domestic market products have also good margins, some of the domestic sales. Generally, you can say export would be a bit better, generally, on an average. Got that. Secondly, in terms of what is the status in terms of the PLI scheme, and in terms of fundraise, what is the time period you're looking at for the fundraise? Look, as far as PLI scheme is concerned, we are informed by DoT officially that No, 14th, Minister is going to inaugurate that scheme by announcing the names and all that. Since we have been informed officially to be present there, I'm sure we must be one of them to be this end of the PLI. Correct. They officially asked to be present there, so I'm sure there must be some good reason for us to be present there. Correct. That is one. As far as the fundraising is concerned, though board has approved, shareholders have approved, we are looking at various options and timings. Whenever we finalize that, we will be coming back to you. Got that. Thanks a lot, [inaudible] sir. Thank you. Thank you. The next question is from the line of [Saket Kapoor] from Kapoor & Company. Please go ahead. Yeah, hello. Yeah, hello, Saket ji. Namaste. Namaskar. Sir, firstly, this capital work in progress part, if you could explain, sir. What is it attributable and how much more it is going to increase? Saket ji, there was some noise when you were speaking. Can you repeat your question? What I'll do is, I'll come in the queue, sir. There is some noise there. I ask the moderator to just send me [inaudible] background so that I cannot hear. I'll come in the queue. Thank you very much. The next question is from line of Sudesh Kumar from HFCL Limited. Please go ahead. Hello. Go ahead, sir. Hello. Jasjit Mahendra. Hello. In the last con call, you had said that the chip and semiconductor shortages will be resolved by your Qualcomm partner. Has that been done? Can you repeat it? Your voice was very kind of sounding hollow. Couldn't understand your question. Yes. In the last concall, you had said that the semiconductor and chip shortages related to the product will be solved in this quarter. Has that been solved? Of course. No. The semiconductor shortage worldwide still continues. It has not been sorted out. Worldwide, everybody is suffering from that problem as much as us. The current quarter, which is under review, the product revenue could have been higher had it not been that the global shortage of chipsets, which is hampering increase in revenue from products like Wi-Fi and this radio, as well as our service switches. Unfortunately, that shortage continues, and I don't think it will be resolved at least for another three to six months. Okay. The balance pledged quantity, by when can we see that increase? All other banks have approved except one. The other bank, this one bank was to have a meeting on this last week, which could not happen. I hope they will be having this meeting next week to 10 days. Let us wait for that. Okay, one more last question. Since the product revenue has increased, margin quarter one and quarter two is less. Any reason? There may be small variation. Very small variation because of different turnkey projects may have a different kind of a revenue mix and different profitability. It's a very slight variation, which can always happen from quarter to quarter. Yeah. Okay. Thank you. Thanks. All the best. Thank you. The next question is from the line of [Yash Sharda] from Daiwa Capital. Please go ahead. Hello, am I audible? Yeah. Yes. Sure. My question is regarding the new facility. You earlier mentioned that the construction is set to begin in two weeks. What is the timeline you're looking at for the completion of the facility? What is the peak revenue which you are expecting from the new facility once at full utilization capacity, maybe say 90%-95%? You know, look, this facility construction is going to start in about a couple of weeks. I think it will be about eight to nine months it will take to complete this facility. Since it's a defense product facility, I won't really say that how much revenue we can get. That will be a little bit of a forward-looking statement. Yes, defense products, electro-optics, software-defined radio, we believe that we are looking at the demand of those equipment, which is very reasonably good demand. We will be able to get a reasonable market share and return on equity and return on capital and investment, revenue compared to investment will be significantly good. Okay. Thank you. That's all I have. Thank you once again. Thank you. Thank you. The next question is from the line of Shivam Saxena from ICICI Bank. Please go ahead. Yeah. Thank you for taking my question again. Two questions. One, whether the margins are better in services or in products? One is this. Another is, are you competing in exports with Chinese competitors like Huawei and ZTE for achieving the products? Are you competing with them and Tejas in Indian company? First of all, in product and services, I would say product revenue margin would be better, generally. There are some service contracts that margin could be good also, in some cases. Generally, yes, product margin would be better, particularly when you have own design and own manufactured products. That is generally, I would say, that statement I would make, number one. Number two, in terms of exports, as I said, our export predominantly has been optical fiber cable in the last quarter or the half year. In optical fiber cable, there is no Huawei, ZTE. They don't do optical fiber cable. They are mostly in the equipment business. Equipment business, we are right now supplying in India. Export, as I said, we are creating export infrastructure, and we will start exporting of those products in next few months' time frame. At that time, we would compete with them, but I don't have a problem. The product which we are going to manufacture or we are manufacturing, like Wi-Fi or unlicensed band radios and the products which we are going to manufacture, routers, switches, 5G small cells, large cells, there is huge market, billions of dollars. Even if there is Huawei, or ZTE or any other company, the required market share which we are expecting for ourselves, it should be pretty easy to get. We will be cost competitive. For example, in fiber optic cable, though there may not be Huawei or ZTE, but there are other large Chinese companies, YOFC, Hengtong, ZTT, FiberHome. Those companies are there, and we are effectively competing against them wherever we are. Sometimes we lose, sometimes we win. We are able to compete, and we are able to get our business. As you have seen, we have increased our business. We would be able to compete effectively. Within products, how much proportion of the revenue you expect from OFC and how much from other equipment going forward, one to two years down the line? What is your target? Three years down the line, I would say, because one has to give a market development time frame also. Yeah. It will be probably, I would say, 60/40 from cable and products, something like 60/40. This may change to 50/50 also, but maybe 60:40. Okay. Thank you. Thank you. The next question is from the line of [Deepak Mehta], an Individual Investor. Please go ahead. Hello. Yeah, Deepak. Good morning, sir. How are you? I'm fine. Thank you, Deepak. Sir, my question is around the 5G strategy. If you can throw some light what's the recent development in this quarter, sir? 5G, our strategy is simple. We want to develop equipment which are required for 5G network. Includes, as I said, 5G small cells, which are under development, 5G small cells for indoor and outdoor, both applications. 5G macro cell, this is also under development for different capacity, 8x 8, 16x 16, which will be followed by 32x 32. When I say all this refers to RF chain, how many RF chain one radio has. One is the radio access networks for 5G. Second one requires Fronthaul Gateways, sort of a small router. The large routers, switches. They're all 5G-related products which will be required in large quantity in the 5G network. We are designing those equipment by ourselves, and we will be selling not only in India but worldwide export market also, for which we have already started our market development activities. Our development will coincide with the launch of 5G networks in India. First we have to sell in your country, then we sell worldwide, because you have to prove yourself in your country first. Which we'll be doing in India, and then we'll be selling worldwide also. That is our strategy for our 5G business, develop products in time to be able to catch up with the market in India and then sell worldwide. Sir, I wanted to ask about the R&D. How you are hiring the right talent, and how is the direction of R&D, and when we can see significant delivery from the R&D investment. That was the two main reason for asking the question. Look, if you have to succeed, you have to innovate. Unless you innovate, you don't succeed. Right. This is what is the mantra of success in technology, I think. We are innovating constantly in two areas, cable and telecom products. For cable also, R&D is important. What we are doing, recruiting some talent internationally also, who have got excellent expertise in development of new kind of cables, which are more for export market. We are recruiting people for that. We have already shortlisted a person for that, very highly experienced person. We will be bringing him on board very soon. Of course, same point of time, whatever new products we develop in cable, you have to have matching machinery here to produce those products, which we'll also be doing. On the other hand, R&D would be equipment. Equipment, as I've told many number of times, we have three-pronged approach. One, our own R&D facilities, which is Bengaluru and also Gurugram near Delhi. We have a partnership R&D where, n ot partnership, contract R&D by companies which are specializing in contract R&D. We have given contracts to them, where we have a joint teams, our team, their team, working on development of products for us, wherein IPR will belong to us. It's a contract development. IPR will belong to us, and then my team will take it over and keep on doing, developing that product, making it better and better from cost perspective, feature perspective, it will continue. The third way is we have taken equity in companies who are designing products for us, like software-defined radio. That's equity. We have taken 50% equity in a company called BigCat Wireless in Chennai. That is developing software-defined radio for us. Three-pronged approach. One R&D facility, contract R&D with others, joint teams working. We have equity in companies who are designing products for us. This is a three-pronged approach we have taken. Recruitment of people, yes, we are finding talent. It's a bit difficult to find talent in R&D than the normal production lines and normal function areas. Yes, we are still able to find good people, which is a mixture of very experienced people and freshers. We are taking a lot of freshers also. Recently, we have hired almost 30 freshers in our Bengaluru R&D center, and they are being trained appropriately by experienced people, and they would come up good. They are coming out good. This is how we are looking at R&D and increasing our R&D facility and people. Thank you so much for your answers. Thank you very much. The next question is from the line of [A. N. Sharma], Individual Investor. Please go ahead. Sir, thank you for the opportunity. I just want to know, when we are shifting our focus from service to products, what is the market size we are targeting, and what will be the margin in that area? The market size of products, once you are marketing not only India but worldwide, it will be billions and billions of INR. 4G networks are getting expanded, Fiber to the Home networks are getting created, 5G networks are coming, like huge number of networks are coming up in 5G. Market opportunity in overall cable and the equipment area which we are looking at is billions of INR. There is no dearth of market. Only question is, how many countries you go in, select those countries, go in and build up depth in your marketing infrastructure there, sales infrastructure there, and sell it because you cannot be selling in 180 countries. You will be selling probably 10 or 15 countries with depth marketing infrastructure, sales infrastructure, after sales infrastructure, and get your revenue, and which we should be able to do comfortably. Sir, what about when we are coming with 5G products and we are targeting the local market or international market for the 5G products, what kind of pricing power do we enjoy in that, and what will be the market size for this product? What sort of marketing power? That was the question? What did you say? I said, what kind of the pricing power we would be having for the 5G products in the local market as well as in international market. What is the market size? Pricing power, the question is, we are doing our own design and doing the latest design based on the latest components. Believe in terms of pricing, we should be competitive with others. We should be competitive with other people. There's no doubt about that. Of course, our PLI scheme and those incentives which are being given by government adds to our competitiveness, no doubt about that. Innovative design, [inaudible], low overheads. Being a company located in India and manufacturing in India, our overheads are low. PLI scheme would benefit us to 5%-6% of revenue, which is what the PLI we are going to receive. These all would make us competitive, and we would be as competitive as anybody else with our own design, our own manufacturing based on latest technology and latest components. There's no doubt that we would be very competitive. In terms of size, again, I say, size of the market is billions of dollars. There's no dearth of the market. It's only how many countries you can tell with what kind of depth in your sales infrastructure and your after-sales service infrastructure. Market opportunity is huge. The kind of sales we are targeting numbers would be 0.00 some percent of the overall market size. Okay. Thank you so much. Thank you. Thank you. The next question is from the line of Ankit Pande from Quant Money Managers. Please go ahead. Hi. Thanks for taking my question. Sir, could you talk a little bit about your trade receivables? A good INR 400 crore improvement since March. Could you talk about BSNL and other maybe other key projects? We had a recent commencement in metros in Uttar Pradesh for a couple of cities. Could you just talk about that? Yeah, Ankit, thanks a lot. If you look at our trade receivables, it has gone down. In the Q1 of financial year 2021, this current financial year, receivable was INR 3,053 crores. Now it has become INR 2,664 crores. There is a reduction of what? INR 350 crores or so. In the current month and the next month, these two months, we are expecting to receive about INR 400 crores more from different customers as terms of receivables. INR 400+ crores, I would say INR 400 plus. In next quarter, you will see the further decrease in the receivables from our various customers. Major portion of receivables is from the defense contracts, which I've been mentioning, that those are turnkey contracts, and we have milestone-based payments are there, and milestone completion got delayed because of problems of non-completion of infrastructure by customers, not because of us. As a result of that, revenue got delayed, and also whenever there'll be revenues, we supply goods, but infrastructure not being complete, our payment were not received. That situation is now we have started gone to the situation where their infrastructure also getting completed because now they are also realizing that they need these kind of networks very fast. Though it has gone down by INR 300 crore, I think we'll be receiving payments of another INR 400 crore from these projects in the next month or current month, and it will further go down. The situation is improving, and it will keep on improving further. By March year-end, you will find it has improved further considerably. Cash flows of the company have also eased out. Free cash flows are becoming better, and it will keep on becoming better quarter to quarter. Okay. This extra INR 400 crore that you're supposed to receive, is that all coming from projects or some of that also from the products? This INR 400 crore I talked from the projects only. That is not the entire revenue. Cabling business and all that revenue is completely separate. This particular INR 400 I talked is just from the projects. I noticed that with this INR 400 crore reduction, our payables have also reduced by a good INR 350 crore. That kind of proportion will continue, or do we expect to net a lot more this time? It will go in tandem. There will be increased cash flow. Yes, money will be received and would be paid to the creditors also. Paid also. Free cash flow would also be there. Okay. Probably in that proportion where we have to pay down about INR 300. Absolutely. This would ease out our balance sheet quite a bit in terms of higher receivables from the customer, higher money realized, and paid to the creditors also. Okay. That's really good to hear. In our order book, you mentioned that under 20% would be from projects so far. Amongst the remaining, how much is government order book, and how much is export order book, if you could give from excluding projects? Of the order book, 20% is from product. Sorry. I said about 15% is from products and 85% is from projects. One should not get misled because of 15% and 85% because product orders keep being kept on received in a small bits and pieces all the time. It flows on almost daily basis. Product revenue would be around 45%, whereas order would be only 15% because they kept on being received in small pieces every day. Coming to the breakup of order book, in terms of, I would say, domestic order would be about INR 5,750 crores. Export order would be around INR 100 crores right now. Export order, as I said, is only for products. They kept on being received in small pieces. Total exports currently would be around INR 300 crores, even INR 200 crores last year. Oh. In terms of different projects which we have order book, about INR 2,500 crore is from Jio, INR 2,500 crore is from defense, INR 1,000 crore is from about Jio, then we have various orders from railways and telecom projects and all that. Total order book is about INR 5,822 crore. In terms of further breakup, government and non-government. Out of INR 5,822 crore, 36% is from government, INR 3,157 crore is non-government. Okay. Thanks for that. That was very helpful. Just on that, do you think the Jio sort of on the book or the pace of their orders, would you like to put a little bit of color on it? Do you think it is as expectations or do you think it's faster than expected given the recent change in that? It is as expectation. If I tell you the current order book. Right about 21% of my order book is from Jio and 79% is non-Jio. It is expected to continue in the same manner. Okay. Lovely. Great. Thank you so much for all the details, and all the very best to you, sir. Thank you. Thanks a lot. Thank you very much. The next question is from the line of Vishnu K G from JM Financial Services. Please go ahead. Hi, sir. Thanks for the opportunity. Sir, there is a small clarification. When you say that you have engaged people in Europe and Middle East for sale of products, are they more like third-party organizations who would act as resellers to our products? No. We have our own people also. We have our own people, and there are resellers also. Our own people will talk to the operators directly and also manage the resellers also. There are distributors, of course, and there are our own people also. Okay, sir. Should it be fair to assume that we would have a 50%-kind of mix between resellers and our products, at least in the near to medium term? No, not necessarily. We can't put a figure like that because it keeps on doing change. If we receive a large order from an operator, this percentage will change. If we receive more orders from distributors, percentage will change. Right now, we cannot put a percentage to that. Sure, sir. Thanks. Just a small follow-up there. Is it fair to assume that the margin profile in our direct selling will be slightly higher than the reseller part? No, I don't say that. It can again vary from customer to customer, order to order and situation to situation, what kind of competition and what kind of cable. It can always change. We cannot generalize that. Okay, sir. Sure. Thanks for the opportunity. Thank you. Thank you. The next question is from the line of [Saket Kapoor from Kapoor & Company.] Please go ahead. Thank you for giving me a second chance. Sir, firstly, it is really very heartening that the receivables have come down. Sir, if you could give us the breakup between the receivables which are older than 60 days and lower than 60 days of the total mix or in any proportion which you have. I don't have breakup right now, but if you send me your email address, I can send you the reply. Right now I don't have that breakup, of course. Okay. I was just looking at the aging part. Now, sir, secondly, towards the order book part, sir, how much is towards the operation and maintenance proportion, sir, and when is that going to kick into the numbers, sir? It is already kicking in in small, different pieces. Of the total 5,822, I think this would be about INR 1,500 crore to the O&M, and rest would be the orders. Okay. sir, for this quarter and for the six months, what should be the breakup from the O&M out of the total revenue which we have booked? It is clubbed under which segment? In the current year, I can say it will be about INR 100 crores from O&M revenue in the current year. For the entire year, sir? For entire year. Entire year. Sir, when will that be a bulky figure? If we have a total position of INR 1,500 crores, when will that warranty period get over and the O&M will start? Year 2024, 2025. That will be the year where we are expecting an O&M revenue of INR 300 + crore, INR 350 crore, about. Okay. Sir, currently, what are the industry's challenges and what are the challenges for HFCL, sir, which you are adhering to, and what steps are you taking to mitigate the same, sir? Industry challenges, of course, any industry always have some challenges. When I talk of industry, I'm talking from the operator's perspective. They have ROW issues, they have spectrum issues, they have various government litigation issues, which are the part of the business which continue all the while. From the manufacturers like us, issues would be semiconductor issue right now. There's a short supply of semiconductors. If there are issues with the operators in terms of their rollout, ROW, those challenges we have to also face. Those challenges we keep on mitigating. Those are day-to-day issues. Semiconductors, it just happened all of a sudden, all over the world. We can hardly do anything much to mitigate that. When the worldwide supply has to improve, then only that would be mitigated. All the time, what we do, whoever are our suppliers, we keep on pushing them every now and then to supply more to us. They get that kind of push from everybody. The semiconductor supply, that worldwide has to improve, then only that would get mitigated. Otherwise, normal challenges, issues of maintenance, of quality, timely supply, logistics, we keep on facing and we keep on mitigating those challenges. In terms of innovation, of course, that always remains a major challenge that we have to be at par with technology. As I said, fiber optic cable, we are innovating. We have recruited international people. We are in process of recruitment of them to have a higher ability to innovate new kind of cable design. Similarly, we are tying up with R&D houses, international R&D houses, to design our products, telecom products. Simultaneously, we are creating our own R&D team of highly qualified people and, of course, the newcomers also to design new kind of products. We have to keep on facing that challenge of innovation. You mitigate that challenge by having your own R&D resources as well as partnership with internationally acclaimed R&D houses to design your products. On the raw material availability and the integration part, how much is it in-house now and what would be the proportion going forward? One more part is on the finance part, finance cost part. That has increased, sir. What should be the absolute number we should look forward? Thirdly to it is the lower revenue quarter-on-quarter, sir. What would attribute to the lower revenue when our plants are running at the optimum levels? If you take the June quarter and the September. Our revenue is not lower quarter-to-quarter. The revenue in this quarter and the last quarter is almost the same. There's no reduction in revenue, Saket. Sir, it was INR 1,100 crore for the June 2021, and it is INR 1,000 crore for September 2021. There is a reduction. There's a small reduction. That happens because of seasonal impacts also. These are rainy seasons. Okay. Correct. As you know, the rains were very heavy. The turnkey work execution could not happen in many other places because of the heavy rains, particularly North India. The semiconductor shortage, that also contributed a small amount to this decrease in revenue. There is no significant decrease in revenue. It's a very low decrease in revenue, and which is all seasonal, minor impacts. In terms of interest cost, it will keep on going down. It has already started coming down. This quarter, it is INR 10 crore lower than the last quarter. It will further come down because with that decrease in receivables, our borrowing will go down. In fact, one of the things I forgot to mention in my opening remarks, our borrowing has gone down considerably. In the June quarter, in the previous quarter one, our total borrowing was INR 895 crore. Year ending March 31st 2021, it was INR 920 crore. Today, now in the current quarter ended, our borrowing is only INR 683 crores. There is a considerable reduction in borrowings, obviously a INR 300 crore reduction in borrowing. That trend may continue also because of the increased receivables. Interest cost is supposed to go down with a decrease in borrowing and also more efficient fund management and better negotiation with the banks in future, borrowing may go down. Borrowing has gone down as well as interest cost has gone down. Right. Sir, I was just referring to the number- This is very, very important. Yes, sir. There's a INR 300 crore reduction in borrowing in the current quarter. Right. Sir, what I was referring to the number of September 2020 at INR 80 crore and September 2021 first half at INR 90 crore. There is a INR 10 crore increase over the year. When the receivables have also gone down, our cash flows have improved. Still, the absolute numbers are up by INR 10 crore. I stand corrected. For a year as a whole, sir, last year it was INR 125 crore, the finance cost, and we have already paid INR 90 crore for the first half. The second half with this improvement in cash flows, we can look forward for a number lower than INR 125? Yeah, definitely, Saket. It will be lower by, say, INR 15 crore, INR 20 crore as compared to previous financial year as a whole. Thank you. Sorry to interrupt you, Mr. Saket. I will request you to come back in the question queue for a follow-up question. Thank you. The next question is from the line of Guru from Wood G roup? Please go ahead. Hello. Yeah, please go ahead. Can you hear me? Yes, we can. Go ahead, sir. Yeah. Congratulations for posting wonderful figures. I have a couple of questions. First is regarding the satellite broadband internet, which is in trend these days, and some of the Indian telcos also have shown interest in that. Will it pose any risk to the OFC business or how about that? Second question is BharatNet PPP model. When can we expect revenue from that? Look, satellite broadband is being talked about. It is a good proposition to have, it is not going to impact fiber optic cable because satellite broadband would be available only to limited number of people. For example, Starlink has announced that in India they will take only 200,000 subscribers. Satellites have only finite amount of bandwidth which they can give, it is mostly targeted to rural and inaccessible areas where there is no terrestrial connectivity available, it's going to be costlier also. Satellite broadband does not pose any threat to terrestrial communication, which includes fiber optic cable also. It will not have any effect on that, the number of subscribers all put together would not even cross a million or so. It does not pose any threat, any significant or insignificant threat also. That was your question. Yeah. What was your second question? Regarding this BharatNet PPP model. BharatNet, sorry. So publisher- BharatNet PPP, they have extended the date twice because there has been some discussion on viability gap funding, whether this is the right number or the number looks to be increased or whatever. That is under discussion. I think it will take at least six months before BharatNet PPP model is finalized and awarded to people. I think it is still six months. Then only, and the revenue we can look at in the next financial year only. Okay. My last question is regarding the BSNL 4G. I heard that HFCL, along with some partner, could not continue with that. Some, I mean, view on that please? It's not a question of we could not continue. We thought that we would be going ahead for 4G for BharatNet, and we have applied for that validation. It's still not that we have said that we will not be doing. We have sought this core from C-DOT. C-DOT has said that we'll be able to give you the indigenous core only after December. We are waiting for that to happen, and whenever that happens, we will go back to BSNL and ask for a retrial. That has been the case with us, L&T, and Tech Mahindra, all three of us. Only TCS is continuing, but that also with a limited functionality. They are also not able to meet the entire specification, which we saw yesterday in some of the newspaper reports. The radios are not to that specification. We, instead of going ahead with the less specification or limited specification, we decided that we should wait and go back to them when our products have the full specification complete. Yeah. Okay. Thank you. Thank you. The next question is from the line of [Garmesh Kant from A R D Ventures]. Please go ahead. Hi, sir. Congratulations on a very good set of numbers. Sir, can you throw some light on the amount of money which you are raising around INR 750 crores? What are the areas in which it will be applied to? Look, as I said, shareholders and the board have given approval for raising up to INR 750 crores. Right now, we have not finalized how much is to be raised, when it is to be raised. Whenever we finalize how much and when, we'll come back to you with the applications also. Okay. Got it. Sir, last time in the concall, you had given a guidance of around 15%-20% on the revenue growth. Are we sticking to that for this financial year, FY 2022, or there's some, you know? No, we are sticking to that. There should be around 15% of the revenue growth in the company in the current financial year. We are sticking to that. Absolutely. Okay. Great, sir. In this one's result, instead of INR 1,700 crores, we have been able to do INR 2,200 crores. Right. Margins are likely to stick around? I mean, operating margins of 15.5%? The margins, what we have done in the first two quarters, it will continue. There shouldn't be any problem continuing that kind of margins and profitability in the next two quarters also. Okay. Sir, that is all from me. Thank you so much, sir. Thank you. Hello, [Garmesh], do you have any follow-up questions? No, I am done. Thank you so much. Thank you. The next question is on the line of Abhijit Mitra from ICICI Securities. Please go ahead. Yes, thanks for taking my question. My question is on CapEx. On the first half, I could see that including intangibles, you could spend around INR 70 crores. What is your full year CapEx guidance and which are the key projects that you'll be spending on this year? Thank you. Till now, we have announced that we would be doing our INR 210 crore of CapEx in the current financial year. Of course, as I told you, our shareholders have approved further fundraising. If we decide the fundraising and depending upon amount and when, there may be change in this plan. Depending upon the fundraising, whenever it happens, and whenever we decide to do, depending on various options we are weighing, this would definitely have the possibility of change. Right now, it is INR 210 crore in the whole year. Okay. Got it. The existing INR 210 crores would be mainly to increase optical fiber, FTTH cable, and the fiber capacity? Yeah, it is optical fiber, optical fiber cable, and the defense manufacturing. The defense manufacturing. R&D CapEx is included in that R&D CapEx, whatever you have guided for? R&D CapEx is not included in that. That is separate to this. Okay. Got it. Thank you. That's all from my side. Thank you. Thank you very much. Ladies and gentlemen, we'll take that as the last question. I will now hand the conference over to the management for closing comments. Well, thank you very much to all of you for being on this call. As I have been saying that we decided few strategies for the company, which is new products, new geographies. We are continuing very steadfastly on that. We decided that we would be going into margin-accretive products and services. We are on course to do that. We thought of increasing our exports. We are on course to do that. We thought of going for new product innovation. We are on course of doing that. Whatever strategies we have decided for the company, we are on course, and absolutely steadfastly going in that course, and which would continue for next few years, which would see your company having better revenues and better profitability with products which we will be able to sell worldwide. Our projections in terms of financials, which I have been giving in terms of possibilities of our revenues and profitability on account of the strategies we have adopted, we are on course of maintaining that. I am sure that with the growth in market opportunity, which is very important, with the market opportunities which are there in front of the company, we expect the future operations of the company and also the profitability to maintain this trajectory of growth which we are having at this point of time. Thank you very much to all of you. Thanks a lot. Thank you very much. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.