Ladies and gentlemen, good day and welcome to the HFCL Q4 FY 2022 Earnings Conference Call hosted by ICICI Securities Limited. 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 Mr. Abhijit Mitra from ICICI Securities Limited. Thank you, and over to you, sir. Thanks, operator, and good evening to all the participants, and thanks for joining in. We are here to discuss Q4 and fiscal 2022 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. 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 Q4 of FY 2022. I thank all of you for continuing the interest in HFCL and making it 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 had a chance to glance through them. Friends, as the threat of pandemic recedes, we still remain vigilant about new COVID variants that can pose challenge to the economy. A recent Russian-Ukraine conflict poses new geopolitical challenges, not just for India, but also for the world. While quite a few sectors were beginning to show signs of recovery, we could still be staring at an uneven path of recovery given the changing dynamics. All this, coupled with the pace of technological transformation, call for the need to be vigilant and agile for leaders across nations and organizations. Now, zooming into the Indian context, our healthy growth rate and robust results, coupled with steadily improving tax collections and forecast of a good monsoon, shall help us deliver another year of world-leading growth in FY 2023 for the Indian economy. The Indian telecom sector as well witnesses another year of revenue growth in FY 2022-2023. This happened on the back of rising data consumption and telco spend. Sector is strengthening in form of expanding networks, 5G release, and lowering the 5G spectrum prices shall help ignite the next level of growth for the industry. For HFCL, FY 2023 looks quite promising. However, the margins in quarter 1 may remain under some more 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 thrust on indigenous procurement of telecom and defense equipment, healthy telecom revenues feeding into continued network expansion and upgrade by telcos, policy support for design and manufacturing for PR telecommunications equipment under PLI scheme, Prime Minister's vision to connect all the gram panchayats through 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 2022 has further strengthened our growth foundation. Being recognized as a trusted source for National Security Council Secretariat is a pivotal acknowledgement from the government. Capital raise of INR 600 crore through QIP and raise of 100% of the pledge shares further demonstrated the trust and belief by our stakeholders. Setting up of a dedicated manufacturing facility for defense products and further expansion of optic fiber and cable facilities, strengthening of our global leadership team, 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 stable outlook from CARE Ratings. We closed FY 2022 with an order book of more than INR 5,000 crores. From R&D standpoint, deployment of Wi-Fi seven enabled access points from point to point and point to multipoint backhaul radios are in advanced stage. These products will be comparable to 5G networks in terms of their throughput capacity. Development of 5G radio and transfer products are also progressing well, and these products will result in company's innovation produced to global markets. A new initiative has also been undertaken to produce new types of optical fiber cables for export markets. I would also like to mention that company has been able to increase its product revenue to a level of 33% in FY 2022 as against 27% in the last financial year. This trend is expected to even better in the next financial year. The product revenue of FY 2022 was INR 2,055 crores as against last year's product revenue of INR 1,005 crores. The export revenue of the company has increased significantly in the current year. As against export of INR 201 crores in the financial year ended on thirty-first March 2021, export in FY 2022 was INR 363 crores. We expect to double our export revenue in the current financial year again. Towards the end of Q4 of financial year 2022, 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 point seven million fiber kilometers equivalent cable per annum, respectively, with an estimated CapEx of INR 425 crores. This round of expansion will see our fiber and OSP capacities grow 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 was completed during the last quarter. Providing connectivity to 1,789 gram panchayats through the GPON network, our team laid out 7,765 kilometers of cable network. With this, Jharkhand has become the first state in the country to provide connectivity to all the gram panchayats under the statewide model of BharatNet program. We are proud that HFCL implemented this network. Financial year 2022 was also marked with HFCL forming several strategic alliances and associations. We joined, a worldwide community of mobile network operators, vendors, and research and academic institutions operating in the radio access network industry. The aim of this alliance is to build O-RAN Alliance 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 Aprecomm, a leading artificial intelligence provider providing AI-powered Wi-Fi analytics technology provider. The aim is to integrate Aprecomm 's artificial intelligence-powered solutions to our platform. Our entire Wi-Fi and media product portfolio will now have seamlessly integrated AI-powered network analytics, enhancing the experience for 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 partner in our effort to bring a complete portfolio of products for 5G radio access and transport network. We engaged Ingram Micro as distributor for our Wi-Fi and media line of products with an aim to leverage their strong hold in channel distribution in India and SAARC countries. Let me now brief you on key performance metrics for quarter and twelve months ended FY 2022. Revenue for Q4 FY 2022 stood at INR 1,183 crores as compared to INR 1,215 crores in Q3 of FY 2022 and INR 1,391 crores in Q4 of FY 2021. EBITDA for the current quarter stood at INR 154 crores as compared to INR 174 crores in quarter three of FY 2022 and INR 187 crores at Q4 of FY 2021. EBITDA margin stands at 13.02% for Q4 of FY 22 as compared to 14.32% for Q3 of FY 22 and it stood at 13.44% in Q4 of FY 21. For Q4 FY 22, profit after tax stands at INR 68 crore as compared to INR 81 crore of Q3 of FY 22 and which stood at INR 86 crore in Q4 FY 21. Net margin stands at 5.75% in Q4 of FY 22 as compared to 6.67% in Q3 FY 22 and 6.18% in Q4 of FY 21. Segment revenue for telecom products during the quarter stood at INR 585 crores, which is 49% of Q4 of FY 2022 revenue as compared to INR 388 crores, which was 28% of Q4 of FY 2021 revenue. The increase in input costs, including optical fiber, plastics and semiconductors and logistics during last quarter has put pressure on the operating margins. This will possibly get offset with increase in realization in the coming quarters. For the twelve months ended 31 March 2022, the company reported consolidated revenue of INR 4,727 crores as against INR 4,423 crores in March 2021. EBITDA of INR 693 crores as against INR 585 crores in March 2021. Profit before tax of INR 442 crores as against INR 337 crores in March 2021. Profit after tax, INR 326 crore as against INR 246 crore in March 2021. 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. Receivables cycle has also come down to 160 days in FY 2022 from 214 days as compared to FY 2021. Debt in absolute terms has reduced to INR 730 crore as at 31 March 2022 from INR 922 crore as at 31 March 2021, resulting in the debt equity ratio of 0.26 only. Looking ahead, our drive to continue innovating and widening our product offerings and expanding our global footprint shall further strengthen our growth foundations. With continued shift in demographics, growth in our catalog of products and innovation, we are confident that HFCL has remained a force 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. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. First question is from the line of Sanjay Shah from KSA Securities. Please go ahead. Yeah. Good evening, gentlemen, sir. Thanks for presenting the results. My question was regarding FY 2023, and if we extrapolate it and go to even FY 2024, what opportunity we see for our company and where we are ready, and you be as a company and as a leader, where you see the opportunity for our company? Thank you, Mr. Shah, and good question. Look here, FY 2023 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 opportunities, in the current financial year, as you all are reading in newspapers today, the 5G auction is going to be held very soon, possibly in June. Now, with the 5G auction being held and networks to be expanded by operators who take 5G spectrum, there is large growth in demand of fiber optic cable and also very wideband radios. Both are which would be required to connect the different cell sites, which would be many more in number because the 5G has a coverage limitation because of higher frequency range. Demand of fiber optic cables and wideband backhaul radios which grow up significantly. Significant growth will be there in these two products demand. Similarly, demand of other kind of telecom infrastructure will increase significantly because network roll-outs would happen by operators, and it will be completely large extent of new roll-out for 5G networks. Now, when the 5G networks grows, accessory equipments like Wi-Fi, like Wi-Fi seven, for example, which we are also developing, Wi-Fi 6, which is already under our product range, backhaul radios for Wi-Fi backhaul, broadband connectivity, all these will grow significantly. The transport products for 5G, routers, switches, demand is going to grow significantly. Good thing is that we have huge capacity for manufacturing fiber optic cables, and that capacity is being expanded keeping with new, the large scale network expansion in fiber optic cable to take place. We are inducting wideband radios, E-band radios in our product range. We are having Wi-Fi 6, 7, and seven is under design, of course, and also unlicensed band backhaul radios for the same usage. We are designing router switches. All this put together, you will find we are getting ready for the new kind of products which should 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 these networks on EPC mode, where contracts would be given to companies to implement the entire network. We hear it, you know, from different sources that total requirement of the fiber optic cable is going to be more than 15 lakh kilometers in next years. 15 lakh kilometers, which is a huge demand opportunity. Now, 15 lakh kilometers of fiber optic cable will be required for linking all the villages which are to be linked in BharatNet. Earlier it was gram panchayats, now it is villages over fiber optic cable to give broadband connectivity. Now, it will not only be fiber optic cable, it would be a lot of different kind of equipment, you know, transport equipment, access equipment, which will be required for this purpose. Total CapEx estimation, in our estimation, is going to be more than INR 70,000-75,000 crores, including installation and commissioning expenses. Now, fortunately, HFCL is present in all these market segments. This is again going to be a massive demand opportunity and your company has presence in all these areas with cable, equipment, installation, commissioning, EPC capability. We have second large level of new demand coming up apart from normal extension of network which will go on anyway. The third opportunity, since we are looking at export market, and as I mentioned in my initial presentation. We have been able to increase our exports from INR 125 crore or so to INR 361 crore in the current financial year. We are looking to make it about 2.5 times of the current last year in the current financial year. The INR 361 crore is probably going to be somewhere around INR 800 crore-INR 900 crore. That's the target we have fixed up for ourselves. Worldwide, the demand of fiber optic cable and associated equipment is increasing significantly. The reason is the large expansion of fiber to home network worldwide, whether it is North America, whether it is Europe, large scale expansion of fiber optic cable network and FTTH network is taking place. We are also discussing with different operators in some countries to take contract for business for establishing such networks for them and supplying fiber optic cable in any case to many such operators. That's where our increase in export potential comes from. Indigenous demand for 5G in network expansion, 5G network, BharatNet network, expansion of FTTH network worldwide, including that in India, and we are the largest implementer of FTTH networks in the country. All this put together, there is going to be huge demand opportunity, and we are fully geared up for that. We have fiber optic cable capacity, which we are increasing. We have equipment, we are designing new equipment which will be available for sale, and we are going international also by increasing our sales capacity. 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. My next question was, can you highlight something about our progress on our defense equipment side? Defense equipment, there are two types of defense equipment. There's defense communication equipment and defense electronics. Now, as you know, defense business takes time to, you know, get qualified and long-drawn trials and then orders of supply. We are designing software-defined radio for defense, which will submit for validation sometime by the end of this year. We have designed electronic fuzes which are undergoing trial as we speak now. It's undergoing trial in different places right now as we speak. Night vision devices, again, they are undergoing trial as we speak. Defense equipment, whatever, you know, design has been finished, they are undergoing trial. Software-defined radio is under design. At the same point of time, we are working on 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, you know, as you would have again seen in media, government has decided that a large portion of defense procurement is to be procured indigenously by indigenous manufacturers. This again gives a great fillip 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. Our whole policy for all strategy to design locally and manufacture locally has proven to be very correct with the need of the time. Government is insisting local manufacture to large percentage of Indian components, which can only happen if you design in India, and which is going to be helping us to generate more revenue 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 to come. Defense electronics, we have not taken any revenue. We expect this revenue to start coming up from the financial year 2024, which will further increase the revenues of the company. Great, sir. Thank you very much for answering questions, sir. I'll come back in queue for further questions. Thank you. Thank you. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Saral Seth from Indsec Securities and Finance. Please go ahead. Yeah, sir. Thanks for the opportunity. 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. Where are we on that side, sir? Well, in 5G, you know, we are two different kind of equipment. One is 5G radios and transfer equipment. In the radio equipment, we are designing small cells and macro cells of different kinds. Small cells is for indoor or some outdoor application also, but macro cells is for large scale application for, you know, on the, what we call the base stations or the towers you see for massive, you know, communication capacity. Now, these designs are already happening. We are tied up with the world leaders in this arena to give us software stacks and, you know, designing capabilities. These are going to be our own design, where our R&D team is engaged together with other engineering companies to design these products. These designs are progressing very well. For small cells, macro cells, all is progressing very well. Sometime within this current financial year, this latter part of this financial year, these products will start coming on stream for showcasing it to the customers in the current financial year itself. Second leg of this product is fronthaul gateways, which are the kind of routers on the site side and access routers and distribution routers. They are also going to be in our production line sometime during this current financial year. This is progressing well, and there is going to be a very large demand opportunity for these products. Because as the 5G networks come, everybody will be requiring these products because these are the high-volume products which will be required by all the operators, not only India, but export also. We are gearing for India and export. I would like to reemphasize here, the demand opportunity is massive, whether it is for 5G network equipment or whether it is for fiber optic cable and associated optical transfer equipment. 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. These are the massive competitive advantage we have for this equipment and also fiber optic cable because the massive quantities we produce, we have a competitive advantage and also because of the backward integration into 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. The 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 this expansion 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, you know, extract maximum opportunity in optical fiber cable? Look, as I explained a little earlier to answer your question, Mr. Shah. Yeah. Demand for fiber optic cable increases coming from new network being laid out, 4G network expansion of fiber to home network. I'm talking about India right now. More importantly, BharatNet, wherein more than 15 lakh kilometers of fiber optic cable additionally will be required. All these present 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 fiber optic cable. Now, definitely, you know, we would be needing higher capacities to fulfill this demand. That's why we are expanding our capacities to manufacture fiber optic cable by about another 10 million fiber kilometers equivalent cable. We are expanding our capacity for manufacturing optical fiber from 8 million currently, which is undergoing expansion to 10 million, to expansion of 22 million, which is expansion from current capacity of 8 million to 22 million, to fill up that gap between our manufacturing of cable and fiber. Massive expansion is taking place with the cost of more than INR 400 crores to take care of the demand opportunity which is there in front of us. Demand is increasing so as we are increasing our capacity. Mind you, we have the highest market share within India for fiber optic cable. We have the highest market share, and we expect to continue to maintain that with increase in our capacity and competitiveness. Understood, sir. I'll fall back in queue. Thank you, sir. Thank you. The next question is from the line of Guru from Wood Group. Please go ahead. Thank you for giving me an opportunity. Not only thanks for giving the clear idea about HFCL products and the kind of demand we have going forward. I've got a couple of questions, like, my first question is regarding this NDU, that is Non-Disposal Undertaking of Equity Shares of HFCL. Sorry to interrupt you, Mr. Guru. Please use the handset mode, sir. Hello, can you hear me now? Yeah, go ahead, go ahead. My first question is regarding this NDU, Non-Disposal Undertaking of Equity Shares. After releasing the pledged shares, just want to have some idea, clear idea about the purpose of, Yeah, yeah. Let me first explain, answer this question. Listen up. Pledge has been released. Non-Disposal Undertaking is there from the promoters, part of promoter share, that while the bank loans are existing, promoters should not sell its share and run away. You know, that's a Non-Disposal Undertaking banks take. That till the time bank loans are existing, you know, promoters should not sell significant part of his shares and run away and leave the banks high and dry. That's the kind of protection bank takes from everybody. Out of the total number of shares of 54 crore of the promoter shares, 24 crore equivalent shares Non-Disposal Undertaking has been taken by the bank. It's no pledge. Let me tell you, no pledge. It's only Non-Disposal Undertaking that promoters will not sell 24 crore shares out of 54 crore of their total holding till the time bank loans are existing. That's a very standard thing. Okay. Yeah. Fine. My second question is, as per the last ConCall, it was given to understand that out of the funds raised through QIP, about INR 150 crore will be utilized for the repayment of loan, if I'm not wrong. Any plans to go ahead with that then? We have already paid. We have already done that. We have already repaid those loans. Okay, fine. The last question is regarding this Sterlite patent infringement. We have seen some notification on BSE. Later on now, there's no update on that. Look, you know, I will not talk much about a case which is already in court. You know, we've already informed the court. We have already informed the honorable court that this is not correct. Infringement is not there. That stay was given on ex parte basis, without even hearing us. This, whatever they have claimed as infringement of their patent of 2016, we have been producing that kind of a cable from 2013 or even before that. 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. Even customers have submitted their specifications also, and our bills and their orders and everything has been submitted to honorable court. This is sub judice. I can tell you, it's not, there's no infringement in this case. It is just, I don't know why they have launched this. This stay was taken ex parte. In any case, court has given us permission to keep on exporting the orders we get. We give list to the court, and the export has been approved for us. Okay. Yes. Thank you. All the best. Yeah. That's it from my side. Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead. Yeah. Namaskar, sir, and thank you for this opportunity. 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, you know, out of INR 5,000 crores, you will not find that there are, you know, some thousands of crores. I think the total export order available in hand is about INR 225 crores, against the total export target we have about, you know, as I mentioned, we wish to increase it by 2.5 times of the INR 360 crores of order export we had in the current year. Two twenty-five crores of order, which is to be supplied, you know, 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. Sir, what have been our CapEx for FY 2022, including what have been the maintenance CapEx, and what is our CapEx target for FY 2023? Yeah. I will just get this numbers and come back to you. If you have any other question. Yes. Yes, sir. I have, sir, a couple of them. Sir, what is our net debt level as of, and what is our cost of funds? Just one second. Yes, sir. Also, sir, then coming on to the, this turnkey services part segment, sir. Sir, sorry sir, Mr. Kapoor, I missed your question, you know. No, it's okay, sir. R&D or CapEx? Sir, the maintenance CapEx, R&D, both if you could give the breakup for FY 2022 and- Our target for CapEx, as I mentioned, sir, I missed your question. I thought you're I thought you're asking R&D, and you were asking about CapEx. Sir, Don't know. Look, CapEx target, in the current year, because we are going for expansion of fiber and fiber optic cable, current year's CapEx target is about INR 500 crores, including that of R&D, about INR 500 crores. Okay, sir. For FY 2023? Yeah. How much we have spent for FY 2022? FY 22, because there was some bit of CapEx and some bit of R&D. Total would have been around about INR 125 crore or so. From INR 125, we are going up to INR 500. Absolutely, because we raised capital also if you recollect, for the purpose of expansion only. Sir, last year in some of the calls, you have also mentioned, and there was also some big income tax refund. Have those things materialized for the last year? Yeah, income tax refund has already come. Subsidy, part of the state subsidy, already has been approved. The rest of the subsidy for central government, that has also been approved, but the disbursement is yet to take place. We expect another couple of months, disbursement will happen. How much is the payable, sir, on that front? I think that should be about INR 35 crores, 35 or 47 crores, I think. 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 for last year. Okay, this is after raising INR 600 crore. Yes. Sir, and the other expenses part, sir, we have found that the other expenses have disproportionately gone up. If you could explain the reason that incommensurate to the turnover, the other expenses are slightly higher. Any one-off item there? Yeah. This has increased, one, because of the logistics cost. I mean, the freight on logistics export has increased. Some R&D expenses has been expensed off, maybe around, INR 5 crore or so. We have written off some of the debt, which is INR 2.5 crores, and INR 2 crore of the provision has been made during this quarter against, as the ECL provision, against receivables. This has gone up from, sir, if I take the number for March 2021 from INR 47 crore to INR 78 crore. That is a significant INR 30 crore rupees change. Sir, in total all that what has been explained. It is expensive on the export side because we have to increase our exports by a large volume. We have increased export related market development expenses and the other expenses which Mr. V.R. Jain mentioned just now. All total up, it will be this kind of number. This will continue going forward also because of the higher freight cost is still there. Freight cost, which is the significant portion of it, is higher freight cost, you know. Yes. Which has 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 upon geopolitical situation. I'm not, you know, I cannot give any forecast on that because as you know, this is a completely different geopolitical situation which will determine this kind of a whether it has to go up or not. Okay. It may further go up, who knows? Or it may go down also if the situation Okay. Sir, on the trunking contract and services segment, we have seen degrowth in revenue, whether quarter-on-quarter or year-on-year. How will you explain that? No, no need of explaining. This is our strategy. I have been telling you from the very beginning that our revenue from products will go up and from ETC will go down. That has been the thought-out strategy of the company. As you would see, product revenue which was 27% has gone up to 43%. This is a significant shift, and this is a well-thought-out strategy, and it will keep on happening in future. That has not commensurated to the profits, sir. I mean, if you take the profitability part, the profitability has gone down. Profitability. On an absolute number. Has stayed in the Q4 because of the increase in input cost. Okay. As I mentioned to you, Mr. Kapoor, in the very beginning itself, that in Q4, all input costs have gone up, which you would have seen everywhere. Plastics, you know, which is major raw material for fiber optic cable. Correct. Which has 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 cost has increased significantly. If you look at EBITDA margin, from an EBITDA margin, you know, again, you will find that there has been a significant shift in Q4 because of this increased input costs, you know, which is worldwide trend. Right. What are the current OFC prices, sir? Wait a second. Let me complete. Please sir, please. If you see on a year-to-year basis, this was a story of quarter four. If you see year-to-year basis, in the March 2021, the EBITDA margin was 13.23%. March 2022, it is 14.66%. Had the things not been different in the Q4, this would have been even better. These are nothing to do with the company. These are geopolitical situation. Freight have gone up, input costs have gone up, fiber price gone up, plastic price gone up. Semiconductors are not available. There is a worldwide shortage of semiconductor. To get a ready stock, you have to pay higher prices, which we have done. We were able to supply to our customers. This is a temporary phase which has happened, which may very well continue in the Q1 also of the current year. Of course, two things will happen. We expect this thing to ease out in Q2, but at the same time now our new contracts, our sale prices are also increasing. Our sale prices are also showing increase because as we have input costs, so new orders we are taking at increased prices also. All put together, this will balance out in the Q2. Q1, there might be some impact of this situation. Thank you. The next question is from the line of Hardik Vyas from ETIG. Please go ahead. Good evening, sir. Most of my questions have been addressed, but one of my questions is, in 5G telecom equipment, how is the competitive intensity? Who else is likely to supply those products to, This is, I would differentiate in two parts. One is local manufacturers and another is international. Now, international, all the large companies which you hear the names, you know, Ericsson, Nokia, Samsung would be there. Chinese would of course not be there because Indo-Chinese are no longer being allowed. In Indian companies, in 5G radio equipment, Tejas would be there, which is now a Tata company. We would be there. I don't know if any other company is working on 5G radio network development. I don't know of any company which is doing a large experiment. I heard of Sterlite earlier, but I don't know the latest status. We are of course doing. Local companies, I heard the name of Tejas. They are doing it, of course. We are doing it. We will of course do it for small scale and large scale, both. We would continue to do it. You know, I tell you one thing. Where we look at our competitive advantage. One, for all contracts which are BharatNet's kind of contracts, where of course radio equipment are not there, but all other equipment are there, including some of the equipment which are common use in 5G or optical network, they are all Make in India. 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 cost of development is much lower than others. Manufacturing in India, so it is more competitive. Overall, we find ourselves more competitive in terms of competition with international players. I would give you one example. Wi-Fi 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. I'm sure, you know, when taking advantage of our existing success 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 this would be as compared to Tejas? Because I believe that as compared to the overseas players, we definitely would be more competitive. As far as Tejas goes, how- Look, you know, I wouldn't say that I would be more competitive or less competitive than Tejas. This, you know, prices have to come out. You know, market is so big, so big that two or three or four players can co-exist without any problem. You need not be cutting throat of each other in such a huge market opportunity. Okay. Does it make sense to compare our pricing with overseas players like Ericsson or Nokia? Yes, you know. Well, you know, we have still not seen the prices of 5G products and all that. The sales is to start in India. In my personal opinion, we should be competitive to them by 20%-22% margin. Okay. I get it. Sir, my next question was on our margins. You said that all the input costs have gone up in the Q4. 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 product- No, I'll tell you two, three things. You know, for fiber optic cable, for example, there are two major raw materials. One is fiber, and another is what is based on crude, you know, which is plastics, which is jelly, and all those kind of things. Fiber prices look like they're stabilized now. You know, it increased significantly. Last one month, I am seeing that prices are more or less stabilized. Supply position has become little bit worse because of different reasons. The lockdown in China. As you see, about 27 cities are under lockdown. Factories have suffered, and also the ports are closed, so the ships are not happening. There has become a supply constraint. We have been able to, you know, still pull on our factories to full capacity because, one, half of our requirement of fiber we produce ourselves, half we import. That half, earlier we were in a very comfortable position, but now we have to really, you know, do lot of things, organize and then only we are able to get fiber which is required by us. Fiber prices have started stabilizing. It should no longer increase. Okay. Now, coming to plastics and all that kind of things. 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 if the war continues with the same level of things it is continuing, then I think crude prices will remain around the same. It will not increase. But God forbid, if some two, three 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 may go up. 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 continue the same level, maybe crude prices will also be maintained around the same level and there may not be any increase in the plastic prices any longer, because they've already increased quite a bit. I think, you know, given any very abnormal situation, the prices which have gone up should remain around the same kind of pricing, some possible increase in the plastics. What we are doing to hedge against that, now we are asking our customers to give new orders at increased prices, which customers are also responding because they also know that, price, you know, input has gone up, so output price has to also go up without any doubt. We are now balancing it out in the current time, current quarter. Okay. 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, I tell you. We are not going to refuse any order. With the 5G happening, BharatNet happening, more orders are going to come up. More orders will come up for products and some orders for EPC, you know, the turnkey also. Both will happen. If they're good orders with a good profitability margins in turnkey also, there'll be no need for us to refuse. If, you know, for example, Reliance, for example, or with any other customer. We are good payers ourselves, and if they Jio, Airtel, anybody, if they expand their network and we are good payers also and they give us orders for turnkey also, why not to take that? 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. Okay. Thank you so much, sir, and all the best. Thank you. Thank you. Thank you. The next question is from the line of Abhijit Mitra from ICICI Securities. Please go ahead. Yeah, thanks for taking my question. I have few data questions. Firstly, on your product revenue for the quarter and for the full year, how much of it is contributed by fiber optic cable for the quarter, and how much is it access products? If you can break it up. Oh, I can explain those. Give me a moment. You know, of the financial year ended 2022, the total revenue has been INR 2,055 crores for exports. Out of it INR 1,700 odd crores is by optical fiber cable, and balance is by different products. Balance is by different products, which mostly includes products. Access products and, fiber and all those kind of. As I said in my opening remarks. Yeah, it does not include any defense products, as of yet? No. Not at all. As I explained in the beginning itself, I have not taken any sales of defense products, even the current year also in our AOP. We are all targeting for the next year, because the testing and all that is going on. For example, I tell you one example. Electronic Fuzes. Right now the testing is going on in two places, Balasore and Itarsi. Now this is, you know, not full-fledged live testing, live firing. It is live firing with a low charge. After this is done, next level of testing will occur in Pokhran and Sikkim, in a high altitude, in a cold and very hot condition. Then only, you know, tender will be opened up and evaluated and order will be placed. Defense usually takes long time, so we expect defense products 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. Just to, you know, 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 products. Yeah. This INR 1,700 crores would involve how many million kilometers of fiber, as in fiber optic cables? Well, you know, 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 that data. I can let you know. No, no worries. No worries. Yeah. Yeah. No worries. In terms of access product revenue, you know, the INR 300 crore of revenue that we have seen in FY 2022, how is that expected to grow as per you? Look, you know, this product revenue are fiber optic cable and other things, you know, which include accessories and access products and all that. Yeah. Currently we are looking at starting export of these products also. Till now we are not exporting. I think, you know, this revenue from this one fiber optic cable product should be around INR 250-300 crores in the current year, INR 300 crores plus. You know, INR 450 crores. INR 450 crores INR 450 crores including exports. Should be about INR 450 crores. Yeah, INR 450 crore including exports in FY 2023. That's the expected numbers that I could get. Yes. Okay. Got it. My next question is, you know, regarding the state subsidy that we can see sitting in the other income almost to the extent of INR 15 crore, the subsidy under state incentive scheme. If you can sort of break it up, you know, 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? If you can sort of just lay it out for us. I believe this INR 15 crore included in other income is towards interest subsidy. The interest from the date we commence the production in January 2020 till March 2022. Per quarter it is coming around INR 2.4 crore, something like that. As it was related to earlier period and this approval came in March only, it has been shown and clubbed as other income. Now henceforth, the interest will be lower by, say, INR 2 crore each quarter henceforth. Then there is a capital subsidy also, INR 30 crore. Our block of the fiber unit will be reduced to that extent. Depreciation will be low. There will be lower depreciation going forward. Okay. These benefits are there for the new CapEx also? Yes, this will be there. You are telling the current year's CapEx? Yes, I think the INR 425 or whatever you are spending, so. There will be some other set of incentives which we will come to know as we progress. Okay. It will be spread across locations where you're expanding, right? It's not limited to one location. There will be a, you know, a lot of incentives and spread all across locations. Absolutely. Okay. The formula and all is not yet known. That we'll come to know as, you know. Formula and decision and all you will know in next couple of months. Okay, next couple of months. Got it. My last question is on defense. You know, you have shown a market opportunity of almost $3.5 billion. Yeah. 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 you know, which are the products you are most optimistic about? You know, there are four products. Look, you know, I will say current year we are not looking at any revenue from these defense products. Yeah. Now, future, of course, we are quite bullish. Market opportunities, fuses, electro-optics, which is the night vision, massive market opportunity. We are looking at that. One. Two, we have also participated in couple of other market opportunities which are defense related, and I would not like to talk too much about all those things, you know, because they are sometimes, defense is not very happy about talking in public. But for example, I can tell you, since you opened, upgradation of, our armored personnel carrier, BMP-2. 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 electronic. We have participated. Such kind of opportunities are there, we are working on, which is related to our area of work. You know, night vision devices or fuzes and all those kind of things. From next year onwards, we believe that we will be able to start getting revenue from defense equipment also. I expect next year something like INR 500-700 crore range, revenue we should be able to get from defense products, electronic products. Communication apart from defense electronics. INR 500-700 crores this next year, and then it will increase substantially, very substantially. Because once you are in, then you start supplying. It would Next year, I mean FY 2024, you mean, right? Yeah, yeah. Okay. Got it. No, this is very helpful. Lastly, I forgot, Let me tell you one thing. Yeah. Opportunities in defense now are becoming as big as communication equipment opportunities. It only takes time. Some time is taken in defense because the testing itself is a huge, you know, it involves a huge time frame because of, you know, defense has to go through those kind of tests and all that. Now, I'll give you another thing, you know, what we are doing. Fiber optic cable. Now, defense requires a tactical cable, which is, you know, 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. It is so strong that even a tank rolls over that, it still does not break. We are now starting to manufacture that cable also. Those will be, of course, not defense equipment as such, but yes, it is defense equipment because the defense only. Right. I forgot to ask regarding the fiber optic cable revenue, which was around INR 1,700 crore this year. How do you expect it to grow over the next couple of years? Sorry, that- Yeah. You You know, I expect in the current year, we should be able to reach to about near about INR 2,200 crores. Okay. Yeah, next to that, our estimation is somewhere between INR 2,600 crores-INR 2,800 crores. Okay. Great. Yeah, that's all from my side. I will come back in the queue. Thanks. Thank you. Thank you. The next question is from the line of Shivam Vashi, Kotak Ventures PMS. Thank you for giving us a question. Tell me, what did you say? How did you say? Yeah. Sir, just one question on the debt side. I heard during the call that you're doing a CapEx of around INR 500 crore during the year. Correct, sir? How are we going to fund that? Look, you know, two things. One, we have raised equity. Right, sir. Part of the funding will be through equity, and part would be debt. Internal and external. also internal accruals. Any debt equity ratio that we have, sir, we are going, we have to hand out? No, it will remain below 0.5. Okay, sir. This CapEx, sir, will be largely towards our 5G hardware related products or is there any? I tell you. Okay. CapEx largely is one, expansion of optical fiber capacity. Two, optical fiber cable capacity. Three, R&D expenses on design development of products. The CapEx is related to that. These are the three major heads of CapEx. Okay. Thank you, sir. That helps. Thank you, sir. Thank you. Participants, to ask a question, you may press star and one. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. I thank you very much to all of you for attending this conference call, earnings call of HFCL. As I said, to continue on our path of growth, three mantras we have given, new products, new customers, new geographies. We are very well working towards that. Second thing we have told that we will continue to increase our revenue from products. In terms of percentage, we have increased significantly, 27% last year to 43%. We'll keep on going on that path. Third, we have said that we are going to increase our exports. Which as you've seen that we have increased our exports INR 125 crores-INR 361 crores, and we expect to be more than double in the current financial year. We also said that we will be designing new products aggressively. We are continuing on that path. We are designing new radio products like 5G radio products, Wi-Fi, unlicensed band radios. We are designing new, transport products, routers, switches. We are designing new kind of fiber optic cables, which is predominantly required in the export market. 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. 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 parallel to that. Then the defense products, which is our diversification we have taken, great opportunity in that arena. Because of government of India's insistence on Make in India, we see great opportunities there also. All put together, I'm sure we are there for an exciting future. 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.