Ladies and gentlemen, good day and welcome to Himachal Futuristic Communications Limited Q1 FY 2023 earnings conference call. 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. Amit Agarwal from HFCL. Thank you, and over to you, sir. Good morning, ladies and gentlemen. We welcome everyone to the Q1 FY 2023 earnings call of HFCL Limited. I'm handing over the call to Mr. Mahendra Nahata, Managing Director. Thank you, Amit. Ladies and gentlemen, good morning, everyone, and warm welcome to HFCL's earnings call of Q1 of FY 2023. I truly appreciate and express my gratitude for making it to HFCL's earnings call for the first quarter of FY 2023. I'm sure that you got a chance to go through our financial results, press release, and investor presentation, which are available on the website of the company and also the stock exchanges. Friends, you must have observed that the performance during the quarter under review is somewhat below our expectation. Revenue this quarter got impacted due to supply chain disruptions, including shortage of semiconductors and intermittent gap in supply of optical fiber, which is a critical raw material for manufacturing of optical fiber cables. The revenue was also impacted due to spillover of some of the milestone-based service billing on account of non-availability of certain prerequisite infrastructure from the customer end. One of the major reasons for low margins during the quarter was fulfillment of existing orders from customers at pre-committed prices despite significant increase in price of raw materials such as semiconductors, fiber, and HDPE, etc. The increased logistics cost also impacted our margins. However, we see the revenue and margins restore to targeted levels soon, with gradual increase in supply chain and improvement in sales realization with easing of our input cost pressures. We are witnessing upward correction in optical fiber cable prices by 6%-7%. Similarly, the sale prices of telecom products is also showing upward movement in every new order being received by the company. Further, with required infrastructures being made available, the unbilled revenue will also start getting converted into revenue in subsequent quarters of the current financial year. With these positive changes, coupled with vast opportunity landscape, positioning of the company, initiatives taken to enhance product portfolio, ongoing optical fiber cable and optical fiber capacity expansion, and creation of new capacities for telecom and defense products, we expect improved and much robust performance on quarter-to-quarter basis. Our growth strategy is right on track with strongly built foundation that will ensure consistent performance in time to come. Financial year 2023 will be a revolutionary year for the entire telecom industry in India. There is a boost in demand because of government initiatives like upcoming 5G product auction, 5G spectrum auction, promoting design-led manufacturing and suitable modifications in PLI scheme, thrust on CapEx in Union Budget, continued network expansion under BharatNet and National Highway projects, and approval of 5 MHz 4G spectrum for Indian Railways. All these initiatives will lead to opportunities for us. As per TRAI, the economic impact generated by rapid adoption of 5G is estimated to reach $1 trillion by 2035. India's largest ever 5G spectrum auctions by the end of this month will be a big push for our business. The domestic optical fiber cable environment continues to be strong, and with the current market demand of optical fiber products, optical fiber cable at 35 million-40 million fiber kilometers per annum is expected to grow significantly in next three years on account of higher deployment of optical fiber cable for 5G networks, increase in fiber to home deployment, and expected start of BharatNet project, which will lead to all villages of the country being connected by optical fiber cable. There is tremendous opportunity in global markets as well. We have witnessed that the governments of leading key economies, including U.S., U.K., Germany, and Europe, are investing heavily on building robust fiber connectivity for deployment of 5G networks and fiber to home networks. The global market demand of optical fiber cable is about 500 million fiber kilometers per annum, and it is estimated to grow to 1,000 million fiber kilometers per annum over next five years. In India, BharatNet alone will lead to an opportunity of laying 16 lakh km of optical fiber cable, translating into almost 50 million fiber kilometers. We also see immense opportunities for telecom and networking products across the world, especially in markets like Europe and U.S. We have identified Europe and U.S. to be the key markets of focus on for further deepening our global footprint. We already have our employees in Middle East, France, Germany, U.K., and U.S.A. to reach out to the customers. We are also appointing distributors and agents in several other countries to further deepen our customer reach. Friends, this will. Year will be a major increase in our exports, with increase by 2.5x than the last financial year. We export optical fiber cables and telecom products to 30+ countries, serving 80+ clients globally. We aim to build our global customer relations and also export footprints expeditiously over the next three years and emerge as a large global player in the space. We already have our core leadership in place for global markets, and we will further strengthen the global team with recruitment of sales and marketing talent. During Q1 FY 2023, our exports increased by 167% compared to the corresponding quarter of the previous financial year. Innovation and R&D is our backbone to build a futuristic product portfolio, and we have heavily invested in the same to meet accelerated rate of fiberization, 5G products demand, and also tap opportunities in defense and railways. It has been company strategy to consistently increase revenue from products. You'll be glad to know that in the first quarter of the year, our revenue from products have been 59% of our revenue, which was only 43% in the financial year of 2022. Increase in product revenue will need less working capital and of course quick realization of revenue. Your company is making robust progress in the path of becoming a strong technology-driven product company. Our own R&D centers in Bangalore and Gurgaon, together with our partnership in engineering companies like Wipro and Capgemini and our investment companies are designing latest generation telecom products for us. These products include radio access network products for 5G, routers, switches, backhaul radios, Wi-Fi access points, and software-defined radios. All these products are not only having large demand opportunities in India but worldwide also. Our lower cost base and control on technology will help us in getting good market share India and abroad. The demand of company's telecom products is also expected to be robust. We expect to increase our revenue from our own design telecom products by 100% during the current year, and this will keep on going upwards in the upcoming financial years. You'll be glad to know that the current financial year we have started exporting our designed telecom products also. We have already exported these to U.S.A., U.K., and Africa, though in small quantities right now, but these quantities are expected to increase to much higher level in the coming quarters. Orders have also been received from Sweden, South Africa, and Russia also. In fiber optic cable business also, we are designing new products constantly. We're opening new technology development center in United States, apart from our own R&D center for cable and fiber in Hyderabad. We have already received approval from Telcordia in U.S.A. for our optical fiber and optical fiber cable, which will help us in exporting of optical fiber cable to U.S. market. We're also expanding our defense product portfolio. With completion of design of software-defined radio during the current year, our defense product portfolio will also get enhanced from current portfolio of electronic fuzes and optoelectronics. The PLI scheme announced by Government of India is also going to give boost to domestic manufacturing and attract large investments across announced sectors, including telecom. The recent amendments related to extended timeline and additional incentive aims towards incentivizing design and manufacturing in the center will have a very positive impact on our competitiveness and profitability. Financial year 2023 will be a year of transformation for HFCL as well as we will focus on building our capabilities across all businesses and improving our organizational capability. We'll continue to build our organization for sustainable profitable growth and leveraging on the upcoming opportunities in telecom, defense, and railways. Our mission is to transform as a technology-driven enterprise that innovates and manufactures for both domestic and global markets, and we aim to become a multinational players in cable and telecom and networking products. Our strategic priorities are capacity expansion, product expansion with clear focus on margin accretive products, and expanding our global footprint. This quarter also marked with HFCL securing regular purchase orders from our marquee customers. Anticipating the huge demand in India and globally, we are undergoing capacity expansion both for optical fiber and optical fiber cables. On completion of our ongoing capacity expansion program, our optical fiber cable capacity will increase to 34.7 million fiber kilometers from the current capacity of 24.7 million fiber kilometers per year. Optical fiber capacity will increase from 10 million fiber kilometers to 22 million fiber kilometers on annualized basis. The phased capacity expansion will increase competitiveness, help reduce operating costs, and increase margins and profitability. Our priority of product expansion with clear focus on margin-accretive products has led to share of products rise from 43% during FY 2022 to 59% in Q1 FY 2023. This shift will continue with margin-accretive products followed by expanded capacity of optical fiber, optical fiber cable and FTTH segment, and development of new product in telecom and defense segment. Friends, let me now brief you on key performance metrics of Q1 FY 2023. Revenue in Q1 FY 2023 stood at INR 1,051 crores as compared to INR 1,183 crore in Q4 FY 2022, and INR 1,207 crore in Q1 FY 2022. EBITDA for the quarter stood at INR 130 crores as compared to INR 150 crore in Q1 FY 2022, and INR 191 crore in Q1 of FY 2022. EBITDA margin stands at 12.37% for Q1, as compared to 13.02% of Q4 FY 2022, and stood at 15.82% in Q1 FY 2022. Q1 FY 2023 profit after tax stands at INR 53 crore as compared to INR 68 crore of Q4 FY 2022 and INR 91 crore of Q1 FY 2022. Trade margins stands at 5.04% in Q1, as compared to 5.75% in Q4 and 7.5% in Q1 FY 2022. Segment revenue from telecom products during the quarter stood at INR 620 crore, that is 59% of our revenue, as compared to INR 585 crore, that is 49% of Q4 FY 2022 revenue. Finally, I would like to reiterate our business priorities for upcoming quarters. We aim to continue our strategic priorities related to business transformation with focus on capacity expansion of product portfolio, telecom, defense and railways, focus on margin-accretive products, and expanding global markets. Backed by investments, innovation and R&D, financial year 2022-2023 will transform HFCL, ensuring sustainable growth in revenue and profitability. We are already witnessing product inquiries from our customers. We leverage our core strength in new product design and strong customer relations as we plan to capitalize on the vast business opportunities present both in India and globally. Thank you once again for your keen participation. With this, I conclude my opening remarks and open the floor for Q&A session. Thank you. 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 touchtone phone. 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. The first question is from the line of Hardik Vyas from ET Wealth. Please go ahead. Can you hear me? Yes. Please proceed. Sir, I would like to know how has been the optical fiber prices for the quarter and the delta between the fiber prices and OFC for the quarter actually. Hardik, your voice is not clear. Can you repeat your question? I would request you to speak on the handset rather than a headset. Okay. Sir, is this clear? Clearer? Better. Sir, what are the optical fiber prices for the quarter and how has been the delta between optical fiber and optical fiber cable prices for the quarter? Hardik, optical fiber prices currently, you know, hovers around INR 425-INR 450 per fiber kilometers. In fact, they have risen sharply from the last financial year. Now it seems to be stabilizing, you know, that I don't foresee any further increase in the prices. They seem to be stabilizing. Have the optical fiber cable prices also moved up in tandem with them? I'm coming to that. Okay. Optical fiber cable prices, if you look at, in our case, you know, it may vary from manufacturer- to- manufacturer and, you know, depending upon composition of cable, what kind of cable people manufacture. Okay. It's around INR 1,000 per fiber kilometers, as against what used to be about INR 880 per fiber kilometers in the Q1 of the last financial year. The upward movement has been more or less the same in percentage terms for both optic fiber and fiber cable. No. Fiber has been much higher. Much higher. Much higher. Okay. That has been hampering our margins. Yeah, because possibly last year we used to purchase even at INR 260-INR 270 per fiber kilometer. Yeah. Which has gone up to INR 425-INR 450. That increase has been much higher, and not only that, prices of plastics, you know, also increased significantly, which is the second highest raw material required for manufacturing cable, HDPE, LDPE, PBT. All these also increased significantly with increase in the crude prices. These have also started, you know, coming down now. They are seeing a downward trend. That is also a positive factor. There are positive factors like, look, one, fiber prices have stabilized. Okay. Cable prices have now gone up because, you know, increase or decrease in the prices of finished product follows two or three months later than the increase or decrease in the prices of raw material. Now the cable prices, you know, from the last quarter to this quarter, current quarter, I am talking about ongoing quarter, they increased by 6%-7%. What I am saying this, thousand would be 6%-7% better in the current quarter. In the current quarter. They have already started showing an increase. There is follow-on now. HDPE and all these prices have also started coming down. Mm-hmm. This quarter is expected to be better. This quarter and going forward, it is expected to be better. Okay, fine. Absolutely. Absolutely. Second question is, we are staring at a huge opportunity in terms of 5G. The spectrum auctions are slated to happen very soon. Tomorrow. Tomorrow, yeah. What my question was, X, the spectrum fees for the telcos, what kind of opportunities are, what kind of size are we looking at for the orders flowing in from the telcos and other things for 5G? Look, you know, auctions are happening for tomorrow, and I think government has given good payment plan to the operators, you know. Prices may seem to be higher, but the payments are to be made in 16 years. If somebody buys, you know, 1 GHz of millimeter band and 100 MHz of mid-band, which is almost, I think, the maximum allowed, maybe a little bit more, people will pay about INR 40,000 crore. Now INR 40,000 crore is to be paid in 16 years. There would not be stress on the, you know, cash flow of the telcos as much. Okay. Okay. Okay. Okay. However, network expansion is going to happen, and they will have to invest in CapEx. With the investment in CapEx, I expect that the products which we are having under design and which are expected to be in the market in the current financial year. Okay. We will see a very good demand opportunity. I'll tell you which segments. Mm-hmm. One, fiber optic cable. With 5G network, you know, more and more base stations, the towers which you see, have to be connected over fiber optic cable because the higher throughput, use of microwave radios would be less, use of fiber optic cable would be much more. Therefore, the capacity of the fiber optic network has to be increased manifold. That would see a huge demand opportunity in fiber optic cable. You know, advantage that we have, almost 50% market share in the country, 50%. This increase in demand, large portion of this, I believe, will be available to HFCL, and that would be a major boost to our fiber optic cable business, wherein we have been increasing our revenues consistently over the years. This current year also, we foresee increase in our revenue in fiber optic cable segment significantly. I think last year it was, if I'm not wrong, it was about INR 1,700 crore in the last financial year, which we expect to increase to roughly about INR 2,300 crore. Last year, from INR 1,780 crore, we will increase to INR 2,300 crore in the current financial year. However, large portion of this increase will come from the export market also. Because we see significant increase in export in our fiber optic cable business, again, because of 5G, which is happening not only in India, but happening worldwide. One is the fiber optic cable. Second is the 5G products which we are designing, which includes the radio access network, which includes routers, which includes switches, which are required not only for 5G, but other areas also. There again, as we have seen in our Wi-Fi and backhaul radio business, where we got significant demand from domestic operators, we foresee significant demand from domestic operators for 5G products also. This is going to be a great year in terms of demand opportunities of product which we are manufacturing and which we are designing. To translate to a opportunity in terms of revenues for us immediately as in when the auctions happen and from the second half of the current financial year or for the next financial year. Look, you know, I would not like to give any forecast or any guidance in terms of that, but I think revenue, sorry, order to be received. Okay. would be reasonably large in number. That would be more or less within a year or two, right? Would it be very much in the future as in three years, four years later? It would start from now, and it will continue over the years, because network expansion does not happen in a year. It continues. Okay. Like 4G network started in 2011- 2012, and it is getting expanded even now in 10 years. This network expansion will keep on happening. Okay. I don't see any dearth of demand for next five years to come. You know, either 5G or FTTH, you know, some other form of network expansion will keep on happening. Okay. Sir, my last question is on our defense product portfolio. How is that coming along, and when do we feel that will translate to revenues and also for other telecom products other than Wi-Fi and routers? Look, you know, one, in terms of defense, as you know, defense takes a longer time because the testing processes and all, they are so long. I see, as I've been constantly telling you know, I don't see any larger revenue coming from defense in the current financial year. We think they will start flowing from the next financial year. Not in the current financial year, because defense, processes and procedures are very, very long. In terms of other products, which we, I described just now, 5G and all that. Yes. Yeah. Yeah. I believe that, you know, from the last quarter of the current financial year and starting from, in a big way, in the next financial year, it will start flowing in. Okay, sir. Could I get the breakdown of our order book in terms of optical fiber exports and services? Just give me one moment. Since you have asked the details. Our total order book is about INR 5,058 crores. Okay. Out of which, optical fiber cable is around INR 800 crores. Mind you know, optical fiber cable. No, sorry, it's not INR 800 crores. Yeah, yeah. INR 974 crore. Sorry. Okay. INR 974 crores. You know, we keep on receiving orders of fiber optic cable. Yeah. We keep on receiving orders, so it's not going to be that, you know, it's INR 974 crore for the whole year. You know, we keep on receiving. While we supply, we keep on receiving orders. Yes, I understand. Defense network, which you are laying down, is about INR 2,300 crore. Okay. You know, the projects which we have undertaken for execution. Mm-hmm. For Jio, majorly Jio, about INR 1,000 crores. Okay. Some product orders from Indian Railways, which is about, you know, which includes products and installation commissioning of them. Okay. Certain other telecom products which we are manufacturing, all put together will be roughly about INR 500 crore. Okay. BharatNet, which we are doing and certain miscellaneous is about INR 500 crore. This all put together is INR 5,304 crore. INR 4 crore. Okay, sir. Thank you so much and all the best. That's all from me. Thank you. Thank you. Thank you. you. The next question is from the line of Pranav Kshatriya from Edelweiss. Please go ahead. Yeah. Hi. Thanks for the opportunity. I have three questions. Firstly- Mr. Kshatriya, I would request you to use your handset. You're not audible. There is a static from your line. Okay. I would just want to know how the margins in between product and You're not audible, Mr. Kshatriya. The last quarter or last year, and how things are. Mr. Kshatriya, you're not audible. Going forward. You did talk about some of the cost pressure easing and, you know, the prices for the end product increasing. Can you tell us that, you know, how do you see the margin going forward, for how would that change? Will the margin improvement be gradual, or- Mr. Kshatriya, we couldn't hear you at all. Hello. Hello. Operator, I just, you know, I could follow what Mr. Kshatriya- Okay, sir. Please do. Somewhat, Pranav. You know, your line was very bad. You know, so whatever I can understand, you know, whatever I've understood from you, I would try my best to reply. You know, our EBITDA margin in the current quarter has been 12.37%. Now, with increase in the prices of our sales realization and some decrease in the cost, I think our EBITDA margin should go up by about anywhere around 3%-4% in the coming quarter. 3%-4% will be going up. This will be happening with the increase in the product prices and also decrease in the cost of what, you know. In the product segment of our business, I expect 3%-4% increase in our EBITDA margins, going up, going forward. Okay. I also wanted to understand, you know, how the export contribution increased quite dramatically. Which countries, which orders or, you know, what exactly is contributing it and how sustainable is this? Where do you see, you know, export contribution eventually settling? Yeah, yeah. Export, you know, majorly, you'll be glad to know that we are exporting quite a bit to all good economies and developed countries. This speaks of the product quality we do. In fiber optic cable, which is the major export revenue, because the product revenue has just started flowing in the current quarter. We export to Middle East, which includes Dubai, Oman, such kind of countries. We export to France, Germany, United Kingdom and several other countries, but these are some of the countries. Portugal, you know, these are some of the countries I'm trying to mention. We have now received approval from United States also, so we will be starting our export there also. Our last year, we exported about INR 300 crore. This year we are looking at making it at least INR 750 crore, which is going to increase further in the coming years. We are putting a huge, you know, importance on the export of our products. This year it will not only be fiber optic cable, but it would be our products also. Product also we have started creating infrastructure for sales and marketing in Europe right now, and are recruiting couple of people and putting up agents and distributors for certain products, you know, like Wi-Fi and all that. They are sold by agents and distributors also in some other countries. Good opportunity for fiber optic cable and our products also. In terms of products, as I mentioned, in a small way we have started. We have started exporting to several countries, which I mentioned in my opening remarks, and this will further get strengthened in the next coming quarters in the increase in the revenue. Export, the places we have undertaken U.S.A., U.K., some in Africa. Orders are also there, Sweden, South Africa, Russia, for the products. Cable, as I mentioned, mainly to Europe and Middle East. Okay. Thank you so much. That's it from my side. Thank you. Reminder to all the participants to press star and one to ask a question. The next question is from the line of Sanjay Shah from KSA Securities. Please go ahead. Good morning, gentlemen. Thanks for opportunity. It was very nice to hear your promising words and understanding about the telecom industry. Coming back to our future of our company and growth trajectory, you have explained about all the coming, upcoming opportunities to us as a company and to the industry as a whole. We'd like to understand what are the challenges which you foresee ahead and how our company is going to overcome those challenges and grow further from here. Thanks, Sanjay. You know, number one, you know, as I said in my opening remarks, this quarter was an exceptional quarter in terms of increase in cost, which was contributed by increase in raw material cost, logistical cost, increase in, you know, depreciation in value of rupee which, you know, included a further increase in raw material prices. Also, you know, at the same point of time, non-billing of revenue because certain areas where customer was to create some infrastructure and then the milestone would have got completed could not happen because it was a customer's fault that he could not create infrastructure, which is starting to happen in this quarter. This all contributed for a lower performance in the last quarter. This quarter onwards, as I mentioned, sale prices have started increasing. Costs have now stabilized, rather they have started declining. As a result of that, next quarters are going to be better and better. That is as far as the performance of the current quarter and the expected performance of the next two quarters. Now, the challenge, you know, when we increase our capacity or fiber optic cable, and also we have new products under design which are getting completed, which would lead to require new markets, major challenge is, of course, to get new customers. Now, challenge doesn't mean that it's difficult. Challenge means that we have to work and create new customers in different markets. I am pretty sure, like fiber optic cable you have seen, we almost increased our export by 2.5x last year. This year again, that increased base, we are going to increase by another 2.5x. Why it is happening? Because good product quality, timely delivery and good cost base. Now, same thing is going to happen in our telecom product portfolio also, which again, we have shown in Wi-Fi and backhaul radios. In India, we got the highest market share as an Indian company, as a local manufacturer. With this lower cost base and our control over technology, we'll be able to find good customers abroad also. You know, it always remains a challenge to find customers, to deliver quality as per their expectation and keep on fighting with the competition in terms of features and all that. That we are able to do with our own R&D, because with own R&D, we can keep on upgrading our technology. If it was not our own R&D, then upgradation would not be possible. I will give you an example. Wi-Fi. When we started Wi-Fi, it was based on Wi-Fi 5 standard, then came Wi-Fi 6. We are already producing Wi-Fi 6. 6. Now Wi-Fi 7 is coming, we are already designing Wi-Fi 7. Challenge is mitigated by own R&D, better cost base and good marketing and sales infrastructure. Yes, it was really very great and helpful to understand. Sir, regarding as far as our export is concerned, the growth trajectory which you have shown is very exciting. Can you explain us that how inroads we are doing and facing the competition from other Chinese and other more players? How are our team lined up to. Are we selling through distributor or we are selling directly to the customer? This will help us to understand the inroads into export. Mr. Sanjay, first of all, Chinese competition has declined consistently and considerably. In India, for example, Chinese products are not allowed. U.S. has stopped buying Chinese products. Many European countries have stopped buying Chinese products. I was reading, you know, this is for a strategic reason because they, all the countries suspect Chinese use their telecom products for spying. I was reading one news article in CNN website, which was saying that Chinese Huawei's telecom products were designed to, you know, interfere with the strategic nuclear arsenal communication of United States. You can imagine how serious it is. Worldwide in the equipment side, Chinese penetration has gone down, which has helped European companies, American companies and Indian companies, because they were lowering prices not because of competitiveness, but because of government support for other reasons, the defense kind of strategic reasons. That competition has reduced considerably. Number two, fiber optic cable business, there has been dumping duty imposed on Chinese vendors in Europe, which has also helped us because there is, I think 22% dumping duty has been imposed on the Chinese vendors, which has also helped us because this Chinese dumping of products for strategic reasons has been stopped by governments all over the world. We don't have a problem with the Chinese at all. We are very able to successfully compete with the Chinese all over the world. This restriction on Chinese equipment has helped considerably, not only Indian companies, but companies abroad also. That was your question, sir, or any other question? No, no, it was very well explained. Only the thing was that our distribution done through dealer network or we are just directly selling the product to the customer. It's both. We are selling directly to the operators. One of the very large operator I cannot name, like, you know, customer confidentiality, based in Europe, which has got worldwide operation. We got an order very recently, and we are working with several other customers directly. Some of the products are sold through distributors also, because distributors have wider reach. In number of countries, you know, telcos buys from distributors also, smaller telcos buys from distributors also. We sell through distributors also. Thank you, sir. That increases our customer reach. You know, we are, as I said, for telecom products like Wi-Fi and all this, which are sold in the common market, we are appointing distributors all the places. Our employees which we have recruited in England, for example, who would be taking care of Europe and MENA market, the focus is on appointment distributors. Some products they have, you know, wider reach to distributors rather than one sales people. It's a mix of both. That's great, sir. Wish you good luck and hopefully looking for a very exciting year ahead for HFCL, sir. Thank you very much. Most welcome. Yes. Thank you. The next question is from the line of Neeraj Talal from MIB Maybank Securities, India. Please go ahead. Yeah, hi. Thank you for the opportunity. I had a couple of questions. First is there a difference between, you know, qualification for cables and telecom products? What I was trying to understand is that, is it faster to sell telecom products over in exports market or it is similar to what the optical fiber cable is done? Because what I understand is that the qualification process is slightly longer for the fiber and cables. Is it similar for telecom products, other telecom products, or how should we look at that? No, I think, you know, you should look at conversely. Cable would be little easier than the equipment because cable is tested for large parameters. Equipment, you know, because, you know, it's, one equipment have hundreds of components, so they are to be tested little differently in an environmental test and, you know, optical test or the radio related tests. I would say equipment side would be little longer than cable, but more or less, you know, there is not much of a difference. Equipment side may be little longer. No, because what I was understanding, so we are targeting the export markets through to distributors also. That is the reason. Is it same? We push cables and fiber also through distributors or how should one then look at that? No, no. Some of you know, some of our products are pushed through distributors also in fiber and cable, but they are already pre-qualified from the testing agencies, you know. Not that every customer needs to own approval. There are testing agencies, like I mentioned, Telcordia. Now Telcordia approval is there. Now you can go to U.S. market and say, "Look, this is the Telcordia approval." Not every customer would like to test it so on. Some of them may be. Okay. Not all of them. Got that. With regards to BharatNet Phase II, any update on that? Anything in terms of tendering? Look, yes. What I understand, government has now decided to implement it in EPC model, where contract would be given to larger parties to implement that network, including the supply of equipment. Whenever that happens, I believe Prime Minister has announced program very recently, last month in Bangalore also. DoT should come out with the tendering process soon. This is again a major opportunity for HFCL. The CapEx targeted in three-year time frame is INR 80,000 crore. In this segment of optical fiber cable, HFCL is the largest vendor in country. I see a major demand opportunity for HFCL in BharatNet whenever it happens. It should happen soon because it's a prime ministerially announced program. With the INR 80,000 crore CapEx, I won't guess about the share which we will get, but it is going to be very significant and significantly add in company's revenue and profitability. Got that. Third question is in terms of margins, do you see Phase II margins to be lower than Phase I or vice versa. Second question is, between private and public, what would be the margin differential in terms of private and public? Because where I'm going to is that as our exports are increasing, as the private share of revenues is increasing, we've seen a decline in margins. Obviously, there is some inflation issue, but then, could you comment on how do you see it? Phase one and phase two, you mean to say BharatNet or something else? Yes. Sorry. BharatNet. Look, I, you know, we cannot compare Phase I or Phase II as such, that how the margins would flow. That would completely depend upon number of factors, what kind of tender, what kind of participants, what kind of products. I won't compare Phase I or Phase II margins, but I am sure with the government's insistence on, you know, saying that they would only allow large players to participate in tenders so as to implement the network properly and good quality. Margins, I think, should be in a reasonable terms. In government tenders, you can never expect margins to be very, very high because they are competitive tenders. It would be on a reasonable level without any doubt, number one. Number two, latest trends which I have seen in private and public-private sector margins are tending to be better. Okay. I tell you why. In telecom, in public sector, the buyer is BSNL, and BSNL alone. In fiber optic cable business, you'll find there are 20 manufacturers, and BSNL opens the door for everybody, so prices go down significantly. We didn't even take any order for BSNL in the current financial year. We have not taken any order. In the last quarter when there was a tender, we did not take any order because the prices were going down significantly. That doesn't happen in the private sector because private sector doesn't open door for everybody. They believe in quality. They want quality. They want timely delivery and, you know, quantities to be supplied in time frame which they require. Correct. Some kind of specialized kind of cable which everybody does not manufacture. Okay. Of late, what I've seen, private- sector margins are better than the public- sector margins. Okay. Export also, same trend is there. As I said in my opening remarks, prices between orders received in Q1 and what are being received Q2. Mm-hmm. There's a increase in prices by 6%-7%. They are all from private sectors. Got that. 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. Very good morning. Sir, if you could talk a little bit about the Reliance Jio order book kind of declining or is there not too much to read into it given, you know, it's been higher in the past for us? Your question was what? Can you repeat the question? The Jio order book, you know, INR 1,000-odd crore that you indicated, is that kind of? It's almost. Is a low number? It's not declining. It's almost constant. We expect orders from all operators. Why only Jio? All operators when the 5G starts, we expect orders from all operators. Jio orders are not declining. We are constantly supplying to them. We are constantly supplying fiber optic cable. We are supplying unlicensed band backhaul radios. We are doing installation commissioning services for them, EPC services for them in entire North India for fiber optic cable and FTTH. I believe whenever the 5G happens and whenever they buy, we being a reliable and quality supplier, we expect them to keep on you know bestowing with better orders. Of course, we have to be qualified. We have to be, you know, qualified with good quality, and we have to have a reasonably good prices, you know, competitive prices, and which we have been maintaining with them since last ten years, good quality, timely supply and competitive prices. We should be able to do that in future also. Great. Nice to hear that. Also on continuing the theme, the 5G ordering cycle as such, have companies made inquiries of you? I would imagine there would have been some inquiries leading into the auction. Well, you know, as I said, our product offering for 5G would be coming around, I would say October to December. We will be approaching them. Now we will be starting approaching them. Okay. That, look, these are the products, these are the specifications. From then onwards, we will start having a serious discussion with them. Oh, okay, sir. Understood. Thanks for that. Also, if you could just give a couple of numbers, the CapEx for this year would be what, the expectations would be, if you could clarify that. If you could also give me the receivables and the inventory number, working capital number this quarter end. Look, you know, our first question is the CapEx, which is going to be about INR 450 crore this year and next year put together for optical fiber and optical fiber cable expansion. This is not only this year and next year. Expenditure on R&D is going to be about INR 150 crore in the current year. Okay. What would be the working capital numbers this quarter? That would be all from my side. Working capital numbers means, can you clarify what do you mean by that? Yeah, I mean, inventory, receivables, any components of the. Receivable is 170 days right now. Okay. Inventory is about 50 days inventory. Okay. Nothing, no significant movement from the March numbers as such. Look, you know, if you look at the number of receivable days, it has gone down. Okay. If you look at the numbers of the same quarter last year, it was 195 days. Oh. It has gone down to 174 days now. Oh. Inventory, again, hovers around the same, you know. Okay. Sometimes 45, sometimes 57, 40. It all depends upon situation to situation. Great. Very nice. Just a clarification. You mentioned about the European telecom operator with a global footprint. Did that order come in in Q1, or has it come in in the last few days in Q2? No, it has come in Q1 and Q2 both. Q2 both. Okay. Do we expect significant growth or it's still early days? We expect significant growth, not only from this player, from number of other players also. Okay. Great. You know, with this growth only, I'm talking of increasing the export of 2.5x, you know. Right. What was INR 300 crores? Right. I'm saying that we'll go by 2.5x. That trend has started from the Q1 itself. Of course, the profitability was less because of the reasons I mentioned to you. But now the profitability is going to be better, and the order book is there. Order book for export, order book for fiber optic cable is already building up. You know, our problem right now is the capacity constraint, not the order book. That is why we are increasing our capacity. That will increase our revenue and profitability both. Great. Many thanks and all the very best. Thank you so much. Thank you. Thank you. The next question is from the line of Chetan Shah from Jeet Capital. Please go ahead. Yeah, hi. Congratulations, sir, on a lovely set of numbers. Just one specific clarification. You mentioned that our margin can go up by 3%-4%. Do you mean by company as a whole, or you are talking export in specific? If you can give- No, I said that 3%-4% will go up in the product segment. Product segment. In the product segment. Okay, got it. Sir, my next question, which is broadly to get. I know you alluded to in great detail in my previous colleague's questions, but I'm just trying to understand. Sir, if you look at it, our segmental revenue and a break-up, our EPC business side capital employed is increasing sequentially over the last four, five quarters. Our revenue is more or less flat and actually declining. Could you just kindly help us know where are we building the capacity in terms of some future opportunity? One part is that. Second, by end of August or so, we'll have a clarity on our entire 5G auction, and then, all the three private and one public player will start rolling this out in next 12 months-15 months, in a major geography across India. In terms of the size of an opportunity, I'm not asking HFCL in specific, but as a outsourcing opportunity from this telecom operator, what can this quantum or a number may be and, where you think our pie will be? That will be very helpful, just to get a sense of opportunity in next two years time horizon. Okay. Now, what I estimate is that expenditure for, you know, by telcos in 5G networks and also expansion of 4G networks also. BSNL, for example, is now going to put 4G network. Right. They will go to 5G also. New 4G network, expansion of current 4G networks, that is also going to happen. The 5G networks by three private telcos, then the fourth BSNL eventually. It's all going to lead into market opportunity or the demand increase in various segments of telecom. Fiber optic cable to start with. Passive infrastructure, you know. Passive infrastructure, tower, AVO, you know, all they would be required to put everything else. Small cells, because of the higher coverage required and the lower coverage of 5G because of higher frequency band. Equipment for 5G. Equipment which are, you know, common equipment, 4G, 5G, like, switches, routers, all these are required to have a massive quantities. Minimum expenditure which I expect, this is my expectation, in the 5G networks in four-five years by Indian telcos is going to be INR 300,000 crore. Got it. Our market share, I can't have a guess on that. I think, you know, with the products we have, fiber optic cable, where we have a dominant market share. We have a good market share in execution of services for the good clients. We received a order very recently. Reliance Jio, we are executing at all points in time, we have been executing network for them since last seven-eight years. We'll keep on doing that. Our positioning in cable execution and the products like Wi-Fi, unlicensed band radio, I think will continue in the same manner for 5G products also. You know, there's no reason why it should not be happening. I believe, you know, with this good positioning and CapEx by telcos, HFCL will gain immensely. No doubt about that. Got it. Sir, my question about that, increasing in capital employed in EPC business, but the revenue is not reflecting that. If you can give us some idea on that, please. Capital employed has not increased. You know, revenue has gone down in the last financial quarter. Because of the reason I explained to you. Sure. Services could not be built. That was the problem. Got it. Sir, one last question from my side. This is more of a technical understanding, and pardon my ignorance on that. I'm just trying to understand, sir. Sir, once this 5G rollout happens, and I'm just fast-forwarding two years from today, do you think that this Wi-Fi and Wi-Fi related equipment network, which we are already working in terms of R&D side, can have a major upgrade required? Because in India, most of the routers and equipment for the Wi-Fi, which most of the people, we in our office or home and all, are using for last five, six, seven years. Does the need of replacement of this equipment also creates a very different set of opportunity or that is too much to think as of now for me? Sorry, I'm not a technical guy, so just trying to understand. I can tell you. You are asking technical questions. You may not be technical, but you are asking technical questions, which is good. Right. You know, look, 5G and Wi-Fi, there are different standards which Wi-Fi has to upgrade and to be compatible with 5G. I have been telling in my previous interactions with the shareholders also and now again. Compatible standard with 5G is Wi-Fi 7. Till now we are working on Wi-Fi 5 and Wi-Fi 6 now. Now 5G compatibility will be Wi-Fi 7. We are already working on Wi-Fi 7, and very soon Wi-Fi 7 products will be out. Compatibility means the Wi-Fi has to match the throughput of 5G. Correct. If 4G throughput were lower, you needed Wi-Fi 6. 5G throughput is higher, you need Wi-Fi 7. We are already on Wi-Fi 7. Particularly when you see that, you know, from outside 5G signal is coming, inside how it is to be distributed. It can be distributed by 5G small cell. It can also be distributed by Wi-Fi 7. Depending upon what kind of requirement. In a home kind of a requirement, one would use Wi-Fi 7. In an enterprise kind of a requirement, you need higher throughput and all that. You would use small cells for 5G. As HFCL, we are designing Wi-Fi 7. We are designing indoor small cells for 5G. We are also designing outdoor small cells for 4, 5G. All the products we are covering, whatever customer needs, we will be able to supply. Got it. Sir, my last question on the export business. You said that will be 2.5x of our number eventually. Sir, just to get a sense, because China is now no more a very reliable customer for a lot of people in terms of the equipment and also in terms of the rollout. If we look at the two large players, Tata and Reliance, both are saying that we will be likely competitors to roll out the telecom equipment itself over a period of time on a global side. Do you think that we will also be one of the beneficiaries of that thing, if at all it happens on a larger and a bigger scale, the way Huawei did in the last decade or so? Look, you know, Chinese, as I said, you know, are getting restricted world over, very restricted. Right. Because of the strategic reasons of their spying through telecom networks. You know, as I said earlier to answer one of esteemed participant. Chinese are, you know, declining because of the reason I explained. Now, Tata and Reliance, of course, you know, it is good that more indigenous vendors comes up. But the global demand is so big. Global demand is so big, you know. Few other more number of players would not really matter at all, you know. Kind of numbers we are looking for ourselves, you know, INR 1,000 crore, even if you say INR 1,000 crore, what is, what it is in terms of billions of dollars of global demand, it is neither here nor there. That is why I'm saying our export, we will be able to increase significantly in the coming years because of huge global demand of cable and other equipment. You know, our strong push on export is precisely for this reason. This is huge demand opportunity. Till now we have not been present in the global market to that scale. Still we were having good revenues. Now to further increase the revenues, we are not depending upon the Indian market. We are increasing our presence in the global market. As you see, last year we had a 2.5x increase. Now on that 2.5x increase, we are going to have further 2.5x increase in the current year. Right. Thank you so much. It is always a very helpful and informative interaction with you every quarter. Wish you all the best, sir. Thank you so much. Thank you. Thank you. The next question is from the line of Pratik Singhania from SageOne Investment Managers. Please go ahead. Hi, sir. Good morning. Thanks for the opportunity. My question would be with respect to the near term pricing scenario, given the global demand and supply of- Pratik, your voice is very, you know, echoing. Speak from there instead. Yes. Sir, we have lost the line of Mr. Pratik. We will take the next participant, whose name is Ashutosh Koti, an individual investor. Please proceed. Good morning, sir. With reference to our presentation, slide number 4, page number 4, where we are talking about public telecommunication, we are talking at 79% of revenue, defense communication as 19%, and then railway communication is 2%. Vis-à-vis page number 8. Now, over there we are talking about current order book as public telecommunication INR 1,519 crore, INR 2,354 crore and INR 381 crore. If I try to correlate both of them, bit of a confusion. No, no. You know, the difference is revenue and is the orders. Orders keep on coming, so ratio between orders and revenue would always remain different. Okay. This is what is happening now. Revenue, which has happened in the past. There would always be difference. They can never match. Does that mean that defense is now heading ahead of public telecommunication, defense communication in electronics? Say that again. Does that mean that defense is heading ahead of public telecommunication spends or the order, why so? Our order book would be more from the private operators. Moving forward, new orders coming would more be from private operators. Okay. Private- operators India and globally, not only India. Okay. Sir, with regards to overall our revenue mix, what we have shown as 59% as product and projects as 41%. Within that, if I want to break it up into exports, product exports, project exports, and local, is that possible? You know, our export revenue has been INR 184 crore in the- Right. First quarter, you know, which is the completed products out of 1,061 with the total revenue. Okay. Our margins are much better off in exports Vis-à-vis local or is it better off in local? It's not like that. You know, it all becomes order to order. In the first quarter, as I said, this, what impacted us more in exports in some cases because logistical costs went much higher in the exports, you know, on the CIF orders because of the container prices become high, the rates become higher. There was higher impact on the exports than the local where the containers and all these were not the issues. Going forward, how much of Now you know of course we have seen, as I said, 6%-7% in the export prices in the current quarter. Okay. How much we are going to take the benefit of PLI? PLI, we will be taking significant benefit. We are, we have applied, but we are applying again in the newly announced scheme, and we will be taking full benefit of PLI. The numbers I can't tell you at the moment because in the next four or five years, but it will be significant amount of benefit, significant amount. Till now, how much we have bid for in tendering system, government tendering projects, what is our participation in terms of value? We have bid in the defense sector. Then couple of, majorly in defense sector. There is no bid in the public government telcos. There's no bids pending. I think maybe one bid is there in the BSNL. One bid for some router or something is there, but not much. In value terms, sir. Value, how can I tell you value for the bid we have put? I mean, sir, we have put, we have bid for INR 5,000 crore, INR 10,000 crore, INR 2,000 crore. It may be in the vicinity of. Defense tenders could be in the vicinity of something like INR 5,000 crore or more and, something like that you can say total. Okay. Sir, with regards to fiber optic cables, Sterlite Technologies and some other players, Finolex, where do they stand in terms of competition with our company? Well, how can I talk in front of competition? I respect all the competitors. I respect all of them. They also are good people, good companies, good quality, good competitors, and we respect them. We are way ahead in terms of our share of the market. Domestically, yes. Yeah. Domestically, yes. Okay. Thank you, sir. Thanks a lot. Thank you. The next question is on the line of Pratik Singhania from SageOne Investment Managers. Please proceed. Yeah. Hi sir. Am I clear now? Yes. Yes, you are right. Sir, my question was with respect to near-term pricing based on the global demand and supply of fiber capacities. Because what I hear is, like, China is not adding capacity. Prysmian, Corning's capacity has been fully booked for next two-three years. And because, like, your capacity would also take like some time. What is your sense on the pricing in the near term, say around six-eight months? I think prices are going to remain same. It's not going to increase. People are adding capacity in China also. Why they are not? They are adding capacity. I think everyone is adding capacity in fiber. Not that they are not adding. Everyone is adding. Corning, Prysmian, I don't know because Corning at least don't talk about their capacities. In China people are adding capacities. We are adding capacities. Other Indian vendors, I don't know, but Sterlite, Birla Cable must also be adding capacities because capacity in fiber is being added because the demand of fiber is expected to increase in next five years. In our estimation, this 500 million will go to almost 1,000 million in next five years. Okay. Prices I think going to hover around this. Currently global market price is roughly about $5, above $5, which is going to remain around the same. It had gone up to $5.2, and then, you know, it's depending upon manufacturer to manufacturer time between $5-$5.2. This is what is right now. Okay. Sir, in the PLI scheme, of course, like, you won't be able to share the exact detail, but most of the companies that we have seen that whatever is the CapEx amount, at least that they are able to recoup over next five years after the investment is made. Would that be a ballpark case for us? That should be a ballpark case. Yes. Okay. All right, sir. Thank you so much. All the best. Thank you. Thank you. Ladies and gentlemen, due to time constraint, please limit your questions to one per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead. Namaskar, sir. Just to sum up of what you have spoken and elaborate, then just to make some good sense and correct me, this is one quarter in which the impact of higher input cost in terms of logistics has played its part in lower margins and also, with some disturbance at our client end, some deliverables which were scheduled for this quarter will spill over to the next quarter. Going forward, we are seeing and Kapoor, you basically summarized what I said in my presentation and question answer. You are right. Yes, sir. I was just trying to make good sense of that. Sir, when you spoke about the turnover for OFC cables looking at around INR 2,300 for this year, what have been the OFC contribution for the first quarter? Uh. OFC sales. Yeah. Revenue should be around. I think it was over INR 500 crore, if I'm not wrong. It's around INR 500 crore. Around INR 500 crore. This is INR 530 crore to be precise. 530. It should be in this vicinity of INR 500-INR 600 for the remaining quarters to reach INR 2,300. That should be an idealistic number. You can say that, yes. Yes. Sir, when we look at the purchase of stock-in-trade component that has gone up in- One question at a time. Let others join and you come back. Sir, I was in the queue for a long time. If you complete, I'd come in the queue, sir. Just a purchase of stock and trade part component has gone up considerably for this quarter incommensurate to the turnover. If you could explain the same and I'm coming in the queue. Thank you for all the detailed answers. It's a pleasure to hear in this call, sir, than to ask questions. Thank you. Saket Kapoor, purchase of stock-in-trade is nothing but the outsourced materials which are procured for execution of various contracts in hand. See, fiber cable we are manufacturing, so wherever cable is required that is in-house supply. Other than cable, lot of materials are being outsourced. Right, sir. I'll come with a follow-up, sir. Thank you. Thank you. As that was the last question for today, I would now like to hand the conference over to Mahendra Nahata for closing comments. Thank you, gentlemen. Thanks a lot for your keen interest in HFCL and making yourself available for this conference. I express my gratitude, and I can assure you the company is in good trajectory of progress with this increase in capacities, increase in product range and increase in customers, new customers, new products, new geographies. All three are happening at the same point of time. I'm sure the performance of the company in coming quarters would be in the expected trajectory which we had planned for ourselves. The pressures which came in the Q1 are no longer visible. There should be improved performance in the coming quarters by the company. Thank you very much. Thanks a lot for being with us. Thanks a lot for your time. Thank you. On behalf of Himachal Futuristic Communications Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.