Ladies and gentlemen, good day, and welcome to Q3 FY 2024 Himachal Futuristic Communications Limited conference call, hosted by ICICI Securities. 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. Mohit. Please, over to you, sir. Yeah. Hi, good afternoon, and thank you everyone for joining us for this call. In this call, we have Mr. Nahata, Promoter and Managing Director of the company, Mr. V.R. Jain, CFO, Mr. Manoj Baid, Company Secretary, and Mr. Amit Agarwal, Head of Investor Relations. So without further delay, I would now hand over the call to Mr. Nahata for the opening remark, and then we will open the floor for Q&A. Thanks, and over to you, sir. Technical glitch at the end of the conference call, which has caused this delay. I'm truly sorry for that. Good afternoon once again, ladies and gentlemen, and welcome to HFCL's earnings call for the Q3 and nine months ended December 31, 2023 of financial year 2024. I truly appreciate and express my gratitude to all of you for making it to today's earnings call of the company. 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 on the website of stock exchanges. To begin with, I would like to express immense satisfaction in witnessing the resilience of Indian economy. India growth story remains intact, despite a subdued global growth outlook. Global economy suffered weakest half decade performance in last three decades, said the World Bank in a recent report, and warned that global growth in 2024 is set to slow for a third year in a row. Among this, Indian growth story is promising, and World Bank sees India retaining the fastest growing major economy title. It forecasts a growth rate of 6.4% in FY 2025, accelerating to 6.5% in FY 2026. India has witnessed an extraordinary decade, making significant progress on innovation led by technological advancement. India's telecom market is now the second largest in the world. Our telecom industry is currently valued at $48.61 billion, and we expect it to reach $76.16 billion by 2029, growing at a CAGR of 9.4% during the forecast period of 2024-2029. India's digital public infrastructure is testimony to its technological progress, and we are well poised to become a global leader in information and communication technology and becoming a global digital powerhouse. The ongoing digital revolution and investments in building a robust 5G network makes us optimistic about significant upswing in the demand for fiberization, both India and globally. This heightened demand is further fueled by increased government focus on fiberization, including BharatNet project, the expansion of fiber to home networks, a qualificatiion of data centers, wide-scale adoption of cloud computing, the rise of Internet of Things, investment in 5G CapEx, and the continuous improvement of telecom infrastructure in key global markets, that is India, U.S., U.K., France, Germany, Middle East, and other nations. From being an importer of telecom technology, India has taken a significant step and leap in developing technologies indigenously. KPMG estimates the three technologies, 5G, 6G, satellite communication, and semiconductors, collectively will add $240 billion to the Indian economy in next five years and add 1.6% of India's GDP by financial year 2028. Government initiatives like BharatNet, implementation of fiber to home, PLI scheme, and growing demand for high-speed 5G connectivity are further fostering indigenous manufacturing, as a result of which India is fast becoming an attractive global investment and manufacturing destination. As our company aggressively moves towards a product-centric approach to embark on a transformative journey aimed at amplifying our global footprint and solidifying our position as an industry leader. With a strategic shift away from project-centric endeavors, we are proud to unveil an array of innovative telecom products tailored to meet the diverse needs of both domestic and international markets. This strategic evolution underscores our unwavering commitment to deliver excellence and customer satisfaction, indicating a new era of sustainable growth and expansion. By harnessing cutting-edge technology and leveraging our deep-rooted industry expertise, we are poised to captivate global audiences with solutions that transcend geographical boundaries and redefine the benchmarks of excellence. Embracing an export-focused strategy, we are trying to unlock untapped opportunities, forge strategic partnerships, and establish a formidable presence in key markets worldwide. Here, with a sharp focus on innovation, HFCL unveiled a comprehensive suite of next-gen tech connectivity and 5G backhaul products, like fixed wireless access equipment, MPLS routers, point-to-point unlicensed band radios, and unified cloud network management systems during the India Mobile Congress 2023 for both India and international markets. We also launched 1728 high fiber intermittently bonded ribbon cable, promising high speed data transmission, expansion of FTTH connectivity, and addressing the demand of hyperscale data centers in Indian Mobile Congress. As per NASSCOM, 45 new data centers covering 13 million sq ft are expected to come up in India by the end of 2025. HFCL is well positioned to capture the growing impetus from data centers with the launch of its 728 high fiber IBR cable. Before launching our telecom and communication products in Q3, HFCL is poised to transform its impact in the defense sector as well. HFCL, through its 90% owned subsidiary, Raddef Private Limited, a R&D enterprise specializing in cutting-edge radars and RF solutions, have designed a range of surveillance radars tailored to meet diverse operational needs. These radars employ frequency modulated continuous wave technology, offering numerous advantages over other radar technologies, which includes high accuracy, low power consumption, light weight, and resistance to interference. HFCL is also actively engaged in the development of state-of-the-art drone detection radar, poised to be an important component of modern drone detection system. HFCL's ongoing cutting-edge research and development initiatives extend to a diverse range of radar technologies. This includes Doppler weather radar, threat emulators, LTE-based passive radars, fog and foliage penetration radars, coastal surveillance radars, avalanche detection radars, altimeters, and more. HFCL received an advanced purchase order aggregating to INR 1,127 crore to transform the optical transport network infrastructure across BSNL's pan-India network. Within the dynamic landscape of India's technological evolution, HFCL stands unequivocally at the forefront of innovation and progress. Our order aimed at revolutionizing BSNL's optical transport network is a testament of our unwavering commitment to advancing the nation's technological prowess. Our comprehensive network upgrade will not only address the heightened demand of enterprise and FTTH and broadband services, but strategically positions BSNL for the seamless launch of 4G services and the anticipation of 5G services. Another very significant achievement is the receipt of INR 623 crore order during the current quarter from a leading telecom service provider for 5G telecom networking equipment. This is first such large order for 5G networking equipment placed on any Indian company by any telecom service provider. This strategic win is a testament to HFCL's vision of designing and manufacturing high technology telecom equipment in India. The newly secured order underscores HFCL's commitment to providing cutting-edge solutions tailored to the unique needs of telecom landscapes. Moreover, with enormous export market potential, these indigenously developed products are in line with the country's Make in India for a global scale vision. HFCL, with its strategic variety, position to not only boost revenue, but also enhance profitability, leading to increased returns for the shareholders. In recognition of our superior quality products, HFCL has secured total orders exceeding INR 1,700 crore from its customers in the last few months. With these new orders, the current order book of the company as on 31st December 2023, stands at INR 7,678 crore. Moreover, HTL Limited, a subsidiary of the company, has secured an order from a defense PSU for supply of fiber optic expanded beam plug cable assembly. This assembly is utilized for the 3D Central Acquisition Radar, a medium-range, high-resolution surveillance radar designed to detect and simultaneously track multiple targets in hostile environments. HTL has already established itself as a go-to wiring harness supplier for a leading OEM, with the largest supplier of logistical vehicles to the Indian Army. HTL's wire harness is all set to be deployed in the popular high mobility and specialized truck vehicles of the OEM that cater to the diverse needs of personnel and logistics across the Armed Forces. HTL also secured an order from one of India's leading vehicle manufacturers for wire harnesses. The order encompasses 1,282 BS6 diesel buses, intended for significant transport needs. Our Hyderabad optical fiber plant wins the Silver Certificate of Merit for manufacturing excellence in Frost & Sullivan's Indian Manufacturing Awards of 2023, alongside a Certificate of Appreciation for Good Practices in Digital Systems at the second CII Industry 4.0 award ceremony. The automotive team at HTL won the Gold Award at Quality Circle Forum of India in the ninth Convention of Quality Concept recently. Our recent order wins are clearly a testament that our strategy of moving from projects to margin accretive products, launching new products, reaching out to new customers and new geographies is paying off well and will boost our position even further in 2024. Expansion of optical fiber manufacturing facility capacities is progressing well and shall be operational as planned. In addition, the company is also in the process of expanding its optical fiber cable production capacity from 25 million kilometers to 35 million fiber kilometers. This expansion will also lead to significant increase in revenue and profitability. The capacity will be added in a phased manner, with the completion targeted by 2024, FY 2024-25. Let me now brief you on the key performance metrics of Quarter Three of Financial Year 2024. Revenue Q3 FY 2024 is stood at INR 1,032.31 crore, as compared to 1,111.49 crore in Quarter Two of FY 2024, and 1,085 crore in Quarter Three of FY 2023. EBITDA for the quarter is stood at 163.45 crore, as compared to 139.77 crore in Quarter Two of FY 2024, and INR 193.33 crore in Quarter Three of FY 2023. EBITDA margin stands at 15.83% for Quarter Three of FY 2024, as compared to 13.47% for Quarter Two of FY 2024, and is stood at 17.8% in Quarter Three of FY 2023. Profit after tax for Quarter Three of Financial Year 2024 stands at INR 82.43 crore, as compared to INR 70.17 crore in Quarter Two, and INR 101.60 crore in Quarter Three of FY 2023. That margin stands at 7.99% in Quarter Three, as compared to 6.31% in Quarter Two and 9.36% in Quarter Three of FY 2023. Segment revenue for telecom players during the quarter, quarter ending, stood at INR 363.83 crore, that is 35.24% of Quarter Three of FY 2024 revenue, as compared to INR 473 crore in Quarter Two of FY 2024, which was 42.60% of the revenue. During this quarter, our product revenue declined quarter-over-quarter basis and year-over-year basis due to the continued softening of demand of optical fiber cables. This temporary decline is in line with the worldwide trend seen in the last quarter, and it can be attributed to inventory buildup with major operators, resulting in overall reduction in revenue in absolute terms, as well, as well as lower sales realization per kilometer of fiber. Revenue of all major manufacturers of optical fiber cable has declined worldwide. We are optimistic that demand will be restored from next quarter onwards in both India and key global markets. Furthermore, we are confident that our continued efforts in designing and developing innovative and robust optical fiber cables for international markets, along with introduction of new 5G telecom network improvement, will further yield results in coming quarters. These efforts are expected to provide impetus to both revenue growth and profitability, along with potential to increase our margins. To conclude, 2024 is poised to be a transformative, transformative year for HFCL. We can confidently affirm that our strategic focus on new products, global expansion, focus on building both capacities and capabilities, backward and horizontal integration, has begun to yield positive results. Our commitment to strengthening market share and technology leadership positions remains steadfast as we continue to invest in innovation for both cost and performance benefits. Ladies and gentlemen, 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 very much. Thank you very much. We will now begin the Q&A session. Anyone who wishes to ask a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets when 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 Bala Subramanian from Arihant Capital. Please go ahead. Good evening, sir. Thank you so much for taking my question. My first question regarding 5G CapEx side. One of the Indian telco talked about the 5G CapEx is peaked out in this year, and the global level also, 5G CapEx are coming down. Like, what's your view and overall demand environment on 5G? This is my first question. So let me answer the first question. Hello? Yes, sir. Thanks, Mr. Bala Subramanian. You know, 5G, you know, when you said the CapEx has peaked out, it has to be seen with respect to the applications. 5G networks will again start growing. It's an initial stage, the 5G networks have been put on. Now, the 5G networks will grow as the new applications come in. But we find that, you know, one of the new applications that come is a fixed wireless access instead of mobility. So we then started increasing in the CapEx in that area. So as the applications for 5G grow related to IoT and other areas, medical, education, Industry 4.0, you'll find that 5G networks will again get expanded. Expansion will again take place. You know, mobility is not the only thing which will drive 5G, you know, growth. It will be the applications which will drive the 5G growth. When you find that new applications coming, the growth cycle will restart in the 5G. It's a temporary decrease, not a, you know, kind of a decrease on a permanent basis. Once the applications coming, it will start increasing again. Okay, sir. So as per our channel checks indicated, like, there's still the majority of the inventories are with global telcos and distributor levels. Like, are we getting repetitive orders and new orders from the telcos levels? And what's your view on this inventory issue, or like, when the things are expected to sort out? Yeah, I think you are talking about fiber optic cable. That you did not mention, but I understand from your question you are talking about fiber optic cable. Yes, sir. It is true that there has been an inventory built up with the telcos as well as distributors. As a result of which you would find sale of fiber optic cable has slowed down, which I said in my opening remark also, not only us, but worldwide. What had happened a year ago, in U.S. market, for example, delivery of fiber optic cable had become 7-10 months. As a result of which, telcos around the world, you know, and that was the situation in many other places. Telcos around the world had bought lot of cable, anticipating that demand would be so high that cable availability would be low, so they amassed lot of stock. So was the situation with distributors. But as it happened, Chinese demand was less than what was expected, and as a result of which, there was an inventory built up in China, which was going into the market worldwide. So that, including then inventory accumulated with the operators, led to a, the lull in the, a temporary lull in this demand. So we expect, you know, U.S. market has started looking up again. European market, we believe, would start looking up again in next one or two quarters. U.S. market, particularly with the government funding, which is being done to access the inaccessible areas of fiber, is going to pick up very, significantly in next couple of quarters. You are right, there is inventory build-up, there is a lull in demand, and that you would find in our result also that fiber optic cable sales has gone down drastically in the current quarter and in the last quarter also. But this is all expected to again come back to the normal levels in next couple of quarters. Got it, sir. Sir, right now, we are in the progress of new products on 5G. Like, right now, you mentioned about the new applications are coming up, like, when the benefits are expected to realize on this new product side? Look, you know, we have already started realizing those benefits. As I said again in my opening remarks, that an order of INR 623 crore has been received for, you know, 5G networking products by HFCL. Now, let me tell you, which I said in my opening remark also, that we are the first Indian company to receive such a large order for 5G equipment, for indigenously designed product. First Indian company to receive such a large order for indigenously designed 5G product. Nobody else has done so. So this speaks itself of our, you know, initiative, which we took to design equipment in India, keeping in view of our Make in India initiative of government. Today, we are able to receive 5G orders to a large quantity. And not only this, we'll be exporting this, these products to different countries also, as we are doing in fiber optic cable. So we have done 5G, fixed wireless access equipment, other networking equipment, routers, for example, which are used in 4G and 5G both. But specifically, the routers which we have designed are going to be used in large quantity in BharatNet, which government has already announced, and a draft RFP has been floated for industry consultation, and we expect the final tender would come out in next 2-3 weeks' time, and which would also see a large demand of fiber optic cables as well as routers. There is built a demand of about 600,000 kilometers of cable, fiber optic cable, equivalent to about 20 million fiber kilometer equivalent cable and about 160,000 or so routers, you know. All these are very large opportunities for HFCL, because these are indigenously designed products, indigenous products, and we would be more cost competitive. So not only in India, but we are going to export these products also in the coming financial year. So benefit of these products which are designed have started accruing. And, number of large orders are further expected for this indigenously designed products. And I'm sure that export also would be a good market opportunity for HFCL. Got it. So my last question regarding on the telecom product side. So last two quarters, we have reported single-digit margins. I just want to understand the, like, the lower performance because of volume driven or price realization driven. And I just want to understand about OF and OFC side realization in this quarter. Look, you know, basically a decrease in margin has been the lower sales of optical fiber cable. Because lower scale of optical fiber cable has resulted in higher cost, because the fixed costs are still remaining same. So it has been driven down by the lower sale of optical fiber cable. As the sales pick up, you know, the margin will pick up once again. And moreover, you know, for the new products which we're building, you know, five new products and all that, their margin is reasonably good, and it is expected to remain reasonably good. Okay, sir. So on the realization side, sir, OF and OFC side, like, what are the current realization in Q3? How much it changed compared to last quarter? You know, realization in fiber optic cable, if you look at the fiber, you know, the realization roughly, you know, I would say, has come down by some percentages. It has come down. Practically, if you see, the per fiber kilometer realization has come down roughly almost about 20%. What used to be in Q2, about INR 1,000 per fiber kilometer, has come down to about 1,000-some rupees per kilometer. So about 15%-20% decrease in the realization per kilometer is there. But that kind of some decline is there in the raw material cost also, particularly in case of fiber. Got it, sir. And on the OF sector, optical fiber side? Optical fiber, again, as I said, you know, the prices have come down. What used to be the prices were something like INR 350-INR 380 per km, has come down to something like INR 250-INR 260 per km. Got it, sir. Should I ask one more question, sir, or I stay coming back? I think you should give chance to others. Yeah. Fine, sir. Yeah. Thank you. Thank you. The next question is from the line of Santosh Sinha from Emkay Global. Please go ahead. Thanks for taking my question. My question is regarding the BharatNet Phase III, now the government has actually the cabinet has approved around INR 1.3 trillion-INR 1.5 trillion for BharatNet project. So are there opportunities for HFCL in areas other than optical fiber and optical fiber cable? Are there other products that HFCL can supply, and what can be the overall opportunity size for this? And what are the margins that we can expect from BharatNet projects? And, yeah, I will ask later the other question. Yeah, Mr. Sinha, thank you for your good question. You know, BharatNet is a large opportunity for everybody. All telecom players involved. It's about INR 140,000 crore, all which, but let me be clear, out of which, roughly about somewhere INR 40,000-INR 50,000 crore will be CapEx. Rest would be OpEx, you know, which would be over 10 years. So it is going to be a turnkey contract, whoever wins. There are 16 different cycles, they have carved out, and it was 16 different tenders. And, you know, maximum 4 would be given to one company, not more than that. And, it is divided in CapEx as well as OpEx, as I just mentioned. Now, a company like HFCL, what are the opportunities? One, I first let me limit it out to CapEx. One, you know, if you do EPC projects as we have been doing till now, the payment conditions are not 100% clear. Because the current payment conditions are little bit onerous on the vendors, in a sense that, you know, part of the payment would be received much later with the overall project execution. So all the vendors have represented that the payment condition need to be improved. So whatever draft tender has come, that is undergoing some changes, and we would see the final tender coming up in next 2-3 weeks' time. We'll know the payment situation then. So imagining that payment situation will improve, which I'm pretty confident of, then the opportunity, maybe we don't want to go for a very large scale opportunity for EPC projects, but yes, there are EPC opportunities, because we are trying to transform our company into product company from an EPC company. From an EPC, more of EPC-driven projects, we are making our company, not only trying, we have actually done so, to a product-led company. So one opportunity is there in the EPC business. Second opportunity is there, if you win EPC business, then there is a continuous revenue on every year basis for O&M, operational and maintenance. There will be annual revenue coming up for 10 years. Now, but the good opportunity is in the equipment side also, and the fiber optic cable side also. As I said, there is a demand of 600,000 km of fiber optic cable in this tender for 3 years. This implementation period is 3 years. So every year there is a requirement about 300,000 km of fiber optic cable. So that's a good opportunity for us. Number 2, then there is opportunity for selling fiber also. Because, let us say somebody else wins the fiber optic cable from some other EPC player, so he needs fiber, because there are not many people who manufacture fiber in India. We will able to supply the fiber. Then routers... routers is a significant part of the equipment, significant part of the equipment, although the, I think, most significant part of the equipment required, and routers are required about 160,000+ in the quantity. Let me tell you, we have designed our own routers. We are now one of the two companies who have got indigenously designed routers required by BharatNet, indigenously designed routers. Only one of the two companies, we and Tejas, which is Tata and company, they have routers and we have routers. So I think we enjoy a significant cost advantage over our multinational friends on account of our local production, and as a result of which, we should be able to have a good opportunity for selling routers also. So fiber, fiber optic cable, routers, some of the other optical equipment, we have a good opportunity coming up in front of us, and I think BharatNet should be a very significant opportunity, not only for HFCL, but all indigenous vendors who manufacture in India, and where HFCL has got a significant. Fiber, fiber optic cable, routers, other optical equipment. And then if you go to the next phase of BharatNet, which is going to be implemented not by government, but which is going to be implemented by private entrepreneurs for giving connectivity to the houses. The government is taking the network to the panchayat, panchayat building or whatever. From there on, it would be the private entrepreneurs who should be giving connectivity. They may be using Wi-Fi, they may be using optical ONTs. Again, those are the areas where HFCL is present, and those will also present significant market opportunity to HFCL. Thank you, sir, for the detailed answer. My last question is regarding the PLI benefit. So how much of the product of HFCL is actually eligible for PLI benefit? Is it only the optical fiber and cable or the other products also? And when is the first year from which this actually PLI benefit will start coming from? PLI benefit is not available on fiber optic cable. It is available on telecom equipment. We will start receiving this from this coming financial year, 2024. Thank you, sir. Thank you. The next question is from the line of Pranay Gandhi from Green Portfolio. Please go ahead. Hello? Hello. Hello. Mr. Pranay Gandhi? The next- Hello. Yes. The next question is from the line of Pranay Gandhi from Green Portfolio. Please go ahead. Hello. Sir, can you hear me? Yes,. Yeah. So firstly, I would like to express my gratitude to the management, including you, Mr. Jain and Mr. Agarwal, for accommodating our request to connect with the management on one-on-one basis in the last con call. The proactive outreach from Mr. Amit after the last conference call reflects positively on the management, and it has really helped us understand the company prospects in a better way. So thank you so much. Now, turning to my questions, I would appreciate if you could provide more details on the recent order from 5G telecom equipment secured from a domestic telecom operator. Could you elaborate on the nature of the products that the company will be supplying? And considering the fact that the INR 600 crore order is already on hand, are there any upwards revision to the projected revenue of INR 1,000 crore from this segment in FY 2025? Look, you know, equipment is 5G networking equipment for subscriber access, so wireless equipment for subscriber access. So that equipment, you know, because there are certain non-disclosure agreements, so I cannot go in more detail, but it is a subscriber access equipment on wireless for broadband on 5G. And this is secured INR 23 crore order, which has to be supplied within the next financial year or as soon as possible, if we can do it early. If we do it early, we can certainly expect more orders from our customers. And this is the demand of one customer, but we would be going ahead to sell this to other customers also, in India and abroad, both. Because this equipment has very significant demand opportunity worldwide, because fixed wireless access as a broadband access has come up as a significant use case for 5G networks. So we can definitely look forward for more revenue from this equipment in the next financial year. Now, coming to INR 1,000 crore or so, whatever numbers you're using, I think indigenously developed equipment, we should be able to do quite more than INR 1,000 crore, which we might have projected earlier. It should be quite more than that, because we are expecting more orders of reasonable size in coming weeks. We are expecting more orders, including from BSNL, including from private operators. So, I, I expect it, you know, I have no doubt that it will be significantly more than INR 1,000 crore. Okay, and so these orders would be for telecom equipment itself and not for the projects, right? No, this will be telecom equipment itself. I'm not talking of projects. Project is different. Yeah. This is telecom equipment itself. You know, because why I'm saying so? You know, one, the six will be INR 3 crore is already there. Some large orders are in pipeline, which I should be able to receive very soon. Very soon. Then, as I said little while ago, BharatNet is coming up. You know, BharatNet has got a huge demand for routers, which are again, we haven't really independently designed them, which is a very major thing. You know, we are only one of the two companies who have designed routers in India. We and the other is the Tata TCS company, Tejas. There's nobody else. All others are, you know, international, multinational companies. So there is significant demand opportunity there. Then, you know, we have a significant demand opportunity for unlicensed band radios, which are being used for enterprise connectivity, but, not only that, for backhaul of the traffic of the 4G networks. So that is also a good demand opportunity. In fact, BSNL came out with a large tender for that, about INR 200 crore, for the 5G backhaul for the unlicensed band radio, and we have been L1 in that. So we expect that we should receive order for that also. So, you know, these are all equipment orders which I'm talking about, and we can say that we should definitely cross INR 1,000 crore without iota of doubt. Perfect, sir. Sir, just an add-on to this. I believe previously you had mentioned that regarding the UBR equipment, you had received very strong feedback from one of the international companies. So is there any progress, I mean, in terms of it getting converted to orders? We are talking to quite a few companies, quite a few companies. I would not name them, but we are talking to quite a few companies internationally and locally also. Locally, we have deployed a huge quantity of this UBRs. We have been lowest in a large tender of BSNL also, and likewise, we are talking to a number of international companies also, where I believe we will be receiving reasonably sized orders sometime in near future. Okay, perfect, sir. Sir, my second question pertains to the defense side of the business. Previously, you had mentioned electro-optics, that we had participated in one tender, and there was an upcoming tender. So if you could give a brief on that, and same goes by, ammunition fuses. I believe the company had approached Indian Army for trials. Any update on that? And lastly, the SDR, which was still under development and was scheduled to be completed by mid of this year. So if you could just, shed some light on all these three aspects. I will go through all the different products which we are doing. Some are under development, some are being tried in army. Coming to one of the projects which is recently we have participated in upgradation of BMP-2 armored fighting vehicle, where fire control system and optical sights are to be upgraded. We have successfully gone through UTRL, which is user trial readiness, something like that they call it. And now we wait for the RFP to come, where we will be participating. On SDR, which is already under development, as I told you. On the other hand, the radars, which is a recent development, you know, where we have already gone through development cycle of some of the radars and others are under development. So we expect this year to receive reasonably, reasonably good quantum of orders for the radars also. On the fuse side, we have not been lucky so far. We have asked for a retrial by Indian Army, which I think expected to happen in next two to three months time. After we go through those trials, then would be the question of orders will come. Till now, we have no orders for fuses. But yes, this is a consumable item. It's a consumable item, and there's a continuous demand for fuses. So I'm sure that once we pass through these trials, in next few months' time, there should be demand coming up for fuses also. So again, since all these defense orders take a lot of time, we have not included in our projections even for 2024, 2025, any order from the defense, you know. When we do AOP, we have not included anything, but we expect, still we expect, products like radars, products like electro-optic sights should give us some revenue, should, should give us some revenue. On optical sights side, yes, we have some products under development. One of the tenders we participated, there has been, we were a bit unlucky, unbelievably unlucky. We could not get that order. But yes, nevertheless, our sight has proven very successful, so we should be able to get more orders in future. So as I said, this year we have not included in our projection any order for defense, but we are very bullish about it, particularly this BMP-2 upgradation, then, for this electro-optic products, then radars. We are quite bullish about that, that we should suggest, good, good results, in the next financial year. But yes, we will see it start coming in 2024, 2025 also. Okay, perfect. Sir, thank you so much for the opportunity, and all the best for the future. Thank you. Thank you. The next question is from the line of Parth Mehta from M Capital. Please go ahead. Good afternoon, sir. Sir, my first question was, whatever new products on the 5G front that we are developing at RADDEF, the R&D expenses, are they deducted on the PNL, or how do we capitalize them? No, RADDEF, we are not doing any 5G product. RADDEF, we are developing radars. There's no 5G product in RADDEF. So nothing is being developed as a 5G product in RADDEF. So, whatever R&D expenditure we incur at RADDEF for the radar- Please, repeat it. I could not follow you. Any of the 5G R&D that we do and indigenous products that we develop, is that being capitalized on the P&L? Yes, it is being capitalized, and they are being amortized over a period of time. Okay. So my second question is, whatever products that we have developed, we will need approvals for those 5G products, even if we are exporting globally, will we need a blanket approval, or we will need an approval from each country, for making it to the PNL? No, look, you know, any, any operator which buys any telecom product goes through its own approval cycle. There are some countries where there are, you know, agencies which approve the products on universal basis for all the operators. But most of the business operators have their own testing facilities, and they go through their own approval cycle, that whether the product suits to their requirement or not. So there's no such global approval that if you get it approved from one source, then it is approved for everybody. It doesn't happen that way. It is more of a, you know, individual operator structure. Like India, for example, BSNL has got its own approval, PEC. Jio has got its own approval, you know, their own lab is there, where they approve the product. So is Airtel, so is Vodafone Idea. Every operator goes through its approval cycle, where it includes lab testing as well as field trial, which is very normal. Okay. So do you think that will happen in this financial year, and we'll see some contribution from those 5G products in the financial year 2024, 2025? Oh, yes. This is INR 22 crore order has been received after approval only. Yeah. More, more on that, we are looking to receive in the next- We are looking for more such orders. There are, I think, two, three places where trials are already going on. Good. So they're domestic or they're export orders? No, this INR 623 crore is the domestic. Domesticly. Other trials talking about are domestic as well as international. It's okay. So my last question is on the front of contribution from projects and contribution from products. As the line has been, we have been going more on the product, 70/30 was the contribution that we were looking at, but if you look at contribution for this quarter, it has been tweaked on the other way, so more from the project side and less from the product side. Apart from the falling prices of OFC, what has gone wrong for the product side? No, there's nothing gone wrong. It is because of the lower sales of OFC. As I said, optical fiber cable sale has gone down significantly, Parth Mehta. It has gone down significantly in the last quarter and the current quarter. As a result of which product lab revenue has gone down. If you look at same quarter last year. Yeah. Was INR 693 crore. Yes. In the current quarter, it is INR 364 crore. Yes. So, you know, with this kind of a numbers, you know what I... Just, just let me correct this number. So let, let me, just hold on a second, let me get the total product. Mm-hmm. Ye s, yeah. Yeah, this is more or less the same percentage. There will be some small differences with there, but more or less, you know, OFC sales, yes, these are the right numbers. Last quarter, December quarter of the last financial year, it was INR 625 crore. Yes. This year it has been INR 295 crore. It is less than half. So this is what is getting reflected in this ratio which has changed. And as I said, the ratio will further improve again, once the demand of optical fiber cable improves, and also with this, large orders we have received for, products this, current quarter, you know, which is about INR 2,000 crore, which is about INR 1,800 crore. This will also improve the ratio of, products into the overall revenue, because INR 1,800 crore orders for product is very significant number, and also the fiber optic cable demand is expected to improve. So our overall strategy for becoming a product-led company is very, very successful. Very, very successful. There is a, you know, we can't compare it, particularly on a quarter-to-quarter basis, because quarter-to-quarter ups and downs may happen. The overall basis, we are going very smoothly on that strategy. If you just exclude the optical fiber cable for temporary lag in the demand, you see in this quarter we have received orders for INR 1,800 crores for the products alone. INR 1,800 crores for the products, which is a very, very significant thing, which includes INR 623 crores and little bit more other, for other products we've received orders in that quarter for indigenously designed products. So our strategy is very successful, and I am pretty sure that with this strategy, company return ratios will improve significantly in coming future. Okay. Sir, are we doing any CapEx for these new products to be developed? Last time I think we had said that we are doing little out of INR 100 crore, we are doing CapEx for developing these products. Yes. You know, there are two kind of CapEx. One is R&D, one is you setting about the facility for manufacture of products. So we are doing both. R&D is happening, which would be a continuous process in the company, and also there would be expense of about INR 80 crore-INR 100 crore on setting up the facility for manufacturing of the products, so as to we can take start taking benefit of PLI from the next financial year. This will be for all the products put together, as in we don't need to go for hundred... Yes. Okay. So it is across products? Yeah. Okay. Thank you so much, sir, and I expect the OFC cycle to improve a couple of quarters from now. Absolutely. Thank you. Thank you. Thanks a lot. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Saket Kapoor, from Kapoor and Co. Please go ahead. Hi, Nahataji, and thank you for this opportunity. Sir, you can hear me? Uh, Kapoor, [Foreign language] [Foreign language] Sir, if out of this order book of INR 7,678 for Q3 ending FY 2024, INR 2,051 is towards the operation and maintenance. So when this system and out of this balance amount, how much is towards the OFC? Especially, are we exporting optical fiber cables also, sir, if you could give that number. Yeah, you know, this order of what you mentioned about this O&M, this is for next seven years, next seven years. Optical fiber cable we are exporting, no doubt. Last year we had a good year of export, you know, about INR 800 crore. This year, worldwide demand has slowed down, the export will also go down. But yes, we keep on receiving continuous order for exports. These are not major orders at one point of time. Orders keep on coming and we keep on supplying. We had expected to cross INR 1,000 crore in this current financial year, but with this downturn in demand all over the world, of course, we are going to be falling short of our estimations by a large number. But, as I said, from next year onwards, it is expected to become better in next two quarters, and we will further increase. Sir, as you just explained in the earlier reply, that both OF and the OFC prices have corrected by 20%, correctly there, and then also the demand is down. So, where have the things gone wrong? I mean, is it, I think so one of the key players did mention about the demand for fall from the U.S., in the U.S. market. Fall in the U.S. market has resulted in this, percolating to the domestic Indian market. So, do you think only when the demand from this, from U.S. and Europe, improve, then only our domestic, OF, and the OFC market will improve? Or when the BharatNet comes into play, that is the time when things will start, you know, looking up, sir. If you look at our operational numbers, then, barring this other income component, the numbers are not up to the mark if you exclude the other income part. Kapoor, let me explain you. Demand of fiber optic cable for Indian companies, when I say improvement, will come from two, three different areas. If you look at domestic, BharatNet is going to play a major role, because that's a 600,000 kilometers of fiber optic cable. It's a large quantum, and, which will be translated into more than, 20 million kilometers of fiber. So which is a large quantum, that is one. Second, U.S. demand is going to go up significantly in the next financial year. I tell you why. The U.S. government has announced, you know, large subsidy for serving unserved or less served, low served areas by fiber optic cable to ensure people are able to have a seamless broadband connectivity from their homes and offices. Total subsidy for the last mile, only for the last mile, announced is about $61 billion, $61 billion! Statewise division has also been announced. Disbursement of that subsidy is expected to start from middle of this financial year. Sorry, this coming current calendar year. So once that subsidy disbursement picks up, the demand of fiber optic cable would increase significantly because this is for giving broadband connectivity over fiber. So U.S. demand will start happening in next couple of quarters itself with this BEAD and BABA and all those names are there, broadband subsidy the U.S. government has announced. Similarly, when, as I said little while ago, the stocks with the distributors and operators go down, as was there in the case in the beginning of the year, demand for Europe will also pick up. Demand will pick up not only because of BharatNet, it is demand from U.S., demand for Europe. All these demand, all these places, either they will pick up from the next, another couple of quarters or maybe quarter more, depending upon country to country, place to place. But demand is certainly going to pick up in fiber optic cable in the next financial year itself. Right, sir. So just to conclude on this point, sir, then, it is only the OF prices that has corrected led to the lowering of realization? Means, the fresh capacity in OF has been added or the lower utilization levels for OFC worldwide has led to this decline, sir? This is both factors. One, the prices have come down. Second, the utilization has also gone down. That is why this revenue reduction of roughly about 50% is there. Some extent, prices have gone down 15% or so. Rest is the less demand at this point of time, which as I said again, next couple of quarters, we are pretty sure will start improving. Okay. So one more question I would like to ask you about the... Sir, second question, please sir. I'm sorry to interrupt, sir. May I request that you return to the question queue for follow-up questions, as there are several parties? Opportunity, [Foreign language] sir. [Foreign language] Yes, sir. Hello, your next question, please. The next question is from the line of Rajesh Agarwal from Maneyore. Please go ahead. Sir, going forward, what will be our product component, the mix, how the percentage mix will change, and from when? And second, the margins in telecom products are more than the optic cables and fibers. Now, look, market for telecom equipment is not only, optical fiber cable, but it is, for, it's telecom equipment also. You know, we have large orders for telecom equipment, you know, and which are indigenously designed telecom equipment also. Because as I said, INR 1,800 crore orders we have already received in the last quarter for equipment. Okay. You know, again, I'd like to re-emphasize that we are becoming a product-led company. Okay. This quarter was a pretty aberration quarter because of a lower demand of fiber optic cable, but which is catching very quickly. So on the equipment side also, we are doing significant amount of work, and I think, I can say with lot of pride, that your company has received the largest 5G order which any Indian company has received till now, INR 650 crore. Nobody else has received till now, which itself speaks of the kind of development we are doing. And I am expecting, I don't know the size of the new orders which will be there, but yes, I am expecting more orders to come for the equipment in near future to HFCL. So if I, you know, my target is to become at least 70/30, 70% product, 30% EPC, or if possible, even reduce that also, maybe, maybe 75/25, something like that. But yes, 70/30, we should definitely be able to reach, at least 2/3, 1/3, we should be able to reach in the next financial year itself. And when will we start delivering this order, sir? We should be this, you know, particular order I am talking about, 5G related order. Our target is to start delivering from April end. April, in a year's time? I would try to do it quicker than that. I would try my best to do earlier than that. What will be the EBITDA margins in that? Well, EBITDA margin, you know, I don't want my customer to know my EBITDA margin. Okay. Then that will be a problem for me. Okay. But overall, the company EBITDA margin will go up from here? EBITDA margin will go up, definitely go up, because of, you know, what has pulled down the EBITDA margin is fiber optic cable reduced sales. Okay. On that increasing, EBITDA margin will definitely go up. Okay. What is your view on the optical fibers, from when it will improve, sir? I think start improving from the Q1 of the next financial year, but a significant improvement from the Q2. Q2, okay. Thank you, sir. Thanks a lot. Thank you. Thank you. The next question is from the line of Dipesh Sancheti from Manya Finance. Please go ahead. Yeah, hi. Am I audible? Audible, yes. Yes, mister. Yeah. Dipesh. Just wanted to know what is the capacity utilization in optical fibers out of the 25 million kilometers, and what gives us the confidence for the capacity expansion, which is, we're going to do of 35 million kilometers? So it is, you know, about 50%, even little less than that. Now the- In this quarter? Yeah, this quarter I'm talking about. Yes. Now, you know, capacity expansion is the right thing to do. If you see when we started capacity expansion, the, you know, market was really booming, you know, we didn't have any free capacity. Our factory was working 24/ 7, and as a matter, we were not able to fulfill the demand of customers. So as an incident, we were we expanded our capacity. But this is cyclical thing, you know. Every three, four years or sometime, demand goes down and then comes up again. You have to see the overall, you know, overall need of the fiber optic cable, and then you have to plan capacity, not on the basis of one year up or six months down. Because if you see, as the need for broadband goes up, as the need for data goes up, as the need for, you know, video and kind of application go up. Today, you know, Netflix and Amazon Prime, all these OTT applications, you know, how fast they have gone up? Now, without fiber optic cable, would you have been able to access Netflix at your home? Would you have been able to watch live television at your home, you know? Without having access to fiber optic cable. No, no, nothing of this would have been possible. This is all becoming possible because of fiber optic cable. So as these applications grow, demand of fiber optic cable is going to keep on going immensely. So this few months downturn, because of certain factors, does not mean that it is a downturn forever. It is only temporarily, and which happens every three, four years, it happens once. It has happened now, it will come up again. So increasing capacity was, you know, commensurate with this, expected demand of increase in the fiber optic cable. And you will find the next couple of quarters, the demand will go up again, and this, capacity utilization would again reach to the previous levels. Since you mentioned that it is cyclical, generally, this downturn remains... I mean, in your experience, that this downturn remains for how many quarters? This is, there's no fixed rule for that. There's no fixed rule for that, you know? So it will remain for how many quarters? Now, this has gone down, but the U.S. demand is going to be there in next couple of quarters. It's going to come up again. Indian demand is going to increase again, maybe next three quarters, about two to three quarters with the BharatNet happening. So normally, two to three quarters is the number I would say the demand slows down and then comes up again. What is this? Rule for that. There's no fixed rule for that. Right. So what is the risk in the U.S. market as well as the Indian market if something like the, for Tesla is developing a direct satellite internet? What will be the risk to our optical fiber business? Look, satellite is a country... Have you assessed that? Yeah, we have discussed that. We have understood that. You know, satellite is a completely different segment of market. It's, it can never compete with fiber. What bandwidth fiber can provide, satellite can never provide, at least not in the foreseeable future, that satellite would provide that kind of a bandwidth. And number two, handsets are very costly, service pricing is costly. Satellite would be more used for remote areas where, you know, fiber accessibility is not there, broadband accessibility is not there, telephone accessibility is not there. So those would be the places where satellite would be used. For in terms of bandwidth, satellite would never be able to compete with the fiber optic cable, you know? So it's not a competition, more of a complementary approach. Okay. And, this is the last question, but is BharatNet will give more opportunities on product-based, is it a product-based opportunity or a project-based opportunity? It's both, it's both. It's a mixed opportunity. What ratio? There are three things. There are three. One is product, one is project, and third is operation and maintenance, which is going to be O&M revenue for next 10 years. There are three opportunities in this. When we are bidding for BharatNet opportunities, we are going to look at more product-based or we are going to explore on all three opportunities? So we are currently working on analyzing all the aspects of the tender. Let the final draft of the tender come out, then only we will decide how are we going to do about that. Because the final tender has not come out, it is the, you know, first draft come out for industry consultation. Many suggestions have been given, but, once, the final number comes out, final shape of the tender comes out, we will decide at that point of time. We are evaluating. Okay. Yes, no doubt, it's a good opportunity for us. Okay. And I was just going through the presentation, and it shows that domestic railway opportunities. How many orders have we received as Kavach? And because that has been a buzzword for- We are not in Kavach. You are not in Kavach. Product format. We are in telecom systems for railways. So we are working on telecom. Kavach is a signaling product, and our How many of the orders we've received is from the railway sectors? Railway orders should be around INR 600 some crore. Yeah, it is about INR 620 crore or something like that. Okay. I would really appreciate if, you know, if you can divide the order book, you know, how much is railways, how much is telecom, how much difference in telecom, how much it is for optical fibers. Because that will help us to understand, you know, how we are going to go- I'll note your suggestion, and we'll publish it on our website. Definitely. Thank you. Thank you so much, sir, and all the very best. Thank you very much. Thank you. That was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir. Thanks a lot, ladies and gentlemen, for attending this earnings call for Q3 of FY 2024. As I have been saying, that we have got three strategies, you know, more number of products, more customers, more geographies, and we are very successful at that. This quarter, though, you see the results are a bit subdued because of fiber optic cable demand going down, and it is a worldwide factor, it's nothing to us, nothing particular to us. But if you look at the product side of it, we have received orders for INR 1,700 crore-INR 1,800 crore just for the products alone. This effort of making company a product-led company is becoming successful and will remain successful, and we will keep on increasing our revenue for products, and more so from indigenously designed products, not only for Indian market, but from the world market. And that strategy through our R&D is proving to be very successful, and I can assure you that this will improve not only the revenues, but all the return ratios of the company also. And with the demand becoming better for fiber optic cable in near future, I expect this ratio of product to the total revenue will definitely go up, return ratios will improve. So, we all, you know, with the growth of Indian economy, which is really growing at a faster pace than even the world market had estimated, and we are growing despite of the world economy going down, thanks to the leadership of and the policies of our Honorable Prime Minister, Shri Narendra Modi's government, I am sure that telecom sector, which is already doing well, will further do better. And companies which are more focused on indigenous development and indigenous manufacturing, like your company, HFCL, will do even better in future. Thank you very much, gentlemen. Thanks a lot. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.