HFCL, one of India’s oldest telecom equipment and services companies, reported strong growth for the three months ended December, riding on burgeoning demand for fiber optic equipment and related services in India.
The company’s revenue increased by a whopping 21% compared to the preceding three months ended September 2020, while net profit jumped by 60%.
Revenue was up 50% compared to the same three months of 2019, while pretax profit rose 63% compared to the same period last year.
Founder and MD Mahendra Nahata said the outlook for the company continues to be very strong due to rising demand for the kind of services and products that the company specializes in.
“Our outlook is very optimistic given the demand we are seeing for optical fiber cables and FTTH, not just in India but also from exports. Transformational projects like PM-WAN/ when viewed in conjunction with BharatNet, and add to that, the upcoming SG rollout, all this will significantly boost the Company’s prospects,” he said.
HFCL is the key supplier and contractor for the expansion of Reliance Jio’s fiber-to-the-home service, Jio Fiber, and recently started producing special fiber-optic cables designed for the FTTH market at its premises in Hyderabad.
Jio’s frenetic expansion in this space has also spurred competitors — both organized and unorganized — to also invest in upgrading their copper networks to fiber, driving demand for fiber and related products to their highest ever.
HFCL has not been far behind in taking advantage of this sudden spurt in demand.
“With the commencement of our latest FTTH facility in Hyderabad in Q3FY21, we have become the largest FTTH Cable Manufacturer in the country and currently, we are expanding this capacity further in next few quarters. With the focus on expanding our product portfolio and increasing exports of our “Made in India” offerings, we are excited about the growth
trajectory going forward,” Nahata added.
The tech entrepreneur said his company has an order book of Rs 7,313 cr, a number that is bigger than the total business done by the company in the last two years.
For the three months ended December, the company got 74% of its revenue, or Rs 944 cr, from various deployment contracts and services, and the remaining 333 cr from the sale of equipment. A year ago, product sales accounted for only 14% of the total revenue.
RISING COSTS
Even as HFCL’s revenue rises, the company is being forced to buy more and more equipment from other players, which has limited the full benefit of the rise in revenues from reflecting in the company’s bottom line.
Even as revenues rose 50% compared to 2019, the amount of money spent for purchasing various equipment from the market rose by 321%.
In rupee terms, such expenses rose from 145 cr in the third quarter of last year to Rs 611 cr this year. From 18.3% of the total expenses, such purchases have risen to 52.3%, while expenses on raw materials has gone down.
It is possible that FTTH cable may have been a key component of such stock purchases, and the recent commencement of its production at the Hyderabad plant may serve to bring down such expenses in the Jan-Mar quarter.