The proliferation of 5G networks worldwide has led to a corresponding surge in demand infrastructure, equipment, research and development (R&D), and turnkey solutions in telecom. HFCL Limited is a technology-led company manufacturing transmission and access equipment as well as optical fibre cable (OFC), and specialising in setting up the latest communication network for telecom service providers, railways, defence, smart cities and surveillance projects. In an interview with tele.net, Mahendra Nahata, managing director, HFCL, shares his views on the company’s investment plans under the production-linked incentive (PLI) scheme for the telecom sector, 5G and future growth strategies…
What have been HFCL’s key business and financial highlights in the past year? What are the company’s current focus areas in India?
In financial year ended March 31, 2022, our revenue from operations grew to Rs 47.27 billion on a consolidated basis (up 6.8 per cent year on year), while profit after tax (PAT) grew to Rs 3.26 billion (up 32.5 per cent year on year). Our earnings before interest, taxes, depreciation and amortisation margin also improved to 14.7 per cent from 13.2 per cent in financial year 2021. For the half-year ended September 2022, HFCL’s consolidated revenues stood at Rs 22.24 billion and PAT stood at Rs 1.38 billion.
Financial year 2022 also saw HFCL crossing several milestones. We were recognised as a trusted source by the National Security Council Secretariat, raised Rs 6 billion in capital through qualified institutional placement, and announced a capacity expansion for the production of OFC and optical fibre to strengthen our supply chain and improve margins.
Financial year 2023 has been a year of transformation. We have further innovated on and widened our product offerings. Backed by our investment in R&D initiatives and our 5G product portfolio, we launched the world’s first open standard Wi-Fi 7 access points, 8T8R macro radio units (RU), and 5G lab-as-a-service (LaaS). Our order book stands at over Rs 50 billion and we aim to double our exports to Rs 7.5 billion by the end of financial year 2023.
What are your views on the PLI scheme for the telecom sector? How will the recent approval received under the PLI scheme improve the company’s product development, revenue and global competitiveness?
The launch of the PLI scheme is expected to boost indigenous manufacturing of innovative equipment, create a robust domestic value chain, reduce the dependency on imports, encourage the Make in India initiative and create employment opportunities for more than 40,000 people. The PLI scheme will bolster the 5G ecosystem in the country, opening up various opportunities for telecom players like us. We have recently received approval for availing of incentives up to Rs 6.53 billion under the PLI scheme. We have earmarked an investment of Rs 4.25 billion under this initiative for the production of equipment, including 5G radio equipment, routers, switches, Wi-Fi products and backhaul radios amongst others. This will enable us to improve our margins, increase our export revenue, and focus on R&D for developing next-generation telecom products. This will further enable us to transform into a product-led enterprise, as HFCL aims to increase its revenue from higher-margin, self-designed products. During the first quarter of financial year 2023, the revenue share of products increased to about 59 per cent, compared to about 43 per cent in financial year 2022.
What opportunities does the 5G roll-out in India open up for the company? How do you plan to leverage these?
With the 5G roll-out, companies like us are looking at a future paved with opportunities and growth. We are working towards developing an array of 5G-focused telecom equipment. In fact, at the India Mobile Congress, Asia’s largest digital forum, HFCL launched the world’s first Wi-Fi 7 access points as well as 5G 8T8R macro units, 5G LaaS and 5G outdoor small cell to facilitate the roll-out of 5G networks, and further provide products and solutions for India and global markets.
HFCL has launched the world’s first open source Wi-Fi 7 access point. With this, we have become the first original equipment manufacturer to launch this revolutionary, one-of-a-kind Wi-Fi technology designed to deliver extremely high throughput, higher spectral efficiency, better interference mitigation and real-time applications support. HFCL’s Wi-Fi 7 access points will support peak data rates of over 10 Gbps and will offer latency lower than 2 ms, as compared to 5 Gbps and 10 ms under the current Wi-Fi 6 products.
5G LaaS was another significant launch. It is open to all and will help provide an automated test environment for the private sector, start-ups, academia and government to work together on product innovations, from concept to reality. It will further accelerate 5G roll-out and increase innovation, both in India and globally.
Our 5G 8T8R macro RU is modular in design and can be easily customised to support any sub-6 GHz frequency band, to address the global markets. Our next-generation RU combines the power of vRAN with open standards to accelerate 5G deployment.
We are also developing a global system integration service for 5G private networks and integration services. Because of the roll-out, cell sites have seen an overall hike in throughput, further leading to an increase in the demand for fibre on the global front. Some of HFCL’s innovations are here to bridge the gap and offer world-class products for India and global markets. We are aiming for a 15-20 per cent year-on-year revenue growth, which will mainly be driven by this increase in demand for OFC and our range of 5G products in development. Our efforts to strengthen our 5G portfolio are well under way. With a strong backdrop in R&D, alongside our global collaborations, we plan to leverage our 5G capabilities to tap new products, customers and geographies.
How are the recent collaborations with Qualcomm and Wipro expected to transform HFCL’s portfolio? Is the company looking at other collaborations as well?
With the widened landscape of opportunities in India following the 5G roll-out, we recently collaborated with key industry players such as Qualcomm and Wipro. We launched the world’s first open source Wi-Fi 7 access point, besides our existing Wi-Fi 6, Wi-Fi 5, ultra-broadband radio and switches portfolio. Our recently launched 5G 8T8R small cell RU is indigenously designed and developed by HFCL, enabling operators to accelerate the roll-out of 5G services in India and worldwide. We are also developing 5G millimetre wave-based fixed wireless access customer premises equipment products as a part of our 5G product portfolio. Further, we set out to develop various 5G transport products, including cell site routers, distributed unit aggregation routers and centralised unit aggregation routers. These products will empower enterprises and manufacturers to make their 5G-enabled vision come to life.
What will be HFCL’s key growth strategies in the Indian market for the next two to three years?
To support the 5G roll-out in India, we are working towards developing a range of 5G products and bolster our portfolio. Our investments in R&D, backward integration, government-led initiatives, and production of next-gen products and solutions, as well as our capacity expansion in the OFC business, thrust on exports and expanding global footprint will enable us to transform into a technology-driven enterprise that innovates and manufactures for both the domestic and global markets. HFCL plans to grow by 15-20 per cent every year and will continue to focus on its strategy of new products, new customers and new geographies. Currently, our order book is over Rs 50 billion, and our recent order wins are a sign of our strong footing in the market. We have won recent orders from Bharat Sanchar Nigam Limited, RailTel and other prominent telecom players.
Our focus on indigenous futuristic products and solutions has also resulted in the share of exports in our revenues improving to 16.38 per cent in the second quarter of financial year 2023, as compared to 9.08 per cent in the same quarter last year. We have seen a strong response in key global markets such as Europe, Africa and the Middle East, which makes us optimistic about doubling our exports to Rs 7.5 billion by the end of financial year 2023.
With our wide range of products, we aim to bridge the existing digital divide and enable telcos to successfully expand their reach across rural, suburban and dense urban areas. We will also soon be launching our new manufacturing facility in Delhi-NCR, which will further help in the production of equipment such as Wi-Fi access points, RUs, switches and routers.