investment thesis on HFCL

5 G spectrum allocation in india in july 2022 facilitate telcos rolling out 5 G services by FY23  5G will allow enterprises to embark on the Industry 4.0 journey, and it will help accelerate digital transformation across industries, India is the world’s 2nd largest telecom market with 2nd highest internet users. The launch of the 5G network will enable telecom operators to start providing a new generation of high bandwidth services to customers.Economic impact of 5G

estimated to reach USD 1 trillion by 2035. Growing domestic market – increasing Minutes of Use (MoU) and data usage – supported by growing income and youth population, Supportive government policies – like ‘Make in India’ and China +1 strategy – creating new opportunities in both global and domestic markets .Government focus on rural connectivity and implementation of BharatNet Phase II to lead to incremental demand of fibre optic cable.

Strengthening of telecom infrastructure with increased fibreised cell tower ratio, expected to double by 2025. 5 G- will be a game changer for indian economy.

HFCL is a leading innovation-led technology co. in area of Integrated next-gen communication products and solutions provider, Over the past three decades, HFCL has delivered innovative, customized and competitive products and latest solutions in the high technology telecommunications infrastructure sector. The Company specializes in manufacturing of telecommunication equipment, optical fiber cables and intelligent power systems. As a telecommunication solutions provider, the Company has implemented several projects, including the setting up of CDMA & GSM networks, satellite communications, wireless spectrum management and DWDM optical transmission network.

The Company has state-of-the-art Optical Fiber and Optical Fiber Cable manufacturing plants at at Solan(Himachal Pradesh),Goa and Hyderabad, and in its subsidiary i.e. HTL Limited at Chennai along with FRP and ARP Rod manufacturing plant in its subsidiary at Hosur. The Company’s in-house Centre for Excellence in Research located at Gurgaon & Bengaluru along with invested R&D Houses and other collaborators at different locations in India and abroad, innovate futuristic range of technology products and solutions. Some of the newly developed products through R&D are Wi-Fi Systems, Unlicensed Band Radios, Switches, Fuses, optic devices, and Video Management Systems. There is a suite of products under development, which include Software Defined Radios, Routers, PON, 5G Transport and Radio products, Wi-Fi 6 access points, Point-to-multipoint Radios and Ground Surveillance Radars.

HFCL’s offerings in the Safe & Smart City domain include key core solutions like Communication/IT/Telecom infrastructure, Data Centre, Disaster Recovery and Management, Security, Surveillance, Traffic Management and Citizen/Mobile Applications.

HFCL has largest market share in optic fiber cable supplies in of the largest producers WI-FI / UBR systems and FTTH cables in of the largest implementer of defence and public communication network. Besides India, products are exported to the UK, Eastern Europe, Africa and Middle East as well as the South and South East Asian regions about 30 countries.

HFCL is certified with the ISO 27701:2019 standards, ISO 27701:2019 enhance security procedures and methods.

projects under implementation :

Public Telecommunication –

Optical fibre Cable & FTTH Network for Reliance Jio across Northern India.

BharatNet Phase-II OFC network, settingup Rural mobile network, WiFi, IP and MW network.

Current order book –Rs.1519 crore

Defence communication –optical backbone network in 300+ locations,for Indian armed forces.

Current order book-Rs. 2,354Crore

Railway communication –

Integrating communication network for dedicated freight corridor, metros & mainline railways, video management systems at 600 railway Stations , network for KanpurAgra, Mauritius and Dhaka Metro rail projects.

Current order book – Rs.381crore

In Dec.21,HFCL receive the approval as a ‘Trusted Source’ from National Security Council Secretariat (NSCS). this is a distinguished achievement and reinforce HFCL’s commitment to delivering Make in India world-class products/solutions.

HFCL  played a crucial role in BharatNet Phase -II project by deployment of 7843 Km of OFC Network in Punjab and 7733 Km in Jharkhand, and bringing broadband connectivity to 3200 villages in Punjab and 1789 villages in Jharkhand. HFCL will be a leading contender in the implementation of Phase III of the BharatNet Project,  Rs.70000 crore plus, Expected CAPEX investments from government of India in phase – III of BharatNet Project.

HFCL is amongst the major infrastructure provider  of more than 1.75lakh Km of OFC Rollout for Private Telecom Operators.

HFCL’s Long standing relationships with major clients –stakeholders –



New opportunities for HFCL : Strong potential of the new business

There is huge potential of growth of  business as 5 g rollout begin and HFCL prepared to meet this growth prospectus well in time to explore this opportunity .(Total Addressable Market) of USD 32 bn during FY21-25 in India


USD 7.8 bn for Telecom Equipment

USD 18 bn for 5G Equipment and Services

2022, India’s tower fibreisation stood at 33%, leaving plenty of room for growth as the country strives to reach 70% Huge opportunity for HFCL to assist in India’s target of achieving 70% tower fibre footprint by 2025. As of March of tower fibreisation by 2025. As a result, demand for optical fibre cable (OFC) networks and related solutions has risen significantly and is expected to increase further in the coming years.

The Indian Government as part of the National Broadband Mission (NBM) has decided to invest more than Rs.10,000 crore to lay Optical Fibre Cables along all upcoming Greenfield and Brownfield expressway corridors by NHAI*. The Indian Government will create a dark (inactive) fibre infrastructure which stakeholders in the market will be able to use in a direct plug and play model.

In addition Immense demand for fibre optic cables,Telecom and networking products across the world followed by expansion of 4G and evolution of 5G Network. HFCL is raising  annual Optical Fiber manufacturing capacity from 10 million fiber kilometres (fkm) to 22 million fkm and Optical Fiber Cable capacity from 24.75 million fkm to 34. 75 million fkm with a total outlay of Rs. 425 crores.Expanding OFC & fibre capacity at Hyderabad,Goa & Chennai , Setting up new facilities at Hyderabad for manufacturing of defence products.

As one of the largest infrastructure providers in South East Asia, HFCL recognised the potential of European markets and formed strategic alliances with local players in these regions to provide services for OFC / FTTH rollout.

Development and capex

December 14, 2021- HFCL has raised 600 crores via QIP issue. The QIP has shown an overwhelming response from the Institutional investors like Reliance Ventures, Quant Mutual Fund, IIFL Wealth, Elara India, Discovery, Segantii,The QIP proceeds shall be predominantly utilized towards funding of capital expenditure requirements for setting up of new manufacturing facilities, capacity expansions and expenditure on R&D and product development.

HFCL has entered into a partnership with Wipro  to engineer a variety of 5G Transport Products. Wipro is a key partner because of its world-class engineering and in-depth experience in hardware design, embedded software.

Also Collaboration Agreement with Qualcomm Technologies, Inc. USA for design and development. In continuation with its 5G product strategy for India and global markets.”Qualcomm Technologies is a recognized world leader in 5G technology.

HFCL appointed Beetel Teletech Ltd as National Distributor of  IO products. This will allow HFCL to strengthen  distribution network for existing and future product lines and  will be playing a key role in providing internet for all.

distribution network expansion with Ingram Micro India, which has a stronghold in channel distribution in India and SAARC countries On 21 feb2022, HFCL has joined the O-RAN ALLIANCE, a world-wide community of mobile network operators, vendors, and research & academic institutions operating in the Radio Access Network (RAN) industry. O-RAN ALLIANCE’s mission is to re-shape  more intelligent, open, virtualized and fully interoperable mobile networks.

HFCL,has Joint Venture with a Canadian enterprise DragonWave, for Point-to-Point Microwave Radio Links (IP radios up to 23Ghz).

HFCL recently appointed two global leaders for production technology and sales

Dr. Peter Weimann  the Chief Technology Officer, Optical Fibre Cable Business. His technology leadership will certainly take HFCL to greater heights of success and global expansion!

Mr. Jochen Arms, Vice President, Sales (DACH, Europe) – Optical Fibre Cable Business . With his exceptional skills and experience,


Valuation and outlook

Being the market leader,HFCL at a price-to-book ratio of 4.05x, trades at a premium .

A run up in HFCL’s share price by around 300 per cent in the previous calendar year has increased its valuation.HFCL is likely to continue to command this premium. Its market leadership, will add further glitter to the stock.

Mutual Funds have increased holdings from 1.84% to 1.86% in Jun 2022 qtr.

FII/FPI have increased holdings from 6.66% to 6.81% in Jun 2022 qtr.



  • Company has a low return on equity of 13.8% for last 3 years.
  • Promoters have pledged 44.7% of their holding.
  • Promoters have decreased holdings from 39.23% to 39.20% in Jun 2022 qtr
  • Dividend payout has been low at 2.63% of profits over last 3 years

Financials –

HFCL Creating consistent value for investors –

CAGR 5 year –

Revenue- 16.3%,  EBITDA –26.6% ,PAT – 21.4%.

Gross Margin – 26%,  EBITDA Margin- 14.7% RoCE- 19.3%, Debt-Equity -0.26x

Order Book as on 30th June,2022 ~INR 5,300 Cr + (~USD 671 mn)

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