Moderator:
Ladies and gentlemen, good day, and welcome to the HFCL Limited Q2 FY27 Earnings
Conference Call hosted by Nuvama Institutional Equities. Before we begin, I would also like
to read the disclaimer statement. Statements made during this call may be forward-looking in
nature based on management's current beliefs and expectations. They must be viewed in
relation to the risks that HFCL's business faces that could cause its future results, performance
or achievements to differ significantly from what is expressed or implied by such forwardlooking statements.
Investors are therefore requested to check the information independently before making any
investment or other decisions. 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 this 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. Achal Lohade from Nuvama Institutional Equities.
Thank you, and over to you, sir.
Achal Lohade:
Yes. Thank you. Good afternoon, everyone. On behalf of Nuvama Institutional Equities, we
are glad to host the senior management of HFCL Limited. To discuss the Q2 FY27 earnings,
we have with us Mr. Mahendra Nahata, Promoter and Managing Director; Mr. V.R. Jain, CFO;
Mr. Manoj Baid, Company Secretary; and Mr. Amit Agarwal, Head, Investor Relations. We'll
start the call with the opening remarks from the management and then move to Q&A session.
Thank you, and over to you, sir.
Mahendra Nahata:
Thank you, Achal. This is Mahendra Nahata, Managing Director of the company.
Good evening, ladies and gentlemen.
I extend a warm welcome to all of you on HFCL's Earnings Conference Call for the Second
Quarter and half year ended September 30, 2026 of Financial Year 2026-27. I trust you have
had the opportunity to review the Financial Results, Press Release and Investor Presentation,
which have been uploaded on the Company’s website as well as on the websites of the stock
exchanges.
It is my privilege to present the best ever quarterly performance in HFCL’s history that marks
a defining moment in our growth journey. These results reflect the increasing scale, strength
and momentum of our business and reinforce our confidence in HFCL’s ability to deliver
sustained growth and create enduring value for our stakeholders.
Let me begin with our outstanding performance for the second quarter and first half of FY27.
Both profit before tax and profit after tax grew more than fivefold over the same period last
year. Consolidated profit before tax in Q2 FY27 reached ₹538.60 crore as compared to ₹106.34
crore in Q2 FY26, rising 406.49% year-on-year and 62.46% quarter-on-quarter. Consolidated
profit after tax in Q2 FY27 rose to ₹394.22 crore, as compared to ₹71.92 crore in Q2 FY26, an
increase of 448.14% year-on-year and 60.49% quarter-on-quarter. On half yearly basis the PBT
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October 19, 2026
grew from ₹61.64 crore to ₹870.12 crore, up by 1311.62% while PAT grew from ₹42.62 crore
to ₹639.86 crore, up by 1401.31%.
Consolidated revenue surged to ₹2,541.79 crore, increasing by approximately 143.62% yearon-year and by 32.73% over the previous quarter. EBITDA increased to ₹658.00 crore,
delivering growth of 223.55% year-on-year and 47.78% quarter-on-quarter. Equally
significant, EBITDA margin expanded to 25.89%, improving by 640 basis points year-on-year
and 264 basis points quarter-on-quarter, while PAT margin rose to 15.51%, gaining 862 basis
points year-on-year and 268 basis points over the previous quarter. Together, these numbers
demonstrate the strength of our operating model and ability to translate rapid growth into
substantially higher profitability.
The momentum we are witnessing today reflects the strategic initiatives taken and investments
made by the Company. We invested ahead of the curve in capabilities, capacity enhancement,
backward integration, development of world-class technology products and global market
access with a clear focus on building a stronger and more scalable business. These initiatives
are now translating into meaningful business growth, which is also reflected in our export
performance, representing a growth of approximately 493% year-on-year.
More significantly, the growing business visibility across these strategic initiatives gives us
strong confidence in the journey ahead. I want to assure you that HFCL is on track to maintain
its growth trajectory of revenue and profitability ahead. Our focus is on sustaining the pace of
execution and translating the opportunity into continued strong performance.
Our order book stands at ₹28,900 crore, providing multi-year revenue visibility. Beyond this
secured business, we also have a strong pipeline of orders at advanced stages likely to be
converted into firm contracts in due course. Friends, I want to emphasise that we do not see this
quarter as a peak, but as the sustained phase of strong growth. Our confidence rests on a robust
order book, a strong pipeline and long term customer programmes. Our customers include
some of the World’s largest, financially strong technology companies, with demand anchored
in long-term agreements and firm commitments. As the pipeline converts into orders, we
expect our order book to strengthen further. These relationships, together with our capacity
expansion and growing share of advanced optical connectivity products, give us strong
visibility and confidence in sustaining—and building on—the current revenue and profitability
trajectory.
Demand continues to accelerate across AI infrastructure, hyperscale data centres and telecom
networks. Encouragingly, opportunities with hyperscalers and telecom operators across
international markets are steadily converting into firm contracts, strengthening our order
pipeline and providing revenue visibility for long term. Our sustained investments in
technology, customer relationships and manufacturing capacity position HFCL strongly to
capture this long-term growth opportunity.
Friends, you will recall that we began FY27 with a revenue growth aspiration of approximately
20% over FY26. After the first quarter, we revised it to 40%, and today when I present
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October 19, 2026
Q2FY27 results to you, i am extremely pleased to share that, based on our current expectations
and business visibility, we expect revenue growth of at least 80% in this financial year.
We had also envisaged achieving ₹10,000 crore revenue by FY29. Given the momentum we
are seeing, I would not be surprised if we reach that milestone much before that.
To support the next phase, our planned investment of approximately ₹1,800 crore across
optical fiber, cable and preform manufacturing will expand capacities and deepen integration.
Our advanced cable portfolio and data centre connectivity capabilities are also progressing
well, strengthening our ability to serve customers as their requirements grow.
Let me now turn to Defence and Aerospace sector, which we see as HFCL’s next major engine
of growth. We are very excited by the long-term opportunity in this business. Years of
investment in indigenous technology, product development and qualification have created a
platform that we are now translating into orders and deliveries.
Our portfolio spans thermal weapon sights, electronic fuzes, surveillance radars and MultiMode Hand Grenades. In September, we successfully delivered the second batch of Thermal
Weapon Sights for AK-203 to the Indian Defence Forces. We expect to complete the
acquisition during the current quarter. Importantly, the aerospace business being acquired
already has unexecuted order book of approximately ₹1600 crore, providing good visibility
from the outset. At the same time, our ambitions in this sector extend well beyond this
acquisition, and we are actively working on several other large opportunities. We remain on
track towards our aspiration of approximately ₹500 crore of Defence revenue in FY27.
We are also setting up an ammunition manufacturing complex in the state of Andhra Pradesh.
As I have already informed you that Government of AP has already allotted us 1000 acres of
land parcel to set up this complex. Construction of this site will start soon. Together with the
ongoing aerospace acquisition, will further strengthen our Defence and Aerospace platform.
With a strong pipeline, expanding capabilities and increasing business visibility, we are
confident that Defence and Aerospace can emerge as a substantially larger contributor to the
Company’s growth in the coming years.
Friends, let me close with conviction. We believe both optical fibre cable and connectivity
solutions, Defence and Aerospace business are on the cusp of enormous growth. In Optical
Fibre Cable, continuing demand, a strong order book and pipeline, and deeper backward
integration support our confidence. In Defence, our capabilities, deliveries and strong pipeline
are building the next leg of growth.
We expect this growth momentum to continue. The opportunity we see extends over the next
six to seven years and beyond. We are determined to convert it into sustained revenue growth,
stronger profitability and lasting value for all our stakeholders.
Thank you for your continued trust in HFCL. I wish you and your families a very happy
Dussehra and prosperous Diwali. We will now be happy to take your questions.
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October 19, 2026
Moderator:
Thank you very much. We will now begin the question-and-answer session. Our first question
comes from the line of Pranav Kshatriya with Emkay.
Pranav Kshatriya:
Congratulations on a good set of numbers. I have 2 questions. First question is your
presentation mentions that you have around INR18,500 crores of book for OFC and data center
interconnect. I wanted to understand how much of that is coming from hyperscalers? And is
there any concentration to specific hyperscaler in this order book? I wanted to get a customer
risk profile, if at all there.
Mahendra Nahata:
Pranav, I can't obviously give you the customer names and profile since its under NDA. But
out of INR18,500 crores, a large portion would be from hyperscalers only, a large portion. I
don't have the exact number, but yes, maybe 70% would be from hyperscalers of the export
orders. Now the indigenous local orders are from telcos, mostly from telcos. Data centers are
yet to pick up in India. Whenever they pick up, we'll be supplying to them also.
Pranav Kshatriya:
Okay. My second question is that you've given 80% plus kind of growth and really good to see
the acceleration. But I think your guidance seems very conservative because it seems like flat
H2 or maybe slightly decline compared to what you have done in this quarter. Is it because you
are being conservative or there is a capacity constraint or there is any preform supply
challenges? Any color on that would be helpful.
Mahendra Nahata:
Yes, it is always good to be conservative. Give you a lower number and surprise you by better
numbers.
Pranav Kshatriya:
Okay. Yes. But basically, that means that there is no I mean, supply challenges from in terms
of preform or anything like that?
Mahendra Nahata:
No., Not at all.
Moderator:
Our next question comes from the line of Ashutosh Kumar Jha with Balyasny Asset
Management.
Ashutosh Kumar Jha:
Congrats on a great set of numbers and thank you for taking my question. Sir, just questions
around the margin, particularly given the fact that we have already hit this 26% sort of margin
level right now, and I'm assuming that the interconnect and connectivity solutions piece of the
portfolio will be a higher-margin business. How do you think about the margin trajectory for
the business for this year and even going ahead over the, call it, next 2 years?
Mahendra Nahata:
Look, margin profile, again, depends upon kind of customers, kind of cable, kind of solutions
they want because margin varies from product to product and solution to solution. On an
overall basis, I would say margin profile is going to get better only. There is no chance I see of
getting reverse or less.
It is going to get somewhat better only because more orders are coming up for connectivity
solutions, more orders are coming for higher fiber capacity fiber cables, which are not so much
in supply by many suppliers. The suppliers are limited. So with the increase in volume,
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October 19, 2026
capacity and also the kind of orders which we are receiving, there will be some increase in
margin profile. There will be increase in margin profile.
Ashutosh Kumar Jha:
Sir, and my second question is around the sort of demand trajectory that you guys are seeing
because there's this whole noise around rates going up in the U.S. and that could cause a
slowdown in the build-out of data centers. How are you guys seeing the demand? Is there any
sort of slowdown that you guys are seeing in the near term at least?
Mahendra Nahata:
I don't see any slowdown because the rates going up, you have to view data centers as a point
of necessity. As the rates go up, at the same time, businesses want to increase their efficiency.
AI has increased efficiency of the businesses by multifold.
So AI rather than being a luxury or availability to the few, it has become a common
requirement and necessity. With that kind of a necessity going around, I don't think there will
be any slow down in more data centers coming up in future or in the pace with which they are
coming. I expect that to continue.
But the second point is very important, which is right now, you see the growth in North
America, predominantly U.S.A. Now growth has not picked up as much either in Europe or in
Asia. I'm not talking about China. I'm not really aware what is happening inside China. Very
few people would be aware.
So this growth has to pick up in Europe and Asia also, including India. Middle East may be a
different story at this point of time because of the political situation. But in rest of the Asia,
Europe, this growth will pick up. So demand will come up from there also.
Second most important thing people may be missing is that demand from telcos are also going
to increase. Telcos have not been buying much since last 2 years. Reason being simple,
because the prices increased so much, telcos were not ready to absorb that shock.
But finally, they have realized they also need to increase their fiber network because data has
to be ultimately carried from the subscriber by the telcos only in most cases. So they are also
going to start buying fiber. In fact, some telcos, which have not come to the market are coming
up now, and we are looking at the possibility of large orders from telcos also now.
In fact, we have started receiving very concrete inquiries from those telcos. So there will be, if
at all, I'm saying if at all. 1 or 2 companies slow down their data center requirement, the
demand which will come from Europe, from Asia, from Southeast Asia, from telcos, this is
going to more than offset or rather increase the current level of demand.
Ashutosh Kumar Jha:
Understood, sir. Sir, if I may, just a last third question, which is around defense. If you can
help us with how you see the evolution of this business going ahead? I think we have a fairly
steady order book. You guys are building capabilities. How does this the revenue from this
segment look like over the, call it, next 3 years?
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October 19, 2026
Mahendra Nahata:
Yes, I can give a very short answer, a very long answer. So revenue this year, as I said,
maintain INR500 crores to INR600 crores. Next year, we look at least INR2,000 crores. And
aspiration is to take it in 3 years' time frame to INR5,000 crores.
Now if we look at the sector, geopolitical situation itself will tell you that every country is
strengthening its defense requirement, including India, because defense has to be strengthened,
particularly our country, the way our neighbors are, we really need to strengthen our defense
capabilities. And government is doing that actively and promoting local industry.
So what we have done, developed a lot of equipment locally. A number of them are which are
currently under trial in the last phase of trial, like, for example, radar. Certain radars, we have
developed a unique capability like Foliage Penetration Radar. One trial has already taken
place. Second trial is expected to happen in another 2 weeks or so. First trial has been very
successful.
Second would also be successful because it's a different kind of a terrain. Now those kind of
radars, then the Drone Detection Radar. We have already participated in a large tender for
Drone Detection Radar in Chambal, where it is indigenously designed. Ground surveillance
radar, indigenously designed, which we are expecting export orders also for that.
So these are the kind of technologies we have developed, which are indigenously developed
and are going to be required by our armed forces and maybe export purposes also. Second area
is aerospace, which we have gone into through acquisition. And there also, we have a pending
order book of INR1,600 crores. That acquisition is expected to be completed in this quarter
itself.
So that revenue also will get consolidated after acquisition being completed. So that also has a
very good export demand. These all the orders are for exports, and we expect to receive large
orders in this segment also in next few months' time frame. So overall, it should not be
difficult for us to reach the INR2,000 crores figure and a INR5,000 crores figure.
We are looking for many more opportunities, many more partnerships. So and including this
ammunition complex, which we are creating in Andhra Pradesh, as I already told in my
opening remarks, that should also start giving us revenue in about 2 years' time. We have
already participated in a tender for 800,000 multi-mode hand grenades, which would also be
manufactured at this site only.
So we are pretty confident about defense and aerospace business. In fact, this provides us a
second leg of growth in our business. So hypothetically, 5, 7 years later, fiber market, if at all
stabilizes, then this sector of defense will show us growth. So there are 2 pillars of growth in
the Company, which stabilizes the revenue and sustainability of profit or rather increase it
when both of the sectors are going good. So defense and aerospace, we are very positive about.
Moderator:
Our next question comes from the line of Chinmay Sapre with Schonfeld.
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HFCL Limited
October 19, 2026
Chinmay Sapre:
Is it possible to give the split of revenues within telecom segment between conventional telcos
and hyperscalers?
Mahendra Nahata:
Say that again, I couldn't listen to you properly. Say that again.
Chinmay Sapre:
For the telecom revenues, the telecom segment, which where we had about INR2,300-odd
crores of revenue. Is it possible to give the split between conventional telcos and hyperscalers?
Mahendra Nahata:
I would probably say it's something like 70-30, something like, not exactly number, something
more or less 70-30.
Chinmay Sapre:
Got it. And what utilization levels would be would this division be running at?
Mahendra Nahata:
Look, fiber optic cable, let's divide in 2 parts, fiber and cable. Fiber runs 100% of the capacity.
And again, when you ask 100% of the capacity, it varies from kind of fiber you manufacture.
If you manufacture 250-micron fiber, capacity is something different. 180-micron cable,
machines have to be slowed down. Capacity is something different, but the price realization is
much higher. So it is more than the 100% capacity of if it was 250 micron.
Similarly, cable, it depends upon who is buying cable. Somebody wants armored, somebody
wants unarmored, somebody wants double jacketed, somebody wants loose tubes, somebody
wants tight buffer, somebody wants IBR, somebody wants flat. You have to have different
machines for different kind of cables and not that all the machines simultaneously run for
everything.
So though capacity utilization is more than 100%, but it may differ when the products are
different and kind of products which are in demand. Like, for example, data center products
are in demand. It is running 24/7 all time. Some telcos cable are less in demand. There may be
some little bit less capacity. But overall, in terms of money terms, whatever capacity utilization
we have envisaged that is 100%.
Chinmay Sapre:
Okay. The second question is on the cost front. So what is the frequency of cost resets that we
have in our contracts with our suppliers for preform. So just wanted to understand what kind of
RM inflation are we seeing in preform and maybe it's not hit us so far because of contracted
nature, but eventually, what sort of margin pressure could come from here?
Mahendra Nahata:
Look, prices are determined on
either yearly basis or 18 months basis depending upon
contract to contract. So whichever have been our suppliers, which are yearly contracts or 1.5,
18 months or 24 months contracts there is no pressure on that. But whenever those contracts
expire, of course, the price variation has to be there.
But similarly, price is also increasing from the customers. These customers also, we have a
similar situation. On the long-term contract, the price variation clause is there on a year-to-year
basis. Year-to-year, we examine the prices and redo the prices. It can go down, it can go up.
But nowadays, the time is it is only going to go up.
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October 19, 2026
Chinmay Sapre:
Got it. So margins, you think that you would be comfortable maintaining current level of
margins?
Mahendra Nahata:
Well, I'm not only confident of maintaining, but I'm confident of getting it better.
Moderator:
Our next question comes from the line of Riken with Capri Family Office.
Riken:
Congratulations for a very good set of results. Sir, the first question is if it is similar to the
perspective you gave for the defense business from a 3-year perspective, if you could share
probably a 3-year perspective on the optic fiber business of where do we see ourselves in terms
of business size over there?
And you did mention you are confident of improving margins also. If you could outline what
could be from a 3-year perspective, the key drivers that will help you improve margins in the
optic fiber business. So one is the top line perspective from a 3-year point of view and a
perspective of how margins can improve in this business over the medium-term perspective?
Mahendra Nahata:
First of all, our margins are pretty decent even now. And there is a strong possibility of they
are improving. First, let me come to the top line. The top line will definitely increase because
we are increasing capacity. Fiber optic itself is going from 28 million to 38 million and 38
million to 43 million. Cable is going to about from 39 million fiber kilometers to 56 million
and 56 million to 63 million fiber kilometers. So this itself would mean increase in the top line
because the capacity is going up.
Then we are installing higher capacity for connectivity solutions introducing more products
than only the fiber-based products, but also the other products which are required inside the
data center. That also we are introducing and the revenue would start coming may be last
quarter of the current financial year or may be in the larger way in the beginning of the next
financial year.
Any way, this year itself, we have a connectivity solution revenue of about more than INR800
crores we had projected, which may be better rather. And next year, we have projected a
revenue of INR2,000 crores, which was INR800 crores this year. And with the optical fiber
cable revenue not going down, but increasing with the capacity increasing, there is every
reason that we would see improvement in the top line.
With the improvement in the top line, even if I maintain the current percentage of cost or the
margin, the bottom line will also increase. But percentage of margin, EBITDA or PBT you
said, I expect somewhat increase in that also because of, one, higher capacity; two, more
backward integration, preform, which we are introducing in next -- this construction is going
to start soon and '28, late '28, our own preform would be available. So that would significantly
increase our margin profile.
So one, top line is definitely increasing because of increasing capacity and higher number of
connectivity solutions getting introduced. Some of them are very unique. And then the second,
margin is going to improve because, one, higher capacity utilization or higher capacity
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October 19, 2026
available; and second, because of backward integration; third, because of connectivity
solutions.
Riken:
Got it, sir. That is very useful. Sir, the second question that I have is with regards to the
defense business in terms of the way in which we see this business ramping up. You do have
started reporting the segmental numbers here for some quarters now. So while we see that
there has not been any meaningful scale up as yet it's in that INR40 crores, INR50 crores as of
now in terms of quarterly run rate.
For that INR500 crores, it seems that you will sort of, at some point, have to do about INR200
crores of kind of a number a quarter. Can you help us with some visibility of what products
have achieved some kind of approvals or scale, which will help us, let's say, maybe in Q3 or
Q4, start doing a INR200 crores quarter kind of a run rate for the defense business?
Mahendra Nahata:
So look, one is electro-optic sights, which have started increasing revenue, and that will
increase the revenue. Number two, radars. For example Foliage Penetration Radar, that has
almost been through approval. Another couple of weeks and that will give us good revenue.
And then the second most important is the aerospace business, which we have gone for
acquisition and just getting completed within this quarter. That has an order book of about
INR1,600 crores or INR1,800 crores. So that will start giving us revenue from this quarter. So
all put together, INR500 crores is not an issue. We'll surely be able to achieve.
Riken:
Got it, sir. And just one last question, sir. In the EPC business, we do see that this quarter also,
there was a loss in that segment. You did mention that with the O&M revenues that should
start seeing better profitability. Could you give us some sense on when do you start seeing that
segment report positive numbers?
Mahendra Nahata:
Yes. I tell you why there has been loss. First, you should understand that, and then I come to
when. So, this Army's AMC contract is now on the final stage of approval. First year's AMC is
going to be done by BSNL, means they would give us a contract. Then next year onwards, it
would be by the Army.
So BSNL is in final stage of approval, maybe a week or 10 days, it will get approved and will
get signed. So that revenue would start coming in. So that expenditure, which is being
incurred, so that would a large part of that would be offset by the revenue which come in
because of AMC, which will be started coming to us. That is number one.
Number two, last quarter, we did a lot of work for BharatNet. But because there are some
defined milestones in the tender, the expenses were incurred, but bills were not raised because
the milestones are yet to be completed, verified and you know the processes, just engineers,
what they call IEs, then the BSNL verification, then this BharatNet authority verification, all
these long processes. File has to go through 25 different steps. One file if the 25th step put
some query, it goes back to step 0 and then comes back step 25 again.
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October 19, 2026
So submission of bill because of milestone issues has taken a longer time. This quarter, those
bills will be getting submitted. So what had been debited as expense in the last quarter against
that billing will be done in this quarter. So the loss which we incurred because of expenses
incurred, but not billed, that will not happen this quarter.
So this I would say this loss, which is you have seen INR121 crores or some crores in the
current quarter, next 2 quarters put together should not be more than INR75 crores to INR100
crores.
Riken:
Got it. And when do we see profits reported in this segment, sir?
Mahendra Nahata:
I think first quarter of next year, you would start seeing profit in this segment.
Moderator:
Our next question comes from the line of Manik with Balyasny Asset Management.
Manik:
Congrats on a great set of quarter. I'm just curious to understand on a very high level about the
India data center opportunity. We do hear from many other industry participants about the data
center growth in India and how it's evolving. But is there any color you can share in terms of
how the pipeline is evolving for you? What kind of engagement or traction you are seeing on
that front?
Mahendra Nahata:
Look, India data center, government is putting a lot of emphasis and a lot of incentives are also
coming from government for creation of data center by state governments in terms of
availability of water, availability of power, availability of land, a lot of facilities are being
given. Current capacity in India, as much I understand, is about 1.6 gigawatts for data center.
This is expected to become 6 gigawatts by 2030.
It's a good increase, very good increase, and it will generate reasonably good demand. But if
you compare it to what is happening in the U.S., it is minuscule in a sense that U.S. is already
having 130 gigawatt of capacity and which they want to increase to 300 gigawatt by 2030. So
you can understand the difference.
But it doesn't mean that India is lagging behind. If you look at Europe, Europe is also in the
same situation what India is. They are not, again, as advanced as what U.S. is. But these
countries will also come up. Like India in 4G came up all of a sudden, we became among the
first 5 in the world in 4G, 5G.
Similar thing is going to happen in data center also. In my personal opinion, the way the
private investment is coming in data center, this 6 gigawatt capacity would be more than 6
gigawatts by 2030, maybe 10 gigawatts still be that. That still is a good number.
All the major industrial houses are working on data centers: Reliance, Adani, Yotta, Mahindra,
all of them, Tata, all of them are working on creation of new data centers. And government is
also working on its own way of giving incentives to creation of data centers. So I am quite
positive about India, but yes, compared to North American market, we are still a lot to catch
up.
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October 19, 2026
Manik:
Got it. Got it. And maybe my second question just in terms of the FY29, INR10,000 crores of
number that you've given seems extremely conservative given the kind of run rate that you're
already giving. Any way in some way, if you can give us some guidance for FY28, both on
top line and margins?
Mahendra Nahata:
Well, I would avoid giving any guidance for FY28. But I can say this INR10,000 crores
number would be achieved much sooner than we projected in FY29 because you can see the
run rate by yourself. And FY28, I think we should be again, it's too early to give a guidance.
But yes, we should be doing better than what we are doing now in the current quarter or the
current year or the current half year because the reason is simple. We have order book to be
fulfilled and those orders have to be executed. And with the execution of those orders, the
revenue will definitely go up. And moreover, more orders are in pipeline.
Capacity increase is taking place, most importantly, with increased capacity, of course, there
will be increased supply also. So the revenue numbers and top line numbers and bottom line
numbers, both are going to be better to the best of my expectation. Unless there is some global
geopolitical thing happens, nobody can predict that. Business remaining business as such, I'm
pretty sure that the numbers will be better.
Manik:
Got it. Okay. No, that's helpful. Just lastly, with current revenue run rate, what kind of
utilization levels would we be having at from financial standpoint?
Mahendra Nahata:
I already answered this question. Fiber 100%. Cable also, again, as I said, different kind of
cable are required by different class of customers, depending who is giving order for what,
capacity utilization depends on. But you have to keep the machines for every kind of cable,
what customer requires, any other different customers require.
So sometimes a particular kind of order machine may be working at 80% capacity or some
other kind may be working at 100% capacity. But if you read then on the basis of revenue
numbers because machines have to be kept for every kind of a requirement. So on the revenue
numbers, you will see we are achieving 100% of capacity.
Moderator:
Our next question comes from the line of Kush Tandon with Ananta Capital.
Kush Tandon:
Many congratulations on numbers which are better than expectations again. Sir, I have 2, 3
questions. The first is, out of this H1 revenue of INR4,457 crores, how much will be revenue
attributable to the USD1.1 billion order that we had got from the hyperscaler? Will you be able
to share that number with us?
Mahendra Nahata:
Kush, I don't have that number in particular. Only thing I can say we have already started
delivering against that.
Kush Tandon:
Okay. Apart from that hyperscaler, we have some other hyperscaler orders, sir? Just wanted to
understand.
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Mahendra Nahata:
Yes, yes, of course, we have.
Kush Tandon:
Okay. Understood. And sir, in the order book, we are seeing INR5,000 crores of O&M order
book. I'm sure that would be at a higher margin than the regular business. Would you be able
to quantify again the margin profile of the O&M business that you are running, sir?
Mahendra Nahata:
Well, Kush, it would be broadly the same. Some of them may be less also, some of them may
be more. But broadly, margin would be same as we get into normal turnkey contracts. Normal
turnkey contracts, margin could be about, let us say, EBITDA margin could be something like
15% to 20%.
Kush Tandon:
Okay. Also, sir, you mentioned about the EPC business, there was some possibility of
restructuring or some thoughts on that. Any update on that.
Mahendra Nahata:
We are already discussing that. The committee -- Board committee, which we had formed for
restructuring and we have some external advice also taking E&Y probably, yes, E&Y. And
that committee is already on just finishing line of making the recommendation. Once I receive
the recommendation, I think may be a week or 10 days' time, we would be calling for a Board
meeting to discuss and take a decision on that. So another couple of weeks, I think we should
be able to finalize whatever restructuring we finally do. EPC is, of course, one thing which is
under active consideration.
Kush Tandon:
Okay. And sir, obviously, we are under a capex program of around INR1,250 crores is what I
see in preform and there may be some other capex. But early thoughts because of the cash flow
generation, any debt reduction thoughts going ahead, sir?
Mahendra Nahata:
Any, what was that?
Kush Tandon:
Debt reduction plans?
Mahendra Nahata:
Debt reduction, yes, it will happen. Already, we are repaying old debt. We have taken some
new debt for capex. And finally, the debt reduction will start in the current year.
Kush Tandon:
You mean to say, sir, the March '27 and March '28 balance sheet, the debts will keep coming
down?
Mahendra Nahata:
Yes, it will substantially go down.
Kush Tandon:
Okay. And sir, just one you've answered this question, but just wanted to understand, in this
quarter, again, this is business as usual. No high-margin order, no onetime event, nothing like
that in this quarter either.
Mahendra Nahata:
No, there is no such thing that there is very high-margin business of any particular quarter. It
will be as normal. As I've said, there may be some improvement in the margin, but there's no
diamonds falling down from the sky.
Moderator:
Our next question comes from the line of Khushi Soni with Nuvama Institutional Equities.
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October 19, 2026
Khushi Soni:
Congratulations, sir, on yet another excellent quarter. My first question is with regards to the
preform facility. So we have announced the capex to increase, and we have doubled our
capacity from 300 metric tons to 600 metric tons. We also moved up the commissioning time
line by almost 9 to 10 months.
So I wanted to understand what would the progress be on this expansion given that all global
peers are also looking at capacity expansions on similar or larger scale? Do we see any
headwinds in terms of supply chain issues or any machinery delay, any of that, if you can help
answer?
Mahendra Nahata:
There is no such significant delay. We are going to start having I can't give you more details on
that particular aspect because of commercial confidentiality, but we are going to have a
midterm solution for our own preform starting from the first quarter of the next year itself -calendar year itself. So that is one thing which is happening. Second, this 600 tons, which you
talked about, there is no headwind as such.
But yes, machine supplies were there were 2, 3 months delays experienced by us, which we
have already taken into account when we say October '28 because suppliers also got large
orders. So we get orders, they get orders. So -- but there is no such headwind. And October '28
timeline which we have given, that would be met.
Khushi Soni:
Right, sir. Just a quick follow-up on that. Again, with the preform facility right now, since we
are outsourcing preform, we don't really require germanium. But once the capacity comes in,
do we have any contracts or how do we plan to ensure that we have adequate supply of
germanium? Or do we see any impact on margins or any utilization ramp-up delays because of
the availability?
Mahendra Nahata:
Khushi, we are already talking to some of the suppliers for germanium. It's too early to finalize
a contract, but we are already getting in touch with a couple of suppliers of germanium from
whom we have received positive response.
Khushi Soni:
Right, sir. And my second question would be...
Mahendra Nahata:
I said of course, but germanium percentage in the overall cost is so low, price would not be
much impacted. But yes, supply, we have to tie up in advance. That's what we are working. So
we will be needing germanium in 2 years from now. We are still working on that.
Khushi Soni:
My second question would be if you could provide some color on the quarter-on-quarter trends
in terms of volumes and pricing, especially if you can give a sort of bifurcation between
telecom and data center and how the data center segment has scaled up for us? So what kind of
revenues we saw in FY26 then in Q1 and Q2, may be a sense of the mix that we have seen?
Mahendra Nahata:
Khushi, quarter-on-quarter trend, I can only say the revenue which you have seen in the
current quarter, there will be growth in that revenue. There would there will definitely be
growth in Q3. That's my best estimation as of today barring any absolutely something out of
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control happening, which is the geopolitical situation, which cannot be controlled by anybody,
but business going as such, there will be growth in next quarter.
So quarter-on-quarter, there is a growth expected. Next year also, there is a growth expected
because the very fact that which I have told 2, 3 times on this call, the capacity itself is going
up and orders are there. So naturally, there will be growth in revenue also. There's no doubt
about that. So growth in revenue and profitability, both are expected.
Khushi Soni:
So any kind of split in the data center and telecom that you can provide us with?
Mahendra Nahata:
I would generally say anywhere between data center would be 65% to 75%, telcos would be
between 25% to 35%. Somewhere will vary between that.
Khushi Soni:
So this is in terms of revenue or volumes?
Mahendra Nahata:
In terms of revenue.
Khushi Soni:
In terms of revenue. And if you can give a sense of the difference in realizations?
Mahendra Nahata:
Pardon me?
Khushi Soni:
Difference in pricing or realizations between data center and telecom?
Mahendra Nahata:
Data center prices are a bit higher because they need a very specialized fiber. Telcos don't need
that kind of a specialized fiber. So naturally, data center prices would be higher because of
higher level of technology and the kind of fiber required involved.
Khushi Soni:
So in Q2, we have had a revenue growth of 33%, right? So if you can give us a sense of the
growth mix or price mix, what how much is DC more than telecom? Just a broad sense so we
can understand what is the mix?
Mahendra Nahata:
It's not comparable because the products are different. Whereas telcos in most cases require D
fiber, G.657B, which is fiber price is roughly, let us say, roughly USD15, roughly USD15.
Now data centers require A2 fiber of 180 micron. The fiber price is USD25, USD26, USD27,
something like that, USD25 maybe. So not comparable because these are 2 different products.
You can't compare the price of a car and an aircraft. It's something like that. So I cannot
compare the prices between the two.
But relative pricing, I can say, yes, data center prices are costlier because that kind of a fiber
you draw, you draw at a very less speed because it's thinner. It has to be more careful to draw
the fiber because the geometries have to be maintained. So tight-clad fibers are there. So these
are different products. But in terms of -- when you talk of revenue, per meter revenue -- per
kilometer, let me say, for a data center cable is much higher than a cable required by telco
because the products are completely different.
Khushi Soni:
Right, sir. So in Q2, have you seen any increase in the blended prices? I understand you
mentioned that each of the fiber is different, and we cannot have a sense of each and every
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one. But on a blended level, have you seen prices go up or remain stable? What has the trend
been like, if you can highlight on that?
Mahendra Nahata:
Prices in Q2 have really gone up. And I now see more or less stabilizing. But again, I may be
completely wrong. I said this in the last quarter also that looks to be stabilizing, but then it has
gone up by some 20%. So but if you ask my opinion, there may be some increase, but not as
much as what you have seen in the previous quarters.
Moderator:
Our next question comes from the line of Debashish Mazumdar with Shagun Capital.
Debashish Mazumdar:
So most of my questions have been answered. Just one thing I wanted to understand, this is
also on the margin front. If I compare our telecom margin, which is at EBITDA level must be
upwards of 30%. And if I put that number for an Indian competition who is again, fully
backward integrated doing around 20% and the global very large competition like Corning,
who is again much higher attach rate and much higher connecting solution doing 30%.
So just wanted to understand in a comparative landscape, we are doing around 32%, 33% kind
of EBITDA margin in the telecom business. So is it largely because of the product mix? It is
largely because of the hyperscaler mix. What exactly is benefiting us to do this kind of margin
in this quarter?
Mahendra Nahata:
So I cannot comment on what somebody else is doing and how he is doing because it's not
possible for me to know inside of anybody else's business. Only thing I can say what we are
doing, and that is the thing I can explain. We are supplying mostly to data centers till now, but
now starting for telcos also. Last year -- last quarter also, we supply to telcos, particularly to
Indian telcos, not international telcos. Now we are talking to international telcos also where we
think we'll get some orders. The telcos are now increasing their demand.
So obviously, as I said earlier, telcos have a different kind of cable requirement and data
centers have a different kind of quality as well as quantity. Quantity is also different in case of
telcos and data center, as I explained, 180 micron, 250 micron, D fiber, A2 fiber. So it depends
who is doing more business of what kind. If somebody is supplying more telcos, his revenue
per kilometer may be lower. Somebody is doing more of a high-quality fiber, maybe revenue
could be higher.
So it all depends upon who is doing what. So I cannot comment on what somebody else is
doing. That's not for me to comment. Everybody does what he thinks is the best. And they
must be doing, whoever, their best. My good wishes to all competitors.
Debashish Mazumdar:
Sure. Understood. And sir, this almost...
Mahendra Nahata:
I don't treat competitors as competitors. I treat them as friends.
Debashish Mazumdar:
Sure, sure. Obviously. And...
Mahendra Nahata:
Maybe some of them are listening to this call.
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Debashish Mazumdar:
Possible, sir. And this INR29,000 crores order book that you are talking about, this will be
delivered by what time, sir, this will be delivered I mean, what is the timeframe to be
delivered of this order book?
Mahendra Nahata:
Look, this would be some of them are 4 to 6 months, some of them are 3 years, 4 years. So
mostly up to 4 years contract may be.
Debashish Mazumdar:
Okay. But largely to be delivered on an average in a 2 years' time frame, considering that
INR1,000 crores number.
Mahendra Nahata:
Not necessarily. Some of them would extend to 5 years. And now we are talking about
contracts of further 4 and 5 years now. So that would be next 5 years.
Debashish Mazumdar:
Okay. Understood. And sir, third question is that 600 MT preform that we are putting in, is that
sufficient for the 45 million capacity that we'll be having or we need further import there?
Mahendra Nahata:
No. That will be just half of that. Half of that. The rest we will have to initially buy it from
outside. That is the preform we will have to buy. And our own preform would be roughly
about half of the capacity. Rest of the preform we have to buy from outside, for which we have
some long-term contracts also.
Moderator:
Our next question comes from the line of Sagar Parekh with Renaissance Asset Managers.
Sagar Parekh:
Congratulations for a great set of numbers. Just as you gave the defense revenue visibility for
the next 2, 3 years, your aspirations, can you also share how are you looking at your optical
fiber cable business for the next 2, 3 years? Do you have any aspiration in mind that what kind
of scale do you want to reach to?
Mahendra Nahata:
Look, as I already said, we are increasing our capacity of 39 million fiber kilometers to 63
million fiber kilometers. That itself would give us increase in revenue. Now how much in
monetary terms is very difficult to say at this point of time. It depends upon what kind of cable
could be required, what capacity cable would be required. It's very difficult to say. But 39
million fiber kilometers to 63 million fiber kilometers, you can start doing your own
calculation.
Sagar Parekh:
34 million fiber kilometers to 63 million fiber kilometers, right. So that's let's assume that this
year will be about INR8,000 crores, INR9,000 crores of revenue from OFC. So that would
translate to about INR16,000 crores, INR17,000 crores.
Mahendra Nahata:
I have not said that. You have said that.
Sagar Parekh:
Out of INR10,000 crores, I think defense would be INR500 crores and the rest, I think, about
INR9,000 crores...
Mahendra Nahata:
EPC is also there. Telecom is also there. So all of them are there. Let us say any number. It
doesn't matter. 39 million fiber kilometers will go to 63 million fiber kilometers. So any
number you talking, INR7,000 crores, INR7,500 crores, INR8,000 crores, I'm just not going to
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the numbers right now. But yes, somewhere around that, somewhere around that, let us say,
INR7,000 crores, just for as an example. So it goes to 63 million fiber kilometers. So you can
do your calculation, but be very careful.
When I say 39 million fiber kilometers is the total capacity, some part of the capacity for the
telco, for example, they need loose tube cable. They may not be buying at this point of time.
So they may be lying idle. So 39 million fiber kilometers is the theoretical capacity. But
finally, the numbers are important, what kind of numbers you achieve. That's what determines
your capacity because not all kind of cables are manufactured at every point of time.
Generally, you can say the utilization will get better because we are now expanding the
capacity of cables, which are currently in demand, like data center cables. So overall, it will
increase only, but you can do your own calculations on that.
Sagar Parekh:
Right. And my next question was basically on the visibility because you just said that your
order book is INR28,000 crores and about -- average about 4 years is what you said, right? So
that if I divide just by 4, you have about INR7,000 crores of annual revenue run rate, whereas
you are talking about may be even less than slightly less than double in 2 years. So it seems
that we don't have any visibility beyond INR6000 crores, INR7,000 crores for now. Is that the
right way to assume or…?
Mahendra Nahata:
No, no, no. There are 4 years you are talking, more orders are going to be received. Do you
think that I'm going to sitting idle not taking more orders? Many more orders are in pipeline.
So delivery will happen, orders will come. So like when I met you last time, I think order book
was INR26,000 crores, if I'm not wrong.
Now it has been INR28,900 crores, so almost INR29,000 crores. So it has increased. Though
we have delivered INR2,500 crores, but order book has gone up. So INR 2500 crores plus
INR3,000 crores, if you look at that. So it means we have INR5,500 crores or more orders. So
we'll keep on receiving more orders. I think order would be more than the supply we do.
Sagar Parekh:
No, that I understand. I understand that you will keep getting orders. My only point was that
right now, as of now we have INR6,000 crores, INR7,000 crores of visibility in terms of
revenue per year. Beyond that, no more...
Mahendra Nahata:
Again, you are wrong. It's not evenly distributed over 4 years. It's not evenly distributed. More
orders will come. They would get added. More orders are coming. So more capacity is being
added. That is on the basis of the order pipeline. So you cannot say if there is a INR28,000
crores order book and that will remain at INR28,000 crores and supply would be made out of
that only. I'll give you one example. In 1 quarter, INR26,000 crores has become INR29,000
crores, whereas there has been a supply of INR2,500 crores. So against INR2,500 crores
supply, you have received orders of INR5,500 crores.
Sagar Parekh:
And at any point of time, do you have any visibility for the next 2 years in terms of revenue?
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October 19, 2026
Mahendra Nahata:
No. Well, as I already said, capacity is increasing 39 million fiber kilometers to 63 million
fiber kilometers. And last question, I answered this to Khushi. And then defense revenue, I've
already said we have to do INR2,000 crores and possibly INR5,000 crores in next 2 years. So
that should give enough visibility that there is going to be a reasonable growth in revenue and
bottom line both.
Moderator:
Our next question comes from the line of Rishubh Vasa with Indsec Securities and Finance
Limited.
Rishubh Vasa:
Congratulations on a good set of numbers. So my question pertains to the Defense Segment.
So basically, we did around INR80 crores of revenues in the first half, and we are aspiring of
around INR500 crores in FY27. So basically, I just wanted to understand this gap.
Moderator:
Sir, the current participant seems to have dropped from the queue. We will proceed to the next
participant. The next question comes from the line of Akshat Mehta with Seven Rivers
Holding.
Akshat Mehta:
Congrats on a great set of numbers. I just have one broad level industry-related question, sir.
So for the next few years, right, you have roughly INR30,000 crores of order book, right,
which will drive the growth, plus you will get more orders from there. So post, let's say, FY29,
what will be what kind of capex from hyperscalers from AI data centers will you need to
maintain a 14%, 15% growth rate from there on?
Mahendra Nahata:
So capex, we have already announced that our capex spending capex is INR1,800 crores. So
that...
Akshat Mehta:
No, not from your side, sir, from the consumers.
Mahendra Nahata:
Well, what I have heard of, I don't recollect the number, but I think they have been talking
USD35 billion, something like capex for growth of data centers in US alone.
Akshat Mehta:
Currently, around USD800 million for this year only.
Mahendra Nahata:
Yes. Well, I may be wrong on those numbers. So don't hold me on that number. It may be a
very different number, but it is in billions of dollars, and I don't have that number in my mind
right now.
Akshat Mehta:
Okay. And sir, I also wanted to understand that you're targeting INR800 crores of connectivity
revenue in this year, what will that number be in Q2?
Mahendra Nahata:
You're talking about...
Akshat Mehta:
Connectivity.
Mahendra Nahata:
Okay. Q2, I don't have the right number. Total is INR800 crores. Q1 -- just one second. I'll try
to get the number. I don't know. I think you should take another INR300 crores, INR200 crores
to INR300 crores, something like that.
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Akshat Mehta:
Okay. Is it Q1 or Q2, sir?
Mahendra Nahata:
No, no, I'm talking about Q2.
Akshat Mehta:
Okay.
Mahendra Nahata:
It should be about INR300 crores plus, I think INR300 crores should be there.
Moderator:
Our next question comes from the line of Smith Gala with RSPN Ventures.
Smith Gala:
Congratulations on a strong set of numbers. So most of my questions have been answered, but
one question I would like to have clarity on is on the interconnect revenue in quarter 2 as well
as quarter 1 FY26 and what we expect for the full year FY27?
Mahendra Nahata:
I've already answered this question that INR300 crores is our expectation for quarter 2 and
INR800 crores is our expectation for the whole year.
Smith Gala:
And quarter 1?
Mahendra Nahata:
Quarter 1 was nil.
Moderator:
Our next question comes from the line of Dhruv Sitlani with Vyomara Capital.
Dhruv Sitlani:
Congratulations on the stellar set of numbers, sir. I had just 2 questions. So my first question is
from Q1 to Q2, you had around 40% quarter-on-quarter growth. How much of the growth
came from the volume increase versus the realization increase? And in this, going forward, in
Q3 and Q4, do you expect further realization increase or not? And is there any capacity for
more volume growth in the next 2 years?
Mahendra Nahata:
Look, this growth came from volume and price both. It's not only price, not only volume. It
came from both of that. Production also increased and prices also became better. So and the
same trend is going to continue in the future also. It would come from both sides, volume and
pricing both. Now how much would be volume, how much would be price, very difficult to
say.
The price, how much will become better or remain stable is very difficult for me to say now
because different cables have different prices, different customers have different prices,
different type of cables and fiber is there. It's very difficult to say like that. But overall, there
will be growth that much I can say.
Dhruv Sitlani:
Okay, sir. That is great. But it would be better if I can get some ballpark number by any chance
with more than 50, like ratio is 50-50, 60-40 or 70-30, that would be great.
Mahendra Nahata:
I cannot give you a ballpark number. If I give that, it would be an incorrect statement.
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October 19, 2026
Dhruv Sitlani:
Okay. No problem. Sir, my second question is on how much was the revenue from
connectivity in Q2 that you answered rightly? And what is the trend that would be can we see
going forward?
Mahendra Nahata:
I've already told that three times in this call that we expect INR800 crores this year, INR2,000
crores next year.
Moderator:
Our next question comes from the line of Tej Patel with Niveshaay.
Tej Patel:
Yes. Congratulations on a good set of numbers. Sir, I know previous participant had asked the
question on probably on volume value mix. But we, of course, get it there is volume growth
coming from the new fiber -- the cable capacity going live. But just wanted an understanding
on pricing terms.
When you say, sir, the prices have increased, let's say, by 20%, 25% Q-on-Q because these are
prices of market, right? But then we have entered into contracts which are long term in nature.
So are we able to like pass on this complete 20%, 25% given our contracts are long term? Or is
there a certain extent to which only this pass on happens?
Mahendra Nahata:
Tej, one thing. First of all, when I say 20%, 25%, it's not for every raw material. I am talking
about fiber, 20%, 25% fiber is there. There are other raw materials also, gases are there, there
are plastic products are there, jelly is there. There are many other products. Not that every
product has gone up by 20%, 25%. That is one.
Second, whenever there are price increase, there is a negotiation between the buyer and seller
and some equilibrium is always reached so that neither their purchase price is affected too
much in percentage nor our profit margins impacted.
So there is a price reset clause in most of the cases, most of long-term contracts, there is a price
reset clause. Short-term contracts of 4 to 6 months, there is no reset clause. So in these cases, if
prices of raw material go up, we have less margin. But in those contracts, which are 4 to 6
months, the price is always higher than there would be a 5-year. So all these things get
balanced out finally.
Tej Patel:
Superb. Got it. And sir, initially in between, you said you are probably having a midterm
solution for our own preform starting from first quarter. If you could elaborate on this, what
exactly is the solution?
Mahendra Nahata:
I can't elaborate. This is a trade secret.
Tej Patel:
Okay. No problem, sir. No problem. And sir, my last question is sorry.
Mahendra Nahata:
There is a mid-term, but I can't elaborate more on that.
Tej Patel:
Okay. Okay. And sir, but I mean, does this reduce cost? I mean, is it something related to
process or something? Or is it some sourcing strategy?
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Mahendra Nahata:
Well, I would only say it would reduce cost.
Tej Patel:
Okay. Superb. And sir, one last question is, sir, when you say we are probably putting up a
facility for connectivity as well, and we are guiding good numbers towards connectivity as
well. So all this business of connectivity, is it all of scale across, that is, between the data
centers and within the campus? We are yet to sell a solution or make a product for completely
that goes inside the data center, right? Because we will be needing separate certification for
that, right? Is that understanding correct?
Mahendra Nahata:
Look, you know what connectivity we are doing? It is inside the data centers, and that
certification is already there. That is why we have started supplying and generating revenue
out of that. Now, when you talk of certification, every data center does not require same kind
of connectivity solution. If somebody else requires a different kind of a connectivity solutions,
he would definitely do his own testing and qualification again. Not again.
For the first time, maybe he will do that because they are different kind of a connectivity
solutions. So there is an ongoing process which always continues, because cable also same
thing. People require different kind of cables, so if they buy a particular kind of cable for the
first time, then qualification will have to happen. That is a continuous process.
Tej Patel:
Superb. And sir, last question. In the presentation, we have put up stating margins of, let us
say, greater than 27%. But today, just wanted to get your views, not on margins, but a broader
scenario. Today, a lot of our margins has a lot of it has to do with the prices which optic fibers
are currently at, right? But let us say a lot of these global players have announced capacity
increase of almost 40%, 50%.
We ourselves are almost doubling our capacity, same as with our peer. So 2, 3 years down the
line, the preform capacity also would be coming in. I am just trying to get an understanding on
your views on the prices, let us say, would get impacted because of the supply. How are we
probably thinking on margins when today we are saying we will be able to maintain 27%
margins 2, 3 years down the line?
Mahendra Nahata:
I tell you, preform prices will have to come down. Right now, the preform, if you want to buy
from market, we are not buying from market because we have a pre-done contracts, so we
have no issue. If you try to buy from market, they are insane prices, insane and that has to
come down. It cannot continue. They have gone up by 600%.
I don't have to suffer because of that, because I have a predetermined contracts and these are
being supplied, but that's insane, because that's something non-availability. So they have to
come down. This USD300 per kg price cannot continue. and they will come down. Once the
capacity increases, they have to come down to reasonable level which is equivalent to the
prices of the fiber which is available at this point of time.
So those prices, current prices are insanity, and it is a factor of non-availability. If somebody
asks you what is the price of something like X, which is not even available, then you quote any
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October 19, 2026
price. How does it matter? So that price right now is insanity. It has to come down, and that
what it means, that there is a very less capacity than what is required.
So that capacity is required. It has to come up. But that would not mean any dent on the
profitability of company like ours, because we don't have to pay USD300 in any case. But it
has to come down because -- it has to come down to realistic level. These are the prices of
non-availability.
Moderator:
Our next question comes from the line of Saket Kapoor with Kapoor & Company.
Saket Kapoor:
Namaskar, Nahata ji.
Mahendra Nahata:
Namaskar, Mr. Kapoor. I was waiting for you. I cannot finish the call without your question.
Saket Kapoor:
Sir, just to continue on the aspect which you were just alluding to, particularly with respect to
the preform availability and the insane prices. So taking into account the cyclicality factor, sir,
which we see in all the businesses, what according to you are the key risks currently associated
with our business in terms of OFC pricing and this non-availability of the key raw material that
has contributed to the improved realization? Sir, how will you summarize the scenario that is
being played out right now?
Mahendra Nahata:
First of all, raw material availability, we need germanium after 2 years. We have already
started talking to suppliers for germanium. My preform suppliers at this moment have not
talked to me of any less availability of germanium. It means germanium is available to them. If
it is available to them, it will be available to us also. I don't think there is such a short supply
that it would inhibit production of preform in a great quantity, because it is available from
several companies. Country to country, there are export restrictions, but it's not that these are
not available.
In 2 years' time, we will definitely need it, and we have already started talking to suppliers. So
right now it is not impacting us. I do not have any knowledge about how it is impacting others.
I have no knowledge of that. But from two years from now, geopolitical situation may be
completely different. The shortage or so-called shortage is geopolitical, not really the shortage
of raw material for any natural reason.
Saket Kapoor:
Right, sir. That only what would actually factor it into the pricing also for the end product. Do
you think that this is the sustainability of these margins going ahead? And secondly, with the
type of cost of finance that has gone up, especially for the U.S. market and a lot of the data
centers being funded through debt, how will these two scenarios put pressure on the viability
of even the data centers going ahead? And then the entire story that has been planned out for 45 years. Just to have an understanding from you people as you are the veteran in the industry.
So, how are we placed in this whole cycle, sir, just to hear your thought on the same?
Mahendra Nahata:
As data centers are concerned, people have a rational mix of debt and equity of the large
hyperscalers I am talking about. Large hyperscalers like Google, Meta, Microsoft, OpenAI and
all that. If you look at the orders which companies like NVIDIA with GPUs, which are
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primary suppliers for data centers, if you look at their demand, there is a huge demand they
cannot fulfill. It means data centers are coming up.
Now even if there is some percentage less of data centers come up because of cost of capital
increase, who are heavily reliant on debt, which obviously the major hyperscalers are not. So
in that situation, as I have already talked, there will be demand coming up from Europe and
Asia, which has not yet started in a meaningful manner. So that will offset that particular less
capacity expansion of the data centers which are heavily reliant on debt only.
Rest, who are not heavily reliant on debt would continue because the companies are strong
companies and then the demand for data center emanates from more data is being generated,
which AI is generating. Now, if you say, what happens if AI does not happen? Well, I cannot
say -- comment on that, but I do not think that there is any reason that AI will not happen.
Some restriction may be there on use of AI for nefarious purposes, but AI is so much
beneficial to humanity that it will keep on increasing its utilization and therefore data will keep
on growing.
So I don't foresee any big risk out of this interest rate change, except there may be some
closures, some less expansion in heavily debt-reliant companies, but that would be offset by
Asia, Europe, and demand of telcos, as I have already said.
Moderator:
Thank you. Ladies and gentlemen, we will take that as our last question for today. You may
get in touch with Mr. Amit Agarwal for any further queries.
Mahendra Nahata:
I think, all questions that can be there have already been answered. So any further question
would only be repetition only. But still, any of you have any further query which is left
unanswered, please send a mail to Amit Agarwal and we will immediately reply that. But the
last question.
Moderator:
Thank you. On behalf of Nuvama Institutional Equities, that concludes this conference. Thank
you all for joining us. You may now disconnect your lines.
Mahendra Nahata:
Thank you very much, gentlemen. Thank you very much, ladies and gentlemen, for being on
the call, and I really appreciate your presence. And again, give you my lookout for the business
that business is going to remain positive, business cycle is good, and there would be
sustainability in the revenue and profitability of the Company. Thank you very much.
Moderator:
Thank you.
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