Mahendra Nahata, Managing Director of HFCL, has highlighted the burgeoning demand for fibre optic cables, primarily driven by the rapid expansion of AI-powered hyperscale data centers globally. Speaking after the company's first-quarter results, Nahata affirmed that HFCL's strategic investments in expanding manufacturing capacity have positioned it to capitalize on this surge, particularly in export markets.
HFCL Posts Strong Q1 Earnings Amidst AI-Driven Demand
HFCL reported a significant turnaround in its June quarter earnings, posting a consolidated net profit of Rs 229 crore, a stark contrast to a loss of Rs 32.2 crore in the same period last year. Revenue more than doubled to Rs 1,915 crore from Rs 871 crore. This robust performance is largely attributed to the escalating global need for fibre optic infrastructure capable of handling the massive data volumes generated by artificial intelligence.
Nahata emphasized that the fundamental shift in the fibre optic cable market was anticipated by HFCL several years ago, prompting continuous capacity increases. He explained, "Artificial intelligence... is throwing up so much massive amount of data that can only be carried by fibre optic cable. That's the reason the demand for fibre optic cable has increased."
Exports Drive Growth
HFCL's proactive approach has enabled it to meet rising international demand, with exports accounting for over 70% of its fibre optic cable production. In the recent quarter, exports contributed Rs 1,063 crore, representing 55.5% of the total revenue, underscoring their critical role in the company's growth.
Robust Order Book and Future Outlook
The company has raised its revenue growth guidance for FY27 to at least 40%, a confidence rooted in its substantial order book. Nahata revealed, "We have an order book of ₹26,000 crore in hand at this point, which is five times the revenue of the last year." While the timing of equipment shipments and project execution might cause quarterly fluctuations, HFCL remains optimistic about achieving its ambitious growth target.
Strategic Investments in AI Infrastructure
HFCL is also making significant investments in new data center connectivity products and expanding its manufacturing capabilities to support the growing AI infrastructure requirements. The company expects its data center interconnect business to contribute meaningfully by the fourth quarter of the current financial year or, at the latest, the first quarter of the next. This new segment is projected to generate around ₹800 crore in revenue this year, with plans to increase capacity five-fold.
Additionally, HFCL is expanding its optical fibre cable capacity to 3 million fibre kilometres and investing in preform manufacturing through backward integration. These initiatives aim to enhance supply chain stability and competitiveness.
"The fundamental change is the growth of the fibre optic cable market, which we foresaw a couple of years ago, and we continuously increased our capacities." - Mahendra Nahata, MD, HFCL
Stable Margins Expected
Despite ongoing capital expenditure across its telecom, AI data center, and defence segments, Nahata stated that HFCL does not foresee a decline in margins. He cited long-term orders and stable visibility on raw material prices as factors that will protect profitability. The company anticipates strong demand for both fibre optic cables and defence products to persist over the next five years, further supporting revenue growth.