HFCL Limited (HFCL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the HFCL Limited Q2 FY 2017 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 basis that could cause its future results, performance or achievements to differ significantly from what is expressed or implied by such forward-looking 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. [Operator Instructions] 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.

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 FY '27 earnings, we have with us Mr. Mahendra Nahata, Managing Director; Mr. V.R. Jain, CFO; Mr. Manoj Bert, Company Secretary; and Mr. Amit Akawal, 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. .

Thank you, Achal. This is Mahendra Nahata, managing Director of the company. Good evening to all of you, ladies and gentlemen. I extend a very warm welcome to all of you on HFCL's earnings call. for the second quarter and half year ended September 30, 2026 of the financial year 2026-2027. I trust you have had an opportunity to review the financial results. press release and investor presentation, which has been uploaded on the company's website as well as on the website 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 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 FY '27. Both growth profit before tax and profit after tax grew more than fivefold over the same period last year. Consolidated profit before tax in quarter 2 of FY '27 reached to INR 538.60 crores as compared to INR 106.34 crores in Q2 of FY '26, rising 406.49% year-on-year and 62.46% quarter-on-quarter. Consolidated profit after tax in Q2 of FY '27 rose to INR 394.22 crores on as compared to INR 71.92 crores in Q2 of FY '26, an increase of 448.14% year-on-year at 60.49% quarter-on-quarter basis. On a half yearly basis, the PBT grew from INR 61.64 crores to INR 870.12 crores by 1,311.62% while PAT grew from INR 42.62 crores to INR 639.86 crores, up by 1,401.31%. Consolidated revenue surged to INR 2,541.79 crores, increasing by approximately 143.62% year-on-year and by 32.73% over the previous quarter. EBITDA increased to INR 658 crores, delivering growth of 223.55% on 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 over the year-on-year and 268 basis points over previous quarter. Together, these numbers demonstrate retent of our operating model and ability to translate rapid growth into sustainably higher profitability. The momentum we are witnessing today reflects the static initiatives taken and investment 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, a growing business visibility across these strategic initiatives gives us strong confidence in our journey ahead. I want to assure you that HFCL is on track to maintain a growth trajectory of revenue and profitability ahead. Our focus is on sustaining the pace of education and translating the opportunity into continued strong performance. Our order book stands at INR 28,900 crores, providing multiyear revenue visibility. Beyond this secured business, we also have a strong pipeline of orders in advanced stages likely to be converted into firm contracts in due course. Friends, I want to emphasize that we do not see this quarter at a peak, but as the sustained phase of strong growth. Our confidence rests on robust order book, a strong pipeline and long-term customer programs. Our customers include some of the world's largest financially strong technology companies with demand incurred 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 gives us strong visibility and confidence in sustaining and building on the current revenue and profitability strategically. Demand continues to accelerate across the [ AI ] infrastructure, high hyperscale data centers 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 active HFCL strongly to capture this long-term growth opportunity. Friends, you will recall that we began FY '27 with a revenue growth aspiration of approximately 20% over FY '26. After the first quarter, I revised it to 40%. And today, when I present Q2 FY '27 is to you, I'm still pleased to share that based on our current expectation and business visibility, we expect revenue growth of at least 80% in this financial year. 20 to 40, 40 to 80. We had envisaged achieving INR 10,000 crore revenue by FY '29. Given the momentum we are seeing, I would not be surprised if we reach this milestone much before that. Friends, then to support the next phase, our planned investment of approximately INR 1,800 crores across optical fiber, optical fiber cable and [ prepone ] manufacturing will expand the capacity and deepen integration. Our advanced cable portfolio and data center connectivity capabilities are also progressing well, strengthening our ability to serve customers as their requirements grow. Let me now turn to defense and aerospace sector. which we see as HFCL's next [ measure ] of growth. We are very excited by the long-term opportunity in this business. Years of investment in indigenous technology products, product development and qualification have created a platform that we are now translating into orders and deliveries. Our portfolio spans thermal weapon sites, surveillance, radars, electronic fuses, and multimode hand grenades. In September, we successfully delivered a second batch of thermal weapon sights for AK-205 5 to the Indian defense forces. We expect to complete the acquisition during the current quarter for aerospace business. Importantly, the Aerospace business being acquired already has executed order book of approximately INR 1,600 crores, providing good visibility from [ downstack ]. At the same time, our ambition in this sector extends well beyond this acquisition, and we are actively working on several other large opportunities. We remain on track towards our aspiration of approximately to this INR 500 crores of defense revenue in FY '27. We are also setting up and emanation manufacturing complex [ instead of Andrades ]. As I already informed you that government of [ Andreades ] has already allotted us 1,000 acres of land parcel instead of this complex. Construction of this site will start soon. Together with the ongoing aerospace acquisition will further strengthen our difference in aerospace platform. With a strong pipeline, expanding capabilities and increasing business visibility, we are confident that defense and aerospace can emerge as a sustainably larger contributor to the company's growth in the coming years. Friends, let me close with conviction. We believe both optical fiber cable, connectivity solutions, defense and aerospace business are on the cusp of enormous growth in optical fiber cable, continuing demand, a strong order book and a pipeline and deeper backward integration support our confidence. In defense, 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 6 to 7 years and beyond. We are determined to convert it into sustained revenue growth, stronger profitability, lasting value for all our stakeholders. Thank you very much for your continued trust in HFCL. I wish you and your families. I'm very happy Dushera and a very prosperous Diwali. Thank you all now be happy to take your questions. Thank you very much, ladies and gentlemen, for sparing your time to joining this earnings call of HFCL.

[Operator Instructions] Our first question comes from the line of Pranab Catia with MK. .

Congratulations on a good set of numbers. I have two questions. First question is your presentation mentioned that you have around INR 18,500 crores of book for OC 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 the customer risk profile there.

Well, no, I can't obviously give you the customer names and profiles that we and -- under NDA. But out of INR 18,500 crores, large portion could be from hyperscalers on large portion. I don't have the exact number, but yes, maybe 70%, maybe 70% would be from hyperscalers of the export order. Now the indigenous local orders are from telcos, mostly from telco. Data centers are yet to pick up in India. [ Our day ] pickup will be supplying to them

Okay. 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 [indiscernible] guidance seems very conservative because it seems like [ flatish ] or maybe slighter decline compared to what you have done in this quarter. Is it because you are being conservative or there is a capacity constraint or if there is any pre-form supply challenges? Any color on that would be helpful.

It is always good to be conservative. Give you a lower number, I surprise you by better numbers. .

Okay. Yes. But basically, that means that there is no -- I mean, supply challenges from -- in terms of preform or anything like that? .

No, no, not at all. Not at all. .

Our next question comes from the line of Ashutosh Kumara with Balani Asset Management. .

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?

Look, our margin profile, again, depends upon kind of customers, kind of cable, kind of solutions they want because margin vary strong 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 is of getting it worse 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 applied by many suppliers. The suppliers are limited. So with the increase in volume capacity and also the kind of orders which we are receiving, there was some increase in margin profile. There will be increase in margin profile.

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

I don't see any slowdown because if 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. Efficiency -- now AI has increased efficiency of the businesses by multifold. So AI rather than being a lender or availability to the fuel, it has become a common requirement and necessity. With that kind of necessity going around, I don't think more data centers coming up in future or the pace with which they are coming. I expect it to continue. But the second one is very important, which is right now, you see the growth in North America, predominantly U.S. Now growth has not picked up as much either in Europe or in Asia. I'm not talking about China here. I'm not really aware to what is happening inside China, very food people would be aware. So this growth has to pick up in Europe and Asia also, including India. Middle East may be a different history at this point of time because of the political situation. But in rest of Asia, Europe; this growth will pick up. So demand will come up from there also. Second most important thing people may be missing -- just one second. Sorry. Second most important point, people are missing is the demand from telcos are also going to increase. Finally, telcos have not been buying much since last 2 years. Reason being simple because the prices increased so much, telcos are 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 on the most cases. So they are also able to start buying fiber. In fact, some telcos, which have not come to the market, are coming up now, and we are looking for a 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; one or two companies slow down their data center requirements. 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.

Understood, sir. Sir, if I may, just a 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? .

Yes, I can give a very short answer or a very long answer. So revenue this year, as I said, maintain INR 500 crores to INR 600 crores. Next year, we look at INR 2,000 crores. Escalation is to take it in 3 years' time frame to INR 5,000 crores -- around INR 5,000 crores. . Now if we look at the sector, geopolitical situation itself will tell you that every country is strengthen its defense requirement, including India because business has to be strengthened. Particularly, our country the way are [ never are ]. We really need to strengthen our different capabilities. And Government is [ being ] actively and promoting local industry. So what we have done developed a lot of instrument locally. A number of them are which are currently under trial in the last phase of trial. Like, for example, radars. Certain adults, we have developed a unique capability foliage penetration radar. One trial has already taken place. Second trial is expected to happen another 2 weeks or so. First trial has been very successful, Second would also be successful because it has 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 1 detection are in [indiscernible], where is indigenously designed. Ground surveillance, indigenous design, which we are expecting export orders also for that. So these are the kind of technologies we have developed, which are [ initial ] has developed and are going to be required by our armed forces and maybe export varices also. Second area is aerospace, which we have gone into -- through acquisitions. And there also we have a pending order book of INR 1,800 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 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 is the INR 2,000 crore figure and INR 5,000 crores figure. We are looking for many more opportunities, many more partnerships. So -- and including the [ emulation ] complex, which we are trading in [indiscernible] I already told in my opening remarks. That should also start giving us revenue in about 3-year spend. We have already participated in a tender for 800,000 [ multi-pad ] hand grenades, which would also be manufactured at this type company. 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 growth. So there are two pillars of growth in the company, which stabilizes the revenue and sustainability of profit or rather increase it when the both of the sector starts going good. So defense and aerospace, we are very positive about it. Under

Our next question comes from the line of Chinmay Sapra with [ Shawn fell. ].

Is it possible to give a split of revenues within telecom segment between conventional telcos and hyperscale? .

Say that again. I couldn't listen to it again. .

So the telecom revenues, the telecom segment, which -- where we had about INR 2,300-odd crores of revenue. Is it possible to give the split between conventional telcos and hyperscalers? .

I would probably say it's something like 70-30, something like not exact number or something more or less 30 .

Got it. And what utilization levels would be this division they're running at? .

Look, fiber of the cable, let's divide in two parts, fiber and cable. Fiber runs 100% of the capacity. And again, when you ask 100% of capacity, it varies some kind of fiber manufacturer. If you [ navy ] 250-micron fiber capacity, 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 250 micron. Similarly, cable, depends upon who is bankable. Somebody wants armoured, somebody wants unarmored somebody adds double jacketed, somebody wants lose you, somebody wants type buffer, somebody wants IBR, somebody wants [ late]. 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 telco 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 an that is

Okay. My 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 reform? So just wanted to understand what kind of RM inflation are we seeing in form? And maybe it's not [ litter ] so far because of contracted nature, but eventually, what sort of margin pressure could come from here?

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 years, 18 months or 24 months contract; there is no pressure on that. But whenever the those contracts expire. Of course, the price variation has to be there. But similarly, price is also increasing from the customers. The 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 examined the prices and reduce the prices, it can go down, it can go up. But nowadays, with time, it is only going to go up.

Got it. So margins, do you think that we would be comfortable in maintaining current level of margins? .

Well, I'm not only confident of maintaining, but I'm confident of getting it better. .

Our next question comes from the line of Rickin with Capri Family Office. .

Congratulations for a very good set of results. Sir, the first question is if I -- 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 what -- 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 improved 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.

First of all, our margins are pretty decent even now. And there is a strong possibility of they are improving. So let me come to the top line. The top line will definitely increase as they're increasing capacity. Fiber fiber itself is going from EUR 28 million to EUR 34 million and EUR 34 million to EUR 43 million. cable is going to about -- from 34 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 the fiber-based products, but also the other products which are required inside the data center. That also we are introducing and revenue would start coming, maybe last quarter of the current financial year or maybe in the larger way in the beginning of the next financial year. Anyway this year itself, we have connectivity solution revenue of about more than INR 800 crores. We had projected which may be better rather. And next year, we have projected revenue INR 2,000 crores. which was INR 800 crores this year. And with the optical fiber cable revenue not going down but increasing with the capacity increasing 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 sales, I expect somewhat increasing that also because of 1 higher capacity to more backward integration, preform mixer introducing the next this construction is going to start soon in '28. Late '28, our own reform will 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 available. And second, because of backward integration, third, because of connectivity solution.

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 in that INR 40 crores, INR 50 crores as of now in terms of quarterly run rate. for that 500, it seems that you will sort of at some point, have to do about INR 200 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 INR 200 crore a quarter kind of run rate for the defense business?

So look, one is electropic sites, which have started increasing revenue, and that will increase the revenue. [ Timber ] Radar, for example, foliage penetration radar, that has almost been through approval a couple of weeks that will give us good revenue. And then the second most important is the aerospace business, which we have gone for acquisitions and just getting completed within November. That has an order book of about INR 160 crores to INR 1,800 crores. So that will start giving us revenue from this quarter. So all put together, INR 500 crores is not an issue. We'll surely be able to achieve

Got it, sir. And just one last question, sir, in the APC 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? .

Yes. I tell you why there has been lost? First you understand that, and then I come to when this Army's AMC contract is now on the final stage of al.First year, 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 will start coming in. So that expenditure, which is being incurred, so that would -- 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 [indiscernible]. But because there are some defined milestones in the tender, the expenses were incurred, but builds are not raised because the milestones are yet to be completed, verified and you know the process is -- just engineers, what they call IEs, then the BSNL verification, then this [indiscernible] verification, all the [Foreign Language] file has to go to 25 different steps. And the 2050 steps put some clear it goes back to step 0 and then comes to step 25 again. So submission of bills because of milestone issues has taken a longer time. This quarter, those bills will be getting submitted. So what has been debited as expense in the last quarter against that billing would 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 as you have seen INR 121 or some crores in the current quarter, next 2 quarters put together, should not be more than INR 75 crores to INR 100 crores.

Got it. And when do we see profits reported in this segment, sir, next year?

I think first quarter of next year, you would start seeing profit in this segment. .

Our next question comes from the line of Manik with Melia ancet Management.

I'm just curious to understand a very high level about the India data center opportunity. We do hear from any 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 on that front? .

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 centers. This is expected to become 6 gigawatts by 2030. It's a good increase, very good increase and generate reasonably good demand. But if you compare to what is happening in the U.S., it is miniscule in a sense that U.S. is already having 130 gigawatt of capacity, and they want to increase it 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 the same situation but India is. They are not, again, as advanced as what U.S. is. But these countries will also come up. like India, in 4G, it came up all of a sudden, we became among the first site 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 results. That still is a good number. All the major industrial houses are working on data center reliance Adani, [ Yota ], Mahindra, all of their data; all of them are working on creation of new data centers. And government is also working on 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.

Got it. Got it. And maybe my second question just in terms of the FY '27 INR 10,000 crores of number that you've given seems extremely conservative given the kind of run rate that you are already [indiscernible] In some way, if you can give us some guidance for FY '20, both on top line and margins? .

I would while giving any guidance for '28. But I can say this INR 10,000 crore number would be achieved much sooner than the projectory in '29 because you can see the run rate by yourself. And '28, 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, their revenue will definitely go up. And more or more or in pipeline, capacity increase is taking place. Most importantly, with the increased capacity, of course, there will increase 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 thing happens, nobody can predict that. Business as such, I am pretty sure that the numbers should be better. .

Just lastly, with current revenue run rate, what kind of utilization levels would be coming at?

Already answered this question. Fiber 100%. Cable also, again, as I said, a different kind of cable are required by a different class of customers. depending who is given order what capital 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 is working at 80% capacity or some other kind working at 100% capacity. But if you -- we depend on the basis of revenue numbers. because machines have to be kept for every kind of a requirement. So on the revenue number, do you see we are receiving 100% up. .

Our next question comes from the line of Kush Sandananda Capital. .

Many congratulations on numbers which are better than expectations again I have 2, 3 questions. The first is, out of this H1 revenue of INR 4457 crores, how much will be revenue attributable to the $1.1 billion order that we had got from the hyperscaler? Will you be able to share that number with us? .

I don't have that number in particular. The only thing I can say, we have already started delivering against that. .

Okay. Apart from that, hyperscaler, we have some other hyperscale orders, sir? Just wanted to understand .

Yes, yes. Of course, we have. .

Okay Okay. Understood. And sir, in the order book, we are seeing INR 5,000 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're running, sir? .

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 you will get into normal turnkey contract. Normal turnkey contract margin could be about -- let us say, EBITDA margin could be something like 15% to 20%. .

Okay. Also, sir, you mentioned about the EPC business, there was some possibility of restructuring or some thoughts on that. Any update?

We are already discussing that. the committee Board committee, which we had formed for restructuring, and we have some external advice also taking by probably yes, and while -- and that committee is already on the just finishing line of making the recommendation. Once I receive the recommendation, I think maybe we got 10 days' time, we will be calling for a board meeting for to discuss and take a decision on that. So in a couple of weeks, I think we should be able to finalize whatever restructuring we finally do. APC Is, of course, $ thing which is under active consideration.

Okay. And sir, obviously, we are under a CapEx program of around INR 1,250 crores is what I see in [ preformat]. But early thoughts because of the cash flow generation, any deleveraging thoughts going ahead, sir? Any production plans?

Debt reduction, yes, it will happen. Already, we are repaying all debt. We have taken some new debt for CapEx. And finally, the debt reduction will start in the current year. .

You mean to say, sir, the March '27 and March '28, balance sheet, the debt will keep coming down?

Yes, it will substantially go down. .

And sir, just 1 -- you've answered this question, but I 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?

No, there is no such thing that the 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 they know diamonds falling down on the sky.

Our next question comes from the line of Kush Sony with Noma Institutional Equities. .

Congratulations, sir, on yet another excellent quarter. My first question is with regards to the reform 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 increased moved up the commissioning time line by almost 9 to 10 months. So I wanted to understand, what would the progress beyond this expansion, given that all global peers are also looking at capacity expansion 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 you...

Such significant delay. We are going to start having -- I can't give you more details on that particular aspect because commercial confidentiality, but we are going to have a midterm solution for our own freeform starting from the first quarter of the next year itself -- calendar year itself. So that is one thing which is happening. . Second, this 600 tonnes, 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 supply has also got large orders. So we get orders, big get orders. So -- but there was such headwind in October '28 timeline which you have given, that would remain.

Right. So just to take a follow-up on that, again, with the preform facility right now since we're outdoing P1, we don't really acquire 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 [ gominium ]? And do we see any impact on margins or any utilization ramp-up or delays because of the availability?

We are already talking to some of the suppliers for Germanium. It's too early to finalize content, but we are already getting in touch with a couple of suppliers of Germanium and from whom we have received positive response . 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 advantage. That's what we are working. So we would be in germanium 2 years from now. We are working on that.

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 FY '26 than in Q1 and Q2? Maybe a sense of the mix that we'll see?

Quarter-on-quarter 10, I can only say the revenue which you have seen in the current quarter, there will be growth in that revenue. There were some -- there will definitely be growth in Q3 . That's my best estimation as of today's barring ant absolutely -- something out of control happening, which is a geopolitical situation. which cannot be controlled by anybody, but I have business growing assets, there will be growth in next quarter. So quarter-on-quarter, this is growth expected. Next year, also, there is a growth expected because the very fact that which I proved 2, 3 times on this call, capacity itself is going on 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.

Right. So any kind of split in the data center and telecom...

I would generally say anywhere between -- data center, it is 65% to 75%, telcos would be between 25% to 35%. Some will vary between that .

So this is in terms of revenue or volume? .

Terms of revenue. .

And if you can just sense of the difference in realizationsBetween data center and telecom? .

Center prices are a bit higher because they need a very specialized fiber telcos don't need that kind of a specialized. So naturally, data center prices would be higher because of higher level of technology and kind of fiber required involved.

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 about sense so we can understand what is the mix?

It's not comparable because the products are different enough. Whereas telcos in most cases, require defer, 657, which is fiber pricing let roughly $15, roughly $13 million. Now data centers require a to fiber of 180 microns. The fiber price is $25, $26, $27, something like that, $25 maybe. So for 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 2. relative pricing, I can say, yes, data center price are costlier because that kind of a fiber you draw, you draw at a very less speed because it's a 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, for a meter revenue per kilometer, like let me say, for a data center cable; is much higher than the cable required by telco because the products are completely different.

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 sense of each and everyone. 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 it.