HFCL Q1 FY26 presentation: Revenue drops 25% despite 55% order book growth

Introduction & Market Context

HFCL Limited (NSE:HFCL), India’s leading optical fiber cable manufacturer, presented its Q1 FY26 earnings on July 25, 2025, revealing a challenging quarter marked by significant revenue decline despite substantial order book growth. The company’s stock closed at ₹79.25, down 4.18% following the presentation, reflecting investor concerns about the short-term financial performance.

As India’s telecommunications and defense sectors continue their digital transformation, HFCL is positioning itself as a key player in both domestic and international markets, with a presence in over 60 countries and partnerships with global technology leaders.

Quarterly Performance Highlights

HFCL reported a substantial year-over-year decline in its financial performance for Q1 FY26. Revenue from operations fell to ₹871.02 crore, a 24.8% decrease from ₹1,158.24 crore in Q1 FY25. More concerning was the sharp drop in EBITDA, which plummeted to ₹42.93 crore from ₹185.37 crore a year earlier, resulting in an EBITDA margin contraction to 4.93% from 16.00%.

The company posted a net loss of ₹29.30 crore for the quarter, compared to a profit of ₹110.65 crore in the same period last year, with earnings per share turning negative at -₹0.22.

As shown in the following consolidated profit and loss statement:

This performance continues a downward trend visible in the company’s FY25 results, where annual revenue declined to ₹4,064.52 crore from ₹4,465.05 crore in FY24, while profit after tax fell to ₹173.26 crore from ₹337.52 crore.

Order Book and Business Operations

Despite the challenging financial quarter, HFCL’s order book showed remarkable growth, expanding to ₹10,480 crore in Q1 FY26 from ₹6,776 crore in Q1 FY25, representing a 54.7% increase year-over-year. This growth provides a potential runway for future revenue recovery.

The order book composition reveals a strategic balance across service categories and customer types. Network Services accounts for ₹3,964 crore, Operations & Maintenance for ₹3,625 crore, and Products for ₹2,891 crore. Government orders continue to dominate at ₹8,546 crore, with private sector orders at ₹1,934 crore.

The following chart illustrates the order book breakdown and growth:

In his message to shareholders, Managing Director Mahendra Nahata highlighted several positive business developments across segments:

• Optical Fiber Cable business saw a strong rebound, generating ₹210 crore in exports and securing ₹300 crore in new orders during the quarter
• Telecom (BCBA:TECO2m) segment secured ₹650 crore in orders under BharatNet Phase III and received a ₹175 crore repeat order for 5G equipment
• Defence business won a key order for thermal sights for AK-203 rifles and emerged as the lowest bidder for a ₹90 crore tactical cable opportunity

Strategic Initiatives and Growth Strategy

HFCL continues to implement a multi-pronged growth strategy focused on manufacturing expansion, product innovation, and market diversification. The company is significantly increasing its manufacturing capabilities, with planned expansion of optical fiber capacity from 14.0 million fkm per annum to 33.9 million fkm per annum, and optical fiber cable capacity from 25.0 million fkm to 42.3 million fkm.

The following chart details these expansion plans:

A key strategic shift is evident in HFCL’s customer and revenue mix. The company has successfully increased its private sector customer base, with private customers now accounting for 91% of revenue in Q1 FY26. Similarly, export revenue has grown to 24.08% of total revenue, reflecting the company’s increasing global footprint.

This transformation is visualized in the following chart:

Research and development remains central to HFCL’s strategy, with 323 professionals working across three dedicated R&D centers in Bengaluru, Hyderabad, and Gurugram. The company is developing several innovative products, including Wi-Fi 7 outdoor access points, IP/MPLS routers, and coastal surveillance radar systems.

HFCL’s global presence spans more than 60 countries, serving over 80 marquee customers, as illustrated in this map:

Forward-Looking Statements

Despite the current financial challenges, HFCL’s management remains optimistic about future prospects, highlighting four key growth drivers:

1. Entry into data centers networking industry and expansion in 5G and fiber markets

2. Increased focus on high-margin product revenue

3. Growing opportunities with private and export customers

4. Continued R&D-driven innovation

The company’s substantial order book provides visibility for future revenue, while its strategic shift towards higher-margin products and private sector customers aims to improve profitability over time.

However, investors will likely remain cautious until they see concrete evidence of financial recovery in upcoming quarters. The significant gap between the growing order book and declining financial performance suggests execution challenges that management will need to address to restore investor confidence.

As HFCL navigates this transitional period, its ability to convert its robust order book into improved financial results will be crucial for the company’s stock performance and long-term growth trajectory.

Full presentation:

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