HFCL Q1FY27 Update | Revenue jumps 119.9 percent YoY

For most of the last two decades, HFCL operated as a telecom equipment manufacturer whose revenue was closely tied to government orders. BSNL tenders, BharatNet contracts and turnkey network rollouts formed a large part of the business, bringing with them long execution cycles, thin margins and extended payment timelines.
 

The company has since moved in a different direction. It has built optical fibre and cable capacity, shifted a large part of its order book towards private customers and exports, and added defence and aerospace capabilities.
 

As a result, the Q1FY27 profit and loss statement looks materially different from the one HFCL reported a year ago. 
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In Q1FY2027, HFCL’s EBITDA margin jumped from 3.3% to 21.6%, helped by lower raw material costs, a better product mix and operating leverage. 

Revenue grew 119.9%, while employee costs rose 39.6% and other expenses 78.4%, allowing more of the additional sales to flow into profit.
 

However, part of this improvement came from favourable fibre pricing. Spot cable prices are 5% to 15% above long term contracts, and the Telecom Products margin has already eased from 31.8% to 30.4% sequentially.
 

The ₹580 crore preform facility, exports and annual price reset clauses should support margins, but their strength will only be clear when fibre prices soften.

HFCL’s order book grew 154.4% to ₹26,665 crore, or about 5.4 times FY26 revenue. More importantly, private customers now form 60.6% of the book and products 65%, which should improve execution speed and working capital.

Still, an order book does not translate into revenue immediately.
 

Execution timelines range from three months to five years, while the required fibre and cable capacity will be ready only by December 2026. This means the larger volume contribution is likely to come from FY28.

Telecom Products revenue grew 192.5% and now contributes 83% of total revenue, up from 62.4%. Its EBIT margin also rose from 10.3% to 30.4%, making it HFCL’s biggest growth and profit driver.

HFCL therefore became more concentrated during the quarter, although the concentration is in its most profitable segment.
 

That is not necessarily negative, but it does show that the company’s other growth engines are not yet contributing meaningfully.
 

EPC revenue fell 52.3% sequentially, while its EBIT margin worsened from negative 18.3% to negative 31.2%, resulting in a loss of ₹88 crore.
 

Management expects an Army warranty agreement by mid Q2FY27 to support service revenue and reduce losses. Until then, the EPC turnaround remains pending.

HFCL reported a profit of ₹329 crore in FY26, but operating cash flow was negative ₹549 crore and free cash flow was negative ₹875 crore. Inventory also rose from ₹899 crore to ₹1,416 crore, with the gap funded through ₹2,247 crore of debt and a ₹514 crore equity raise.

Working capital has improved, with working capital days falling from 233 to 217 and debtor days from 224 to 176. However, the company still plans capex of ₹640 crore in FY27 and ₹615 crore in FY28.
 

So profitability has improved, but cash generation is yet to follow.

HFCL’s defence order book stands at ₹2,300 crore, including the proposed Defysis acquisition. Management is targeting ₹500 crore of defence revenue in FY27 and ₹3,000 crore by FY29.
 

The current contribution is still small. Defence generated ₹24 crore in Q1FY27, or 1.2% of total revenue, and reported an EBIT loss of ₹8 crore.
 

To meet its FY27 target, HFCL will need to generate about ₹475 crore over the next three quarters. With the aerospace acquisition expected to consolidate only in Q4FY27, defence remains a promising opportunity rather than a meaningful earnings driver today.

HFCL is clearly changing, with its margins, revenue mix and order book all moving towards products and private customers. However, the current margin has not yet been tested in a weaker fibre cycle.
 

The new capacity will come only by December 2026, cash generation remains negative, the EPC recovery still depends on an unsigned agreement, and defence contributed just 1.2% of revenue.
 

Figures are based on HFCL’s reported Q1FY27 results and management commentary. Forward looking figures represent management guidance and are not verified outcomes. This is not investment advice.