HFCL Limited: Q2 FY26 – A Quarter of Resurgence and Strategic Growth

HFCL Limited, a prominent Indian player in the telecom and defence sectors, has reported a robust performance for the second quarter and half year ended September 30, 2025. The company's Q2 FY26 results signal a strong resurgence, driven by strategic initiatives and a favorable market environment. Revenue from operations for the quarter stood at INR 1,043.34 crore, marking a significant 19.78% increase quarter-on-quarter. This growth translated into an impressive 373.72% QoQ surge in EBITDA to INR 203.37 crore, with the EBITDA margin expanding to 19.49%. Profit after Tax (PAT) also saw a remarkable jump of 345.46% QoQ, reaching INR 71.92 crore. These figures underscore HFCL's ability to capitalize on evolving market dynamics and execute its growth strategy effectively.

The company's performance was bolstered by strong traction in its core segments. Telecom Products contributed 51.43% to the Q2 FY26 revenue, reflecting healthy demand. The optical fibre cable (OFC) market, after a subdued phase, witnessed a strong revival globally, driven by hyperscalers and data center operators. HFCL's strategic investments in enhancing OFC capacities and indigenous telecom products positioned it well to benefit from this wave of network modernization. The defence segment also showed meaningful progress, securing new orders for tactical solutions and thermal weapon sights. Collaborations with DRDO on battlefield technologies and ongoing development of next-generation products like drone detection radars and electronic fuzes are strengthening HFCL's capabilities. The company's role in the BharatNet initiative also continued to be critical, with additional orders for routers received for the West Bengal Circle.

Strategic Thrusts and Future Outlook

HFCL's strategic vision is clearly defined by innovation, diversification, and execution excellence. The company is undergoing a transformative growth phase, powered by innovation, scale, and an expanding product portfolio across telecom and defence. A key initiative is the planned expansion of high fibre count cable manufacturing capacity from 1.73 million fkm p.a. to 19.01 million fkm p.a., which will eventually bring HFCL's total OFC capacity to 42.36 million fkm per annum by June 2026. This expansion is crucial for meeting the surging global demand for OFC and improving cost efficiencies.

In the defence sector, HFCL is making a strategic leap with the sanction of a 1,000-acre land parcel in Andhra Pradesh to build an integrated manufacturing facility for artillery shells and Multi-Mode Hand Grenades. This move, coupled with the ongoing development of electronic fuzes and drone detection radars, positions HFCL as a key player in India's defence electronics ecosystem. The company expects its electronic fuzes to complete trials by November 2025 and the drone detection radar to enter production within the current financial year. Management anticipates defence revenue to exceed INR 500 crore next year and reach over INR 1,000 crore the year after.

Operational Efficiency and Market Penetration

HFCL is also enhancing its customer mix by prioritizing higher-margin private clients and expanding its global footprint. The company secured export orders exceeding INR 650 crore in H1 FY26, to be executed by April 2026, and has successfully penetrated Tier 1 telco markets in Europe and America. This diversification reduces reliance on government projects and strengthens revenue stability. The company's plants continue to operate at full capacity utilization, reflecting robust demand across telecom, defence, and exports. Furthermore, HFCL's commitment to sustainable business practices is evident in its improved ESG rating of 65 (Strong) from ERAIL and 73 from CFC Finlease.

Management has maintained its revenue growth guidance of 20% for the current financial year and expects EBITDA margins to remain around 19-20%. The company's focus on high-end products and backward integration is expected to deliver higher margins and improve working capital efficiency. The divestment of its 15.19% stake in Nivetti Systems Private Limited for 52.51 crore further underscores HFCL's intent to sharpen its focus on core strengths and redeploy capital into high-growth, innovation-led initiatives. Overall, HFCL's Q2 FY26 performance and strategic roadmap demonstrate a company poised for sustained growth and leadership in its chosen sectors, reinforcing investor confidence in its long-term value creation potential.