HFCL Q1 FY27: Record Margins, Export-Led Growth, and a Bigger Bet on Data Centre Connectivity

HFCL opened FY27 with its best quarterly performance on record. In Q1 FY27, revenue from operations rose to INR 1,914.98 crore, more than doubling from INR 871.02 crore a year ago. Profitability moved up even faster. EBITDA came in at INR 445.27 crore with an EBITDA margin of 23.25%, compared with INR 42.93 crore and 4.93% in Q1 FY26. Profit after tax was INR 245.64 crore versus a loss of INR 29.30 crore last year.

Management attributed this step-up to a structural improvement in business quality rather than a one-off quarter. The key drivers cited were a higher share of technology-led product revenue, a sharper export mix, improved product realisations, and operating leverage.

A second theme through the investor presentation and concall was visibility. The order book reached INR 26,665 crore at the end of Q1 FY27, with management calling it nearly five times FY26 revenue. The company described the order book as diversified across networks, O&M, and products, and across government and private customers.

A quarter defined by mix change

Two disclosed mix indicators stood out.

First, exports. Export revenue in Q1 FY27 was INR 1,063.30 crore, or 55.53% of revenue, up sharply from INR 209.70 crore (24.08%) in Q1 FY26.

Second, product-led revenue. The company said the products segment contributed 85% of Q1 FY27 revenue. In the concall, management also stated that telecom products contributed 85% of total revenue in the quarter.

Management repeatedly framed the mix shift as a deliberate move away from lower-profit turnkey work and toward product and private customer revenues, which it believes can ease working-capital intensity.

Order book visibility, but with mixed duration

HFCL’s order book of INR 26,665 crore is positioned as a key support for its raised revenue aspiration.

The investor presentation splits the order book into:

• Category-wise: Networks (INR 4,227 crore), O&M (INR 17,339 crore), Products (INR 5,099 crore)
• Customer-wise: Governments (INR 10,502 crore), Private (INR 16,164 crore)

In the concall, management clarified that order duration varies. It indicated that around INR 22,000 crore of the order book could be executed within a five-year period, while some parts are longer, such as O&M contracts.

On defence, management provided two different reference points that investors should separate carefully. Within the INR 26,665 crore reported order book, it indicated defence orders are around INR 300 crore. Separately, it discussed an additional defence order book of about INR 2,300 crore when including a proposed aerospace acquisition. This was explicitly stated as not included in the INR 26,665 crore number.

Capacity expansion and backward integration: the manufacturing agenda

The company’s strategy is closely tied to manufacturing scale and technology capability.

HFCL disclosed:

• Optical Fiber capacity expanding from 28 million fibre kilometres to 34 million fibre kilometres per annum. Management said this is expected to complete by December 2026.
• Optical Fiber Cable capacity expanding from 34 million fibre kilometres to 43 million fibre kilometres per annum.

A longer-duration strategic project is the preform manufacturing plan.

The investor presentation disclosed a preform project capex of INR 580 crore for a 300 MT per annum capacity by July 2029. In the concall, management linked preform manufacturing to two outcomes: supply chain resilience and cost economics. It also quantified that preform is a majority of fibre cost and indicated in-house manufacturing can be materially cheaper than buying at current economics.

Data centre connectivity: new revenue stream, more value addition

A notable incremental narrative for FY27 is HFCL’s push into data centre connectivity products.

Management stated that the company has started the data centre connectivity business in the current year and expects around INR 800 crore of revenue in FY27 from this business. It also said the Board approved an investment of INR 215 crore for the expansion of manufacturing of advanced data centre connectivity products, including miniature multi fibre and super high density multi fibre termination assemblies.

In the concall, management also stated that manufacturing capacities, including through subsidiary HTL Limited, are being expanded significantly, and it expects more than INR 700 crore revenue in the current year even in the first year of production. It described this business as more value-added, due to connectorisation and assembly work.

Defence and aerospace: scaling ambition with capex and acquisitions

HFCL continues to frame defence and aerospace as a long-term growth engine. The company reiterated an aspiration of about INR 500 crore defence revenue in FY27.

It also highlighted progress on an ammunition manufacturing complex in Andhra Pradesh, intended to manufacture electronic fuzes, Multi-Mode Hand Grenades and other specialised products. The investor presentation disclosed INR 275 crore capex as Phase 1 for MMHG in the upcoming 1000-acre Andhra Ammunition Complex.

On the call, management also discussed trials and product demonstrations for defence opportunities and reiterated that it is evaluating group restructuring options, with a restructuring committee and Ernst and Young appointed as strategic advisor.

What management guided for FY27

HFCL raised its FY27 revenue growth aspiration to 40% and above, from its earlier 20% aspiration discussed in the prior earnings call.

On margins, management reiterated that it had targeted EBITDA margins above 20% for FY27, and highlighted that Q1 FY27 already delivered 23.25%. It also stated that the margin profile is expected to be sustainable, barring major external disruptions.

Capex guidance was given with unusual clarity in Q&A.

Management said total capex for FY27 is INR 640 crore, and for FY28 is about INR 615 crore, with allocations across preform, fibre capacity additions, data centre connectivity, and defence.

Takeaways

Q1 FY27 shows that HFCL is operating in a very different earnings regime versus last year, driven by a higher export share and a product-heavy revenue mix. The order book provides multi-year visibility, and management’s confidence has translated into a higher FY27 revenue growth aspiration.

The next phase of the story hinges on execution: delivering the capacity expansions on time, scaling data centre connectivity beyond the first year ramp, and building defence and aerospace into a meaningful contributor. The quarter also underlines that HFCL is committing significant capital over the next two years, so delivery discipline will matter as much as demand tailwinds.