In conversation with Mahendra Nahata, Managing Director at HFCL
4G expansion, BharatNet Project and the upcoming 5G will lead to a huge demand for optic fibre cable in future.
" As far as HFCL is concerned, we are the largest manufacturers of fibre optic cables and fibre to the home (FTTH) cables. Also, we are further expanding our capacities, designing new equipment for 5G setups and also, practising backward integration etc. This collectively will increase our revenue from the self-manufactured equipment & products. " says Mahendra Nahata, Managing Director at HFCL.
What is your outlook on the Indian telecom sector?
My outlook on the Indian telecom sector is very bright. Let me start from the operators’ side. Revenue has been growing in the telecom sector. Let’s compare December 2018 and December 2020: In December 2018, the revenue from the wireless segment of the overall telecom sector was near about Rs 59,000 crore whereas, in December 2020, it was Rs 71,000 crore. Operator to operator growth may differ but the overall potential growth was observed in the telecom sector’s revenue. Even if we observe the quarterly revenue, it is on a growing path. The main reasons for the growth in revenue can be the increased usage of data by the subscribers. Talking about data consumption, in December 2018, the rate per subscriber was Rs 70 while in December 2020, the rate rose to Rs 101 per subscriber. All these put together, things are getting better and life is becoming easier for the operators. In December 2018, per subscriber data usage on the wireless was 8.7 GB per month while in recent times, like in December 2020, it was 12.1 GB per month. This clearly shows that on an overall basis, the operators are benefitting from the increased data consumption as well as increased rate per subscriber, though the benefit can differ from operator to operator.
On the other hand, for the telecom equipment manufacturing companies like HFCL and other peers, a lot of things are going on. Some of the significant things include the whole spectrum for 4G networks, the large-scale deployment of 5G along with BharatNet Project (world's largest rural broadband project) to provide broadband connectivity to all the 2.5 lakh Gram Panchayats across India. This will lead to an increase in investments in the telecom sector, which is expected to be around Rs 4 lakh crore in the next 3 to 5 years. In turn, the demand for the infrastructure, fibre optic cable, telecom & wireless equipment, etc. will witness a push. Thus, due to the positive demand prospects, the telecom industry is sensed to have good days ahead. Those companies, which can manufacture competitively, have got innovation and R&D, possess their own technology and have huge demand opportunities coming up. Those, who have their own technology, will be able to supply competitive equipment worldwide also. As far as HFCL is concerned, we are the largest manufacturers of fibre optic cables and fibre to the home (FTTH) cables. Also, we are further expanding our capacities, designing new equipment for 5G setups and also, practising backward integration etc. This collectively will increase our revenue from the self-manufactured equipment & products.
What is the trend in data usage in India and how it helps to grow your business?
Before 4G came, the data usage was negligible whereas, the data usage currently is 12 GB per subscriber, including the rural areas. The data usage numbers have certainly increased from the previous numbers. With the accelerated data usage, the need for larger infrastructure, more optical fibre cables, transmission equipment etc. will pace up and in turn, assist in flowing new demand opportunities.
What is the growth outlook for the optical fibre cables industry?
Our growth outlook on the optical fibre cables industry is very bullish. We need fibre everywhere; hence, the demand prospects. The 4G expansion is taking place and it requires fibre; our backbone in demand is the requirement of fibre by 4G. Then 5G is coming up, the radio-to-radio connectivity will require greater use of fibre optic cables. There is also accelerated demand for optical fibre cables in BharatNet Project. The requirement of 12 lakh km of fibre optic cable will be involved in this project. Hence, 4G expansion, BharatNet Project and the upcoming 5G will lead to a huge demand for optic fibre cable in future. HFCL is constantly expanding the manufacturing of fibre optic cables affecting Goa, Hyderabad as well as its subsidiary company HTL Ltd in Chennai. We export fibre optic cable to more than 30 countries. In all the countries, I find the demand for fibre optic cable becoming better. Hence, the fibre optic industry has a very good future in India & abroad.
What incentives do you expect after subscribing to the PLI scheme?
PLI scheme has provided a 6 per cent incentive on the cost of items manufactured. It is around 20 times higher than the investment we put into the plant and machinery in an aggregate manner. We would definitely be applying for the PLI scheme as it is a very good incentive by the Government of India.
What is the growth outlook for defence products?
For the defence products, the future again seems bright! The government is trying to reduce the imports of defence products. When you reduce the imports, not only the forex cost goes down, but the prices also go down considerably. So, an ample amount of defence products are being procured in India, which emphasize that they have to be of Indian origin. Around 40 to 60 per cent value addition can happen only if India has designed that product. With this, a huge number of products is being designed by Indian companies. All the indigenous designs lead to lower price and more competitiveness for the country. So, defence products have a large demand opportunity, particularly for defence electronics & communications. With the government's inclination towards Indian products, the companies, which themselves produce the equipment & products will have a good time ahead.