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Managing Director’s Message Annual Report FY 2017-18

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Dear Shareholders,

The spate of structural strengthening of our socio-economic foundations continued through the FY18. The momentum gained through demonetisation, real estate regulation, and insolvency and bankruptcy laws of FY17 was accelerated through smooth implementation of GST and recapitalisation of banks in FY18. The momentary slowdown in economic growth appeared to settle down with FY18 GDP growth at 6.7%. The road ahead from hereon shall witness steady pick up in our growth rate…
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Dear Shareholders,

The spate of structural strengthening of our socio-economic foundations continued through the FY18. The momentum gained through demonetisation, real estate regulation, and insolvency and bankruptcy laws of FY17 was accelerated through smooth implementation of GST and recapitalisation of banks in FY18. The momentary slowdown in economic growth appeared to settle down with FY18 GDP growth at 6.7%. The road ahead from hereon shall witness steady pick up in our growth rate.

FY18 was a watershed year for the Indian Telecom Industry. Prolonged competition led to a year of tectonic consolidation where two large players merged and a new incumbent gained rapid market share. The turf continued to shift from call and VAS revenues to data-linked play. The Government of India continued to further its agenda of digital readiness for defence forces, rural population and un-served geographies across northeastern and LWE regions. The rapid spread of smartphones and mobile internet at one hand and rising popularity of social networking and digital content on the other hand is setting the stage for next wave of telecommunication revolution.

It is in this context that your Company’s steady strengthening of its business foundation yields a decisive enabler, going forward. The shift from wireless to Optical Fibre is imminent, gradual and mammoth. The spread of fibre would follow with its densification and fibre reaching the doorstep of consumers. We are looking at a period of sustained and accelerated growth in demand for fibre as well as telecom network overhaul and expansion. TRAI’s recommendation of ‘net zero import’ of network equipment makes your Company a strong contender to seize this ‘Make in India’ opportunity. Intensification of our Research & Development efforts towards innovative, yet fully indigenous WiFi network solutions has fructified. You will be happy to note that the solution shall be ready for deployment by the end of 2018. This would enable us to participate in the government’s initiative of deploying 1.25 million WiFi access points across 2,50,000 Gram Panchayats.

Infusion of modern technology in railway telecom and signaling offers dual advantages of passenger safety and track optimization. With over 60,000 route kilometers of legacy systems on the block for revamp, your Company’s experience and learnings from the three ongoing projects in dedicated freight corridors would add to our qualification. Building upon its initial success in Ludhiana and Jaipur, our smart city division has tasted a bigger success in Rajasthan in the year gone by. Our foray in defence equipment manufacturing is steadily shaping up, with one of our bids reaching the equipment trial stage and many others awaiting evaluation and results.

From total revenue of ₹261 crore in FY12 to gross EBITDA of ₹281 crore in FY18, your Company has scripted a remarkable turnaround. The strength of our balance sheet with steadily strengthening cash flows and credit ratings are powering our growth oriented CAPEX and OPEX needs. In order to insulate us from supply constraint of optical fibre, we are foraying into its manufacturing with 6.4 million fibre kilometer (mfkm) pa capacity as a first step of backward integration. The move is also going to enhance our profit margins. We are also raising our OFC manufacturing capacity from 8 mfkm pa to 15 mfkm pa by adding a Greenfield plant of 7 mfkm pa capacity at Hyderabad. Construction work for both these plants is in full swing with orders for key machinery and equipment already placed. With a combined CAPEX of ₹300 crore, both these facilities shall commence commercial production in FY20.

Our turnkey network division continues to implement and win new marquee projects across the country. The current outstanding order book of the division is exceeding ₹8,250 crore. With rising capabilities and stature, the division is also contemplating to venture into overseas markets in the near future.

You would be happy to note that our revenues grew by 52% to ₹3,070 crore, EBIDTA grew by more than 40% to ₹281 crore and Net Profit stood at ₹155 crore during FY18. We succeeded to reduce our total debt by ₹70 crore. The EPS, at ₹1.25 per share, grew by 24% over the previous year.

The most vital asset of our Company is its people capital. The human ingenuity and pursuit of excellence has led to quite a few product innovations during the year. We are investing significant attention and resources in raising the skill, motivation and productivity quotient of our talent pool.

The compassion, urgency and scale towards extending a helping hand to the needy and opportunity deprived sections of our society reached its best during FY18. Environmental sustainability and community sustenance is prerequisite to business sustainability and your Company would continue to increase its efforts to address its responsibility towards them.

I place my sincere appreciation to the members of the Board and our leadership teams for their incisive contributions in making HFCL a rising force in the telecom and adjacent spaces. I extend special acknowledgement to the stellar efforts and contributions of HFCLites and thanks to our valued customers and partners. To the shareholders and the financial community, your trust and confidence in HFCL, gives me immense confidence in successfully steering this promising Company of yours to greater heights, always.

Let us all work towards a fabulous HFCL.

With best regards,

Mahendra Nahata
Managing Director

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Registered Office

Himachal Futuristic Communications Ltd.
8, Electronics Complex Chambaghat, Solan, Himachal Pradesh – 173213

Registrar & Transfer Agent

Amarjeet
Sr. Manager – M/s MCS Share Transfer Agent Limited
F-65, 1st Floor, Okhla Industrial Area,
Phase-I, New Delhi – 110020
Tel. : +91-11-41406149-52
Fax : +91-11-41709881
Email Id : admin@mcsregistrars.com

Contact details for Investor grievance redressal

Secretarial Department & Investor Relation Cell

Manoj Baid
Vice-President (Corporate) & Company Secretory
8, Commercial Complex, Masjid Moth, Greater Kailash – II
New Delhi – 110048
Tel. : +91-11-30688999
Fax : +91-11-29226015
Email Id : investor@hfcl.com