HFCL Stock In Focus: HFCL's board has approved an additional capex of approximately Rs 820 crore to expand its manufacturing capacities across Optical Fibre, Optical Fibre Cable (OFC) and Preform, taking the company's total planned investment in these capacity enhancement initiatives to around Rs 1,800 crore.
The latest approval comes on top of approximately Rs 980 crore of aggregate capex already approved for Optical Fibre, Optical Fibre Cable and Preform manufacturing projects.
HFCL Capacity Expansion
The company has approved additional annual capacity of:
- Optical Fibre: 4.60 Mn fkm
- Optical Fibre Cable: 5.64 Mn fkm
- Preform: 300 MT
The expansion is in addition to the ongoing capacity additions. Following the ongoing and proposed expansion, HFCL's manufacturing capacities are expected to reach:
- Optical Fibre: 43.10 Mn fkm per annum, from 38.50 Mn fkm currently under the ongoing expansion
- Optical Fibre Cable: 62.00 Mn fkm per annum, from 56.36 Mn fkm currently under the ongoing expansion
- Preform: ~600 MT per annum, from ~300 MT per annum currently under the ongoing expansion
Before the ongoing expansion, HFCL's existing Optical Fibre and Optical Fibre Cable capacities stood at 28.0 Mn fkm per annum and 39.0 Mn fkm per annum, respectively.
Rs 820 Crore Capex: Where Will HFCL Spend?
Of the additional Rs 820 crore investment, around Rs 670 crore will be invested in Preform manufacturing, while Rs 150 crore will be invested in Optical Fibre and Optical Fibre Cable capacity expansion.
The proposed Preform manufacturing facility will be implemented through HFCL's wholly owned subsidiary, HFCL Technologies Private Limited.
Why This Matters
HFCL said the expansion is aimed at meeting growing domestic and international demand driven by hyperscale data centres, AI infrastructure, cloud computing, telecom expansion and fibreisation.
The company said the rapid expansion of hyperscale data centres and AI-enabled digital infrastructure is increasing the requirement for high-capacity, reliable and low-latency optical connectivity.
Beyond data centres, telecom network modernisation, deeper fibreisation, FTTH deployments and enterprise connectivity are expected to support demand for optical connectivity.
HFCL's combined order book for Optical Fibre Cable and connectivity solutions stood at approximately Rs 19,000 crore as of the announcement.
Backward Integration To Strengthen Supply Chain
Preform is a critical raw material used in the manufacture of Optical Fibre. HFCL said the proposed Preform facility will strengthen its backward integration capabilities, provide reliable access to a key input and reduce dependence on external suppliers.
The company also expects greater integration across the manufacturing value chain to support cost efficiencies, operational control, supply-chain resilience and margin enhancement.
The expansion will create a larger integrated manufacturing platform spanning Preform, Optical Fibre, Optical Fibre Cable and Connectivity Solutions.
How Will HFCL Fund The Capex?
The company plans to fund the investment through an appropriate mix of:
- Internal accruals
- Proceeds from the preferential issue of warrants already issued to the promoter and promoter group entity
- Borrowings from financial institutions and banks
- Other suitable financing arrangements, as required
What HFCL MD Said
Mahendra Nahata, Managing Director, HFCL, said the proposed investment marks an important step in the company's journey towards building a larger and fully integrated optical communications manufacturing platform.
He said the growing adoption of AI-enabled digital infrastructure, hyperscale data centres, cloud computing and advanced telecom networks is creating significant long-term opportunities for optical communication products globally.
According to Nahata, expanding Optical Fibre and Optical Fibre Cable capacities while establishing a larger Preform manufacturing facility will help HFCL meet growing customer requirements, improve supply-chain resilience and enhance operational efficiencies.
He added that the investment reflects the company's confidence in the long-term growth potential of the optical communications industry and its commitment to building globally competitive manufacturing capabilities.
Stock Takeaway
For HFCL, the latest Rs 820 crore approval adds another leg to its optical communications expansion, with the company simultaneously increasing Optical Fibre and OFC capacity and strengthening backward integration through Preform manufacturing.
The key factors to watch will be the execution of the ongoing and proposed capacity expansion, utilisation of the enlarged capacities, demand from AI/data-centre and telecom infrastructure, and conversion of the Rs 19,000 crore OFC and connectivity order book into business.
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