🧵 At a Glance

HFCL wants to be India’s telecom backbone—from Wi-Fi 6 routers to OFC cables to defence-grade tech. But with 170 debtor days, collapsing profits, and a P/E of 72x, it’s starting to look more like a Techno TDS Delay Ltd than a future-ready telecom bet.

📦 1. What Exactly Does HFCL Do?

“From Wi-Fi to Warfare” – is what HFCL might say on its pitch deck.

Here’s the breakdown:

• Telecom Products (57% of revenue):
  🔹 Wi-Fi 5/6 routers
  🔹 AI-driven network solutions
  🔹 Passive infra for data centers & FTTx
• OFC Cables: India’s largest supplier.
• Defence & Aerospace: Surveillance radars, weapon sights, tactical fibre
• Exports: Significant contribution from Africa, Europe, Middle East

HFCL has smartly pivoted away from project-based revenue (read: slow cash flow) to product sales (read: faster margin, lower working cap).

So, why is it struggling?

💔 2. Profit Wala Problem: A Telecom Tale Gone Sour

• TTM Net Profit: ₹173 Cr — down from ₹338 Cr in FY24.
• Q4FY25 Net Loss: ₹83 Cr
• TTM Sales Growth: -9%
• 5-Year Sales CAGR: 1%
• 5-Year PAT CAGR: -5%

HFCL is in a brutal “growth + margin + working capital” sandwich. 📉

They sold less, earned less, and then lost money. 🫠

📉 3. Margins Are Holding… But For How Long?

• FY25 OPM: 11%
• Historical peak OPM: 14–15%
• ROE (FY25): 4.31%
• ROCE: 7.67%

Basically, the company makes tech gear with PSU-level returns. If this were cricket, HFCL is the wicketkeeper-batsman who drops catches and scores 20 runs at #8.

🧾 4. Fair Value Range (EduInvesting Style)

• FY25 EPS: ₹1.23
• Let’s say we give:
  • Base case P/E: 18x (given it’s a tech manufacturing infra play)
  • Best-case P/E: 22x (if you believe WiFi-6, defence and 5G exports all click)

🎯 Fair Value Range = ₹22 to ₹27

Current Price? ₹87.
Actual P/E? 72x

Yes, it’s trading at 3x fair value. Valuation is in Mars orbit, while earnings are in earthquake zone.

🔐 5. Pledging, Promoters & Panic

• Promoters hold only 34.4% (and falling every quarter)
• Of that, 49.7% is pledged.
• That means ~17% of total company shares are pledged. Yikes.

This isn’t a minor red flag. It’s a 4th of July fireworks parade.

📉 Promoter holding: Down 5% in one year
📉 Public holding: Down too
📈 DII holding: Up from 2% to 13% (smart money averaging?)
👀 FII holding: Mostly flat

🧮 6. Working Capital Mess: 170 Days Debtors?!

• Debtor Days: 170
• Cash Conversion Cycle: 127 days
• Borrowings: ₹1,360 Cr (up 37% YoY)

That means HFCL is giving its customers 6-month credit and borrowing to make it up. That’s a recipe for balance sheet heartburn.

Also, don’t miss: HFCL just got slapped with a ₹2.9 Cr TDS penalty for FY21.

🚀 7. What’s the Bull Case?

To be fair, HFCL does have some interesting levers:

• Capex for expanding product lines in fibre and defence
• New order wins from railways, telecom, data center players
• Export narrative is real (Middle East, Africa)
• Management guides for 25-30% revenue growth in FY26
• Big R&D spend, AI-driven tech stack rollout

But here’s the catch: The stock has priced in 2030 today.
Can they justify it? We’ll wait.

🧠 TL;DR – Should You Touch This?

🧠 EduInvesting Verdict:

If HFCL is a product story, let the product profits show up first.

Until then, this is a textbook case of a company that went from “infra execution” to “telecom tech” — but forgot to bring the earnings and cash flow along.

At ₹87, it’s priced like a Tejas fighter jet.
But FY25 numbers show it’s more like a GoAir turboprop. 🛩️

🔖 Tags:

HFCL stock analysis, HFCL fair value, HFCL WiFi business, telecom infra India, pledged promoter holding stocks, undervalued vs overhyped, HFCL Q4 results, EduInvesting analysis

✍️ Written by Prashant | 📅 26 June 2025