Foreign institutional investors (FIIs) have significantly increased their stake in HFCL, an optical fibre manufacturer, as the company's stock surged by 200% in 2026. This move comes amid a cooling of India's valuation premium over emerging markets to its historical average of 50%.
HFCL has become a preferred choice for investors due to its strong financial performance and strategic initiatives. The company reported its highest-ever order book of approximately Rs 26,665 crore in Q1FY27, nearly five times its FY26 revenue. Export revenue also saw a sharp increase, reaching Rs 1,063.3 crore, which accounted for 55.5% of total revenue in Q1FY27.
The company's robust growth is driven by the expanding data centre industry in India, which is experiencing a multi-year growth cycle. According to Nomura, India's data centre IT load has grown from around 350 MW in 2019 to 1.5-1.6 GW in 2025, translating into a 29% CAGR.
“We expect defence revenue to rise from Rs 77 crore in FY26 to Rs 400 crore in FY27, Rs 1,200 crore in FY28 and Rs 5,000 crore in FY29, with EBITDA margins exceeding 25%.”
Deven Choksey, Deven Choksey Research
HFCL's strategic initiatives include expanding its optical fibre and optical fibre cable capacities, as well as investing Rs 215 crore in a manufacturing facility for AI data centre connectivity solutions. The company reported a net profit of Rs 246 crore in Q1FY27, a significant turnaround from a net loss of Rs 29.3 crore in the previous year.
Analysts remain bullish on HFCL, with Deven Choksey Research projecting a 75% upside. The company's defence and aerospace business is seen as a transformative factor, with defence revenue expected to rise significantly in the coming years.
HFCL is at a pivotal point, transitioning from a domestic telecom contractor to a global technology platform. The company's focus on AI optical connectivity, defence electronics, and aerospace manufacturing is expected to drive growth and improve earnings quality.
Background
HFCL's growth is part of a broader trend of increasing demand for AI infrastructure and data centres in India. The company's strategic shift towards high-value technology products and export opportunities aligns with global market trends.
As HFCL continues to expand its capabilities and market reach, investors will be closely watching the company's performance in the AI and defence sectors. The ongoing capacity expansion and strategic investments are expected to position HFCL as a leader in the rapidly growing AI infrastructure market.
