Multibagger HFCL shares surge over 265% YTD; brokerage initiates 'Buy' ahead of Jio IPO

With that being said, Nuvama Institutional Equities has initiated coverage on HFCL with a 'Buy' rating, citing the company's shift towards telecom and networking products, its order book, capital expenditure programme and growth opportunities in data centres and defence.

"HFCL has pivoted decisively from turnkey contracts to telecom and networking products (83 per cent of Q1 FY27 revenue versus 27 per cent in FY21). It is well poised to ride on data centre buildouts globally, backed by record order book, capex program and robust execution capability (reflected in order wins). Moreover, HFCL's defence scale-up creates a valuable diversification along with a significant optionality," Nuvama said.

The domestic brokerage expects HFCL to post a compound annual growth rate (CAGR) of 39 per cent in revenue, 68 per cent in EBITDA and 92 per cent in profit after tax (PAT) over FY26–FY29. It has set the 12-month target price at Rs 380, based on 18 times estimated enterprise value to EBITDA for Q3FY29, in line with global peers.

Nuvama flagged a slowdown in global data centre capex and delays in the completion of HFCL's preform capacity as key risks. It added that the stock trades at 13.1 times its estimated FY28 enterprise value (EV) to EBITDA.

On its turnkey business, the brokerage noted that BharatNet has been a key contributor. HFCL has undertaken large-scale fibre network deployment contracts under the programme, covering engineering and implementation in addition to optical fibre cable (OFC) supply. The company has also secured turnkey projects from private telecom operators, including Reliance Jio, alongside government and institutional projects.

Meanwhile, HFCL promoter and managing director Mahendra Nahata and his family could see a substantial increase in the estimated value of their investment in Jio Platforms following the latter's proposed initial public offering (IPO).

According to the draft papers, the Nahata family and associated entities acquired 37.04 million shares in Jio Platforms through the conversion of compulsorily convertible debentures in July 2020, at a face value of Rs 10 per share. They subsequently acquired another 10.83 million shares, taking their total holding to 47.87 million shares, equivalent to a 0.54 per cent stake.

The holding was valued at Rs 47.87 crore at the face value of Rs 10 per share at the time of the investment.

Jio Platforms is set to launch its Rs 30,200-crore IPO on October 21, with a proposed price band of Rs 1,065–1,119 per share. At the upper end of the band, the company's implied market capitalisation (m-cap) is estimated at around Rs 10.30 lakh crore.

At the proposed upper price of Rs 1,119 per share, the Nahata family's 47.87 million shares would have an indicative value of around Rs 5,356 crore. This estimate is based on the proposed IPO price and does not represent a realised gain.