Tejas Network: The Atmanirbhar Bharat Abhiyan of the Government of India (GoI), which is aimed at limiting import dependence

  • Tejas Network: The  Atmanirbhar  Bharat  Abhiyan  of  the  Government  of  India  (GoI),  which  is  aimed  at  limiting  import  dependence

  • The reaffirmation of Tejas Networks Limited’s (TNL) ratings factors in the strong parentage of Panatone Finvest Limited (PFL), which  is  a  subsidiary  of  Tata  Sons  Private  Limited  (TSPL)(rated  [ICRA]AAA(Stable)/[ICRA]A1+)and  an  investment  holding company of the Tata Group for investmentsin telecommunication. 
  • Further, the ratings draw comfort from TNL’s healthy order book,  strong  track  record  in  the  industry  and  its  long-term  relationships with  some  large  clients,  which  have helped  it  to maintain  a  healthy  market  share  in  the  optical  networking  space  in  India. 
  • Going  forward, TNL’s revenue growth will  be supported by execution of healthy outstanding order book of over Rs. 8,221 crore (as of March 2024) and likely healthy inflow of orders in wireless as well as wireline products from both domestic and international clients. 
  • In FY2024, TNL received order from Tata Consultancy Services Limited (TCS) to supply 4G/5G baseband and radio access network (RAN) equipment for BSNL’s4G network project to be installed at 1,00,000 sites.
  • The  Atmanirbhar  Bharat  Abhiyan  of  the  Government  of  India  (GoI),  which  is  aimed  at  limiting  import  dependence  and increasing  the  demand  for  indigenous  products,  provides  better  growth  opportunities  for  the  company.  
  • Further, following TNL’s approval underdesign-led production linked incentive (PLI) scheme for manufacturing telecom and networking products by the Department of Telecom, Government of India,it received Rs. 32.7 crore in FY2024 as incentives for FY2023.
  • Also, TNLis eligible to receiveRs. 123.7-crore PLI for FY2024.The ratingsfactor in moderate profitabilityand high working capital intensityof the company. In FY2023 and FY2022, TNL’sprofit  margin  wasunder  pressure on  account  of  a subdued  gross  margin  and  high  fixed  expenses.
  • However,  in  FY2024the profitability improved with increase in scale, PLI incentive and better absorption of fixed cost.Going forward, the profitability is likely to improve with economies of scale. Further, TNL’s profitability and cash flows are also exposed to foreign exchange rate fluctuation risks. 
  • In FY2024, the working capital intensity increased compared to FY2023 with high inventory and debtor levels. 
  • TNL secured the long-lead components for expedited delivery for the BSNL 4G project leading to high inventory levels. Further, high billing in Q4 FY2024 resulted in high debtor levels as of FY2024end.
  • The large size of the BSNL 4G order and short period of execution, are likely to keep the working capital intensity elevated and consequently increase the working capital debt in the nearterm. 
  • However, with execution of this order, the cash flow position is expected to improve, supported by healthy collections and liquidation of inventory. 
  • The improvement in the working capital intensity, thus, remains a key monitorable. 
  • The  ratings  continue  to  be  constrained  by  stiff  competition  from  global  players  such  as  Nokia,  Ciena,  and  Huawei,  among others,  who  have  a  more  diversified  product  offering  and  the  advantage  of  economies  of  scale.  


    • Tejas + Design Linked Incentive (DLI) Scheme

     URL: https://youtu.be/5dFNFxQkk0w?si=QISdSSvSF2r7eK2o

    • Tejas is a leading technology innovator in India’s telecom sector with 445 patent filings and a rich repository of 330+ semiconductor IPs
    • Saankhya Labs has applied under both schemes for its telecom products and semiconductor chips.
    • Over 60% of the Tejas workforce is involved in R&D. 
    • With the recent acquisition of Saankhya Labs, the company has enhanced its R&D competencies in adjacent areas such as satellite communications, broadcast and semiconductor chip design
    • Tejas is a part of the Tata Group, with Panatone Finvest Ltd. (a subsidiary of Tata Sons Private Limited.) being the majority shareholder.
    • MeitY has announced the Design Linked Incentive (DLI) Scheme to offset the disabilities in the domestic industry involved in semiconductor design. 
    • TTDF Scheme aims to support domestic companies involved in technology design, development, commercialization of telecommunication products and solutions. 
    • As of March 31st 2023, Tejas and Saankhya had cumulatively filed 445 global patent applications and owned a rich portfolio of 330+ semiconductor IPs. 

     Thank you for contacting Rounaq! Please let us know how we can help you. 

    Whatsapp: 7838491131

    SEBI registered RA : Rounaq Bakshi
    Waheguru

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