Tejas Networks cuts debt with IPO proceeds, banks on 5G expansion for growth

INDIA - JANUARY 31: Sanjay Nayak, CEO TEJAS Network, at office, in Bangalore, India. Potrait (Getty Images)

Durba GhoshMoneycontrol News

A stellar IPO debut in June has helped Bangalore based telecom hardware company Tejas Networks become debt free, co-founder and CEO Sanjay Nayak told Moneycontrol.

The company had a huge chunk of its debt, worth over Rs 280 crore, which it eliminated from the IPO proceeds.

“We are competing with global giants with significant pocket reserves, so it was important for us to get our financials right. With reduced debt, we have more capital to engage in R&D and for international sales and marketing, which is crucial for us in a changing tech scenario,” Nayak said.

The company is exploring opportunities in South East Asia and Africa with the help of government’s program to promote the export of high-tech network products.

Tejas Networks spends at least 9-10 percent of its revenue on its R&D.

The company reported a net profit of about Rs 26.87 crore, up 68.04 percent in the quarter ended September, compared with Rs 15.99 crore in the same quarter last year.

The company’s sales rose slightly by 0.85 percent y-o-y to Rs 216.13 crore in the July-Sept quarter.

The IPO proceeds, combined with the benefit of nil excise duty post GST, has helped the company to record a healthier balance sheet.

“For the same quarter last year, we had excise duty, which is not comparable to the July-Sept quarter in 2017. If we compare at par, revenue saw a healthy 20.9 percent growth y-o-y,” Nayak said.

The 20.9 percent growth y-o-y in the quarter ending September 2017 is in line with the company’s target of clocking a 20 percent annual growth going forward.

“We will also look at stabilising our profit after tax to 14-15 percent in next 2-3 years,” Nayak said. By the end of the current fiscal, Tejas Networks is expecting to improve its bottom line by 200 basis points.

For the first half of the year, Tejas Networks’ net profit after tax was Rs. 47.31 crore. It generated cash of Rs 94.72 crore from operations, taking its cash and cash equivalent reserves to Rs 381.52 crore.

The company, which concluded its IPO in June, had raised Rs 450 crore through the issuance of about 1.7 crore shares. The IPO was subscribed 1.9 times at close.

As a percentage of consolidated revenues, the company’s operating margin also increased to 13.6 percent in Q2, a significant pick up from 10.2 percent margin that the company enjoyed in the same period last year.

With telecom operators gearing up to expand their optical fibre network, Tejas is at the forefront of propelling growth.

“Only about 20 percent of telecom base stations run on optic fibre. Now that all big telcos such as Airtel, Idea, Vodafone are gearing up for 4G and then 5G, that percentage will go up to at least 70 percent. That is a huge opportunity for us,” Nayak said.

The company is also banking on the second phase of the BharatNet project, government’s pet project to take internet connectivity to the last mile. In the first phase, Tejas Networks worked on about 40,000 villages out of the total 90,000. The second phase seeks to connect at least 150,000 villages across India.

“The BharatNet project will have state-wise tenders. But the interesting part is that states are going a step ahead and extending the rural connectivity to link districts and state capitals also, which presents an additional opportunity for us,” Nayak explained.

durba.ghosh@nw18.com.