TEJASNET - Tejas Networks Limited Share Price

Management's outlook for Tejas Networks remains positive, reflecting strong underlying business drivers and anticipated growth opportunities across several technology transitions. For Q2 FY26, the company reported revenues of Rs. 262 crores, a 30% quarter-on-quarter increase from Rs. 202 crores in Q1. However, profit after tax was a loss of Rs. 307 crores, larger than the Rs. 194 crore loss in Q1, primarily due to inventory and warranty-related provisions totaling Rs. 190 crores.

Key forward-looking points from management include:

1. Order Book: The company ended Q2 with an order book of Rs. 1,200 crores, slightly down from Rs. 1,241 crores in Q1. Management aims to convert a significant portion of this order book, especially concerning the outstanding BSNL 4G add-on PO of Rs. 1,500 crores.

2. 4G/5G Deployments: Tejas Networks has successfully deployed 4G networks for BSNL, with future prospects in 5G as existing infrastructure can be upgraded. They expect ongoing growth as 4G deployments expand in emerging markets.

3. Market Growth: Tejas anticipates significant investments in AI data centers, which will drive connectivity needs and bolster their networking business. They project rapid growth in 400G and pioneering segments like 800G WDM technologies.

4. Product Development: The company is investing heavily in its product portfolio, including a new 64T64R massive MIMO radio launched recently and new optical products intended for the increasing demand for high-speed data solutions.

5. International Expansion: Tejas is focused on penetrating international markets, leveraging partnerships, and deploying solutions for both 4G and 5G networks.

6. Innovations and Patents: During the quarter, the company filed 39 patents, increasing the total to 587, indicative of their commitment to innovation and maintaining technological leadership.

In summary, while the company faces challenges, particularly regarding losses and provisioning, management remains committed to long-term growth and positioning Tejas Networks advantageously in the evolving telecommunications landscape.

Here are the major questions asked during the Q&A section of the earnings transcript along with their detailed answers in first person:

Question 1: "Do you have an estimate of what is our run rate revenue required for breakeven given that we have larger R&D investments?"

Answer 1: "As of now, I don't have the data to provide a breakeven revenue number, as our focus remains on improving operational efficiencies and getting through our current investments."

Question 2: "Are we likely to get these orders in the current financial year or will they spill over?"

Answer 2: "We have proactively built inventory and components. BSNL has received the advance purchase orders, and as soon as they are ready, we anticipate that these POs will be issued this financial year."

Question 3: "Now that we have deployed 4G, are we in the stage of POC with operators outside India?"

Answer 3: "Yes, we are engaged with various operators in India and internationally. These engagements involve thorough technical discussions and potential POCs, and we expect some closures soon."

Question 4: "Are we done with manufacturing-related losses or might it continue?"

Answer 4: "These assessments are ongoing and reflect our commitment to ensuring accurate inventory evaluations. We don't expect significant repeat issues from previous loss cycles, but evaluations of contract manufacturing continue as a standard practice."

Question 5: "Is Tejas capable of establishing itself in the data center value chain?"

Answer 5: "We focus on the connectivity aspect of data centers, providing the networking equipment necessary for high bandwidth and low latency. As the data center market grows, our business stands to benefit due to increased connectivity demands."

Question 6: "Will we need to compete with companies like Cisco for TCS's communication contracts?"

Answer 6: "Yes, we will have to compete for those contracts as each company functions independently despite our relationship. We will seek to ensure our solutions stand out in terms of quality and pricing."

Question 7: "Can we expect some visible improvement in Q3 after a soft Q2?"

Answer 7: "We do not provide specific guidance on quarterly performance but are optimistic about the broader business environment and remain committed to investing in product development."

Question 8: "What are the top two risks you foresee in the upcoming year?"

Answer 8: "The primary risk involves not executing effectively on product development and failing to meet customer expectations during trial phases. We are focused on managing these risks proactively."

Question 9: "What margins are we seeing after all write-offs?"

Answer 9: "Typically, we maintain positive profitability across projects executed, but recent write-offs were necessary, stemming largely from our transition from a large project execution phase."

Question 10: "Do you anticipate continued growth over the next few years?"

Answer 10: "While we don't quantify future performance precisely, we remain positive about our capabilities to seize upcoming opportunities as we grow in both domestic and international markets."