Specializing in optical networking, wireless products, and broadband solutions, Tejas is betting on these key areas to drive its next phase of growth.
Strengthening its position, it recently inked a ₹5.3 billion technology collaboration with NEC Corp. to develop advanced 5G and wireless solutions. This partnership gives Tejas access to NEC’s proven 4G/5G core technology, enhancing its competitiveness in next-gen telecom innovations.
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Yet, despite these growth prospects, the stock tells a different story.
Tejas Networks’ share price has tumbled over 40% in the past six months, trading near its 52-week low of ₹651. While broader market trends have played a role, weak quarterly results have been a key factor behind the decline.
Tejas Networks Q3FY25 performance
Tejas reported Q3 FY25 revenue of ₹26 billion, marking a 4.7% year-on-year increase.
However, profitability hasn’t kept pace. Despite returning to profitability this quarter after a loss in the same period last year, operating profit declined over 30% sequentially, and net profit fell more than 40%. This reflects ongoing margin pressures.
The company is also facing a working capital crunch, with trade receivables surging to ₹47 billion and inventory levels rising to ₹31.2 billion due to delayed collections and stock buildup from ongoing project execution.
While Tejas holds a strong order book of ₹26.8 billion, effective financial management will be critical for sustained profitability.
Margins have fluctuated due to shifts in Tejas’ product mix, with different configurations shipped each quarter. The company acknowledged that margins from its first wireless project with BSNL were lower than its traditional wireline business. However, as international deals gain momentum and the order book diversifies, margins are expected to recover.
R&D and future growth
With a workforce exceeding 2,350 employees—over 60% in R&D—Tejas is doubling down on innovation.
The company remains committed to its ₹6 billion R&D budget, even if revenue growth slows in FY26 due to delayed orders. This highlights Tejas’ long-term strategy to build differentiated telecom solutions despite short-term profitability pressures.
In the near term, Tejas expects to complete BSNL’s first one-lakh site order this financial year. Beyond that, further 4G expansion, 5G upgrades, and standalone 5G builds in the n78 (3.5 GHz) band are on the horizon. Execution will be critical as the company positions itself for the next phase of growth.
Outlook for FY26
Tejas remains confident about stronger revenue conversion in Q4FY25 and FY26, driven by anticipated BSNL 5G orders, Vodafone Idea’s network expansion, and international deals spanning the US, Middle East, Africa, and Latin America.
The company is also investing in private 5G solutions, high-speed fibre upgrades, and artificial intelligence (AI)-driven networking—strategic bets aimed at long-term growth.
To accelerate global traction, Tejas has expanded its leadership team, bringing in former Nokia India head Sanjay Malik and strengthening its sales force.
While profitability challenges persist due to high receivables, delays in large government and enterprise deals, and product mix shifts, management sees these as short-term hurdles rather than structural issues.
Projects and growth
Despite short-term profitability pressures, Tejas Networks is betting on major 5G, fibre expansion, and network modernization projects to improve financial performance. The management is focused on expanding sales, strengthening leadership, and diversifying its product mix—moves that signal a long-term growth strategy.
A successful scale-up of projects like BSNL’s 5G rollout, BharatNet Phase 3, and private 5G enterprise deployments over the next two quarters could provide much-needed revenue momentum. However, execution risks remain, and effective cash flow management will be critical to translating these opportunities into sustained profitability.
Tejas is also eyeing fibre upgrades for power and railway networks, which are shifting from 100G to 400G+ technologies, presenting another growth avenue.
Meanwhile, Tejas is conducting proof-of-concept (PoC) trials with Indian telecom operators, which could lead to larger deals. Its successful execution of BSNL’s 4G contract has already boosted its credibility, attracting interest from global players.
The company is in discussions with tier-1 international operators, but these deals require custom R&D and spectrum-specific adaptations, extending sales cycles.
On the government incentives front, Tejas has booked over ₹5 billion in PLI incentives over the past year. It received the FY23 incentives in FY24 and expects the FY24 incentives in the current financial year.
The management is actively engaging with government agencies to expedite approvals, ensuring timely access to these benefits.
Global expansion
Tejas is expanding in key international markets, including Indonesia, Malaysia, the Middle East, North America, and Latin America. To strengthen its foothold, the company is leveraging local partnerships for in-country presence, language support, and customer relationships—critical for network deployment and sales.
In North America and Latin America, regulatory challenges appear minimal. The key requirement is certifying equipment for performance, safety, and radiation compliance through agencies such as TÜV and UL.
While potential tariffs remain uncertain, Tejas is prepared to navigate any changes. Sales cycles in these regions are typically long, involving multiple stages of lab testing, field trials, and commercial negotiations, but once a vendor is selected, contracts often extend over multiple years.
Tejas is actively pursuing major US government programmes, including the BEAD (Broadband Expansion in Rural America) and Rip and Replace (Network Modernization Initiative), a multi-billion-dollar project.
Collaborating with local partners, the company is aiming for a share of these contracts while positioning itself as a leader in circuit emulation over packet networks—a crucial technology for modernizing legacy telecom infrastructure in North America.
Financials and valuations
Over the last five years, Tejas’ sales have grown more than fivefold. After five consecutive years of losses, the company turned profitable in 2024, and this momentum has continued into 2025.
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For the first nine months of FY25, Tejas reported revenue of ₹70 billion and a net profit of ₹51 billion, reflecting strong business execution.
However, high working capital requirements, margin pressures from the BSNL 4G/5G project, rising depreciation, and heavy R&D investments have weighed on returns. Execution delays have also added strain, but better order fulfillment and higher-margin global deals could improve profitability.
Tejas’ stock has dropped about 42% in the last six months. Its price-to-book (PB) ratio stands at 3.6, slightly above its historical median of 3.5, suggesting the market is reasonably valuing the company’s assets.
However, its EV/Ebitda has fallen to 10.9, significantly lower than the historical median of 21.4—reflecting investor concerns over short-term profitability and execution risks.
Conclusion
Tejas Networks has made significant strides, with strong revenue growth and a solid order book. But the real test lies in execution.
Over the next three years, success will depend on how well the company converts orders into revenue, manages cash flow, and sustains profitability. If the BSNL 5G rollout, private sector 5G expansion, and global deals play out as expected, Tejas could see a significant re-rating.
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However, working capital pressures, execution delays, and prolonged margin strain remain risks. The opportunity is big, but so are the challenges.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
