Tejas Networks is all set to capitalize on the 5G wave, climbs 380% in one year!

Tejas Networks is all set to capitalize on the 5G wave, climbs 380% in one year!

by 5paisa Research Team Last Updated: 2022-12-13T13:44:42+05:30

Backed by Tata Sons, Tejas Networks is all set to expand and benefit from the 5G wave.

The stock price of Tejas Networks Ltd hit a 52-week high of Rs 570.2 on 5 October 2021. In the last one year, the stock moved from Rs 89.80 on 30 October 2020 to Rs 431.40 as of 28 October 2021, delivering returns of 380%!

Incorporated in 2000, Tejas Networks is an optical, broadband and data networking products company. It is engaged in designing, developing and sales of high-performance and cost-competitive products, which are used for building high-speed communication networks to carry voice, data and video traffic from fixed-line, mobile and broadband networks over optical fibre. The company’s clientele includes telecommunications service providers, internet service providers, utility companies, defence companies and government entities in more than 60 countries.

In Q2FY22, on a consolidated basis, the company reported total revenue of Rs 172.78 crore, which was an increase of 57% YoY. The PBIDT and PAT came in at Rs 18.34 crore and Rs 3.66 crore respectively.

Industry dynamics

  • As per a study done by Market Research Future (MRFR), the global telecom equipment market size is projected to grow at an 11.23% CAGR by the year 2025.

  • Increasing number of cellular stations, increased data consumption, need for next-generation ready network equipment for 5G networks and fibre-based broadband networks have driven a new capex cycle across the globe.

  • On the domestic front, the government policies favour the telecom sector. The government has designed a Rs 12,195-crore production linked incentive (PLI) scheme for the sector. This scheme aims to boost local production of telecom equipment, reduce dependency on imports and provide an opportunity for domestic manufacturers to focus on exports as well.

Tata Son’s investment in the company

On 29 July 2021, the company announced that it executed definitive agreements with Panatone Finvest Ltd, which is a subsidiary of Tata Sons Pvt Ltd. Tata Sons bought a 43.35% stake in the company for Rs 1,884 crore in a multi-step deal that involved the sale of shares worth Rs 500 crore and warrants worth Rs 1,350 crore. Moreover, Tata Sons made an open offer to acquire up to a 26% stake at Rs 258 per share, following SEBI regulations.

The company (Tejas Networks) shall use these proceeds to invest organically as well as inorganically for expansion of product portfolio and R&D, investment in sales, marketing and additional people. Furthermore, it shall use the funds for enhancing manufacturing and operational capabilities including working capital expansion and for other general corporate purposes.

This transaction provides an opportunity for Tejas Networks for leveraging synergies with Tata Group with access to wider global relationships. Moreover, the capital infusion strengthens the company’s balance sheet, which enables it to invest for growth and expand its product portfolio.

At 1.47 pm, the share price of Tejas Networks Ltd was trading at Rs 435.1 as against the previous day’s closing price of Rs 431.40 on BSE.

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