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Tejas Networks Ltd

| Q3 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤16th Jan 26

Summary : Tejas Networks reported Q3 FY26 losses due to BSNL 4G order delays and R&D investments, but sees positive long-term growth from new products and international expansion.

Management Perspective neutral : Management expressed a "positive long-term outlook" and is "bullish about our business," but acknowledged a "difficult time" and a "transition period taking longer than we would have liked."

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 revenue was INR307 crores, a 17% quarter-on-quarter growth.
  2. Profit after tax for the quarter was negative INR197 crores.
  3. Order book stood at INR1,329 crores, up from INR1,204 crores last quarter.
  4. Inventory remained high at INR2,363 crores, primarily for delayed BSNL 4G orders.
  5. Net debt reduced to INR3,349 crores from INR3,738 crores in Q2.

Future Growth Prospects

  1. Multiple wireless product trials are progressing to commercial negotiation stages.
  2. Selected as a 5G RAN supplier for a pilot on the Delhi-Mumbai railway corridor.
  3. Secured wins for private 5G deployments in Indian ports and mines.
  4. Won additional BharatNet packages, becoming a major IP/MPLS router supplier.
  5. Long-term outlook is positive, driven by technology transitions and AI-led data growth.

Management Insights

  1. Q3 revenue was mainly from wireline products for Indian private operators and international clients.
  2. Current losses are due to significant R&D and supply chain investments for growth.
  3. BSNL 4G project delays impacted current year's financials, pushing execution to next fiscal year.
  4. Wireline business growth with Indian private telcos and internationally is progressing well.
  5. International market engagements for wireless products are long-cycle but advancing.

Signs of Skepticism

  1. Management did not provide a specific timeline for achieving positive bottom line profitability.
  2. Vague responses regarding quantifiable market opportunities for private 5G and data centers.
  3. Lack of detailed information on specific cost optimization efforts and their impact.
  4. Continued high inventory and negative PAT raise concerns about working capital management.
  5. No clear timeline provided for the appointment of a new CEO.

Risk Factors

  1. Company reported significant losses for two consecutive quarters and cumulatively over five years.
  2. Delay in receiving the BSNL 4G add-on purchase order for 18,000 sites.
  3. High inventory levels are maintained in anticipation of the delayed BSNL order.
  4. Long working capital cycle due to inventory holding and government payment timelines.
  5. Heavy dependence on BSNL, a government undertaking, as a primary customer.

Good To Know

  1. Received INR85 crores in PLI incentives for Q4FY25, totaling INR397 crores for FY25.
  2. Filed 26 patents in Q3, bringing total global patents to 613 (370 granted).
  3. Majority of new patents are related to 5G advanced and 6G technologies.
  4. Converged broadband product won an 'Excellence Award' in Dubai.

Key Drivers

  1. BSNL 4G add-on order execution.
  2. International wireless deals closure.
  3. Private 5G deployments scale up.
  4. BharatNet Phase 3 implementation.

Key Analyst Discussions

Competitive Environment

  1. Questions were asked about market share in private 5G and data center opportunities.

Financial Highlights

  1. Analysts questioned the path to profitability and timeline for positive bottom line.
  2. Concerns were raised about high inventory levels and the long working capital cycle.
  3. Queries included potential fundraise needs and details on depreciation/other expenses.
  4. Analysts inquired about gross margins for wireless POCs in international markets.

Product Composition

  1. Inquiry about the focus of new patents (wireless vs. wireline products).
  2. Discussion on the upgradability of 4G products to 5G for private deployments.

Strategic Considerations

  1. Reasons for the delay in the BSNL 4G add-on order were discussed.
  2. Questions on the performance of non-BSNL business and international expansion.
  3. Analysts inquired about the urgency and timeline for appointing a new CEO.
  4. Queries on the approximate order size and duration for BharatNet Phase 3 deployment.