Tejas among global big boys

Tejas Networks has just broken into the global top 10 league in its space — equipment and solution providers for optical transmission networks, according to an IDC report for the last quarter (ended December 2008).

What makes the eight-year old company’s achievement exceptional is that while most Indian technology successes are in the services space, Tejas has built its entire business on its proprietary boxes which have come out of its own R&D.

Once the innovations of an intellectual property led business click in the marketplace its revenue grows in a non-linear mode and in keeping with this characteristic, Tejas has been growing its top-line at a compound annual rate of over 70 per cent for the last few years. It will end the current year with revenue of around Rs 600 crore which will be equal to the combined turnover of the last three years!

“We would have touched Rs 1,000 crore next year but for the global slowdown which has somewhat affected our exports. One of the top global telecom equipment vendors to which we have been a supplier has filed for chapter 11,” says managing director and CEO Sanjay Nayak. He does not name it but the firm is clearly Nortel. With developed country markets in trouble, Tejas has been concentrating on emerging markets where the growth story is still on.

The other road bump in the current scenario is the decline in the value of the rupee against the US dollar which is adding to Tejas’s costs. The components imported to make its boxes which are put together to its proprietary design make up 70-80 per cent of costs.

Tejas, however, remains profitable (it broke even three years ago), has enough cash to finance its expansion and continuing emphasis on R&D. It has so far raised $73 million in funding with the last round of $24 million coming from Goldman Sachs. It was seriously contemplating a public issue until the equity markets went down last year.

In the domestic market Tejas’ growth remains undiminished, its great good fortune being the ability to be there with the right products at the right time to take advantage of the great Indian telecom roll out which continues and shows no sign of abating.

Tejas’s domestic customers (it is present in all the national networks) underline the confidence the firm has in the market. R K Bahuguna, director for network planning and management in Railtel, recalls that Tejas and his firm entered the market at about the same time, being the first to deploy its new product lines and technology. He finds that Tejas has been consistently coming up with new offerings which have newer features and mark an improvement on earlier versions.

To Bahuguna, Tejas’s plus point is being able to offer globally competitive products, thanks to its R&D, at around 70 per cent of international costs. Additionally, they are there to provide a kind of post sales service for the equipment which global vendors have difficulty in matching.

A similar sentiment is expressed by Jagbir Singh, CTO of Bharti Mobility Services, another major user of Tejas’s equipment. He finds Tejas equal to the global vendors in quality, ability to offer new features and upgrades. “With good R&D and a good product line, they will become a global player if they continue to grow the way they are doing and slowly upgrade to higher end products in their own space.”

It is vital to upgrade and offer more for less because the cost of transmitting data is falling the same way as the cost of processing data, captured by Moore’s law.

Kumar N Sivarajan, CTO and the technology big daddy in Tejas, does a quick back of the envelope calculation to come up with fascinating numbers. With the current SDH technology equipment providers have to offer four times the speed at 1.5 times the cost. Once carrier ethernet technology is used, overall capital costs will fall by another 40 per cent.