The increased data consumption is the fundamental long-term growth driver for ourbusiness since Tejas offers state-of-the-art optical and data networking products whichare used for building high-capacity networks to cater to the ever-increasing demand forbandwidth.
Your company is a pioneering deep-technology product company from India which hassuccessfully grown from a start-up to a listed company. Tejas has shown that it ispossible to design and manufacture world-class cutting-edge technology products fromIndia and successfully compete against large global players. By using innovation intechnology and a unique business model Tejas has created a great foundation forprofitable growth in the future.
In today's world high-speed network connectivity and increased use of data is becomingan important element of our daily lives. The current trend of increased data consumptionwill continue for many years with higher proliferation of smartphones home broadbandenterprise data services cloud-based applications 5G and IOT. In addition to privatetelecom service providers even government entities around the world have realized theimportance of providing broadband connectivity to all their citizens so that they canbenefit from the advantages of a digital economy. The increased data consumption is thefundamental long-term growth driver for our business since Tejas offers state-of-the-artoptical and data networking products which are used for building high-capacity networks tocater to the ever-increasing demand for bandwidth.
While telecom services have grown significantly in India over the last 15 years basedon voice usage the data consumption and growth has just started and presents a greatopportunity for us. In fact India is expected to be world's fastest growing opticalnetworking market since there is a lot of pent-up demand for optical networkingequipment due to low fiberization of cell towers and low broadband penetration. Telecomoperators in India continue to expand their optical fiber infrastructure to cater torising data usage and traffic explosion in their networks. All major operators in Indiaare customers of Tejas and use Tejas products in their optical networks. Your company isactively engaged with all its existing customers and is working on new networkapplications where Tejas products are a strong fit. I believe your company is thereforewell positioned to benefit from the opportunities that lie ahead. The Government is alsomaking significant investments in its flagship Bharatnet project connecting over 250000gram panchayats which forms the backbone of Digital India for the rural population. Thecontinued focus on Design-led manufacturing by Indian Government and policies such as"Preferential Market Access" (PMA) present a great opportunity for Tejas sincethey are targeted towards encouraging indigenous technology and use of domesticallymanufactured products like those offered by your company. I am proud to inform you thatas per global market research firm Ovum your company has #1 market share in the opticalaggregation segment in India which is a great achievement for your company since itcompetes against all global competitors and is succeeding in the world's most competitivetelecom market.
Internationally many countries in the emerging markets have India-like telecom needsand your company's success in India is expected to be a highly-valued reference incountries in South-east Asia and Africa. On the other hand many customers in USA aregoing through their optical network transformation to migrate from legacy voice networksto data networks. Converged packet optical products such as those offered by yourcompany are ideally suited for this application in USA. Together India South-East AsiaAfrica and the USA present very significant business opportunities and your company plansto expand and diversify its customer base and build a strong foundation for future growth.
In terms of technology your company has built a world-class R&D team and its focusis on innovation and IPR. Tejas products are built using unique software-defined hardwareTMarchitecture based on programmable silicon chips. This allows Tejas to gain time-to-marketadvantage keep its product costs competitive and provide very flexible and future-proofproducts to its customers that enable them to build next-generation networks in apay-as-you-grow manner. India as a country has world-class software talent and the globaltrend in the telecom industry of software becoming the key differentiator in productsworks in your company's favour. Tejas continues to invest aggressively in R&D tosustain the technological advantages in its products. Your company's R&D is highlyefficient due to a highly talented but relatively low-cost workforce based in India veryeffective design re-use practices and efficient product development processes. Developingoptical and data networking products requires large number of skilled R&Dprofessionals across multiple domains deep technology knowledge and significant up-frontinvestments as well as long gestation period. This creates very
The global demand for data traffic will continue to drive the requirements of opticalnetworking products and I believe that this macro trend will accelerate further with theadvent of 5G. The competitive landscape in this industry is also favourable since manyglobal telecom equipment companies are facing financial pressures due to their highoperating cost structure and are unable to deliver healthy financials. Your company'sstrategy of leveraging low-cost India-based operating model for creating world-classproducts is therefore viable and likely to be sustainable in the long-run. Your companyhas built a strong growth engine while keeping its operating costs much lower whencompared to its global competitors. Your company's asset-light model of outsourcing partsof its manufacturing to multiple electronic contract manufacturers is expected to providesignificant leverage to scale-up manufacturing while making only incremental investments.I believe that all the elements for success of your company are coming together and astrong platform has been created for profitable growth over the coming years.
On behalf of the Board of Directors of Tejas Networks I thank the Governments ofvarious countries where Tejas has business operations. We also thank the Government ofIndia particularly the Ministry of Communication and Information Technology the Ministryof Commerce the Ministry of Finance the Ministry of Corporate affairs the Customs andExcise departments the Income Tax department Reserve bank of India Karnataka StateGovernment and other Government agencies for their support and look forward for theircontinued support in future.
We are grateful to our customers employees shareholders suppliers and bankers allof whom are critical to our success. We are excited about the growth potential of Tejasover the next several years and we look forward to the next stage of your company'sjourney together.
| ||Warm regards |
|Bengaluru ||Balakrishnan V. |
|April 24 2018 ||Chairman |