Tejas Networks slips 9% as December quarter results disappoint Street

Tejas Networks share price slipped 9 per cent to Rs 994.05 on the BSE in Friday's intraday trade after the company reported a weak set of quarterly results on a quarterly basis.

 

Tejas Networks' reported a profit after tax (PAT) of Rs 166 crore for the third quarter ended December 2024 (Q3FY25) as against a PAT of Rs 275 crore seen in Q2FY25. This was a decline of 40 per cent quarter-on-quarter (Q-o-Q).

 

The company, engaged in telecom equipment & accessories company, had posted a loss of Rs 45 crore in the year ago quarter.

 

Similarly, the company's revenue from sales & services jumped 4.5 times to Rs 2,497 crore from Rs 560 crore in the previous year quarter. It, however, declined from a revenue of Rs 2,655 crore seen in the previous quarter of the current fiscal.

 

 

Tejas Networks said it had an order book of Rs 2,681 crore at the end of Q3FY25, as against Rs 4,845 crore at the end of Q2FY25.

 

Tejas Networks designs and manufactures high-performance wireline and wireless networking products for telecommunications service providers, internet service providers, utilities, defence and government entities in over 75 countries. Tejas Networks is a part of Tata Group, with Panatone Finvest (a subsidiary of Tata Sons Pvt. Ltd.) being the majority shareholder.

 

At 09:44 AM, Tejas Networks share was trading 7 per cent lower at Rs 1,025.25 as compared to 0.11 per cent rise in the BSE Sensex. The stock has corrected 34 per cent from its 52-week high level of Rs 1,495.10, which it had touched on June 27, 2024. It had hit a 52-week low of Rs 652.05 on March 28, 2024. 

 

The 'Atmanirbhar Bharat Abhiyan' of the Government of India (GoI), which is aimed at limiting import dependence and increasing the demand for indigenous products, provides better growth opportunities for the company. In FY24, TNL received an order from Tata Consultancy Services Limited (TCS) to supply 4G/5G baseband and radio access network (RAN) equipment for BSNL’s 4G network project to be installed at 1,00,000 sites.

 

A significant portion of Tejas Networks' business is generated from a limited number of large customers, who have substantial negotiating leverage with the company. The company, in its FY24 annual report, said that its business operations may fluctuate due to a variety of factors such as loss of key customers, fluctuation in demand and sales volume, timing and size of customer capital spends, inventory management practices and timely collection of receivables.

 

In particular, with its recent wireless and wireline contract wins with BSNL, India-Government segment is expected to account for a disproportionately large portion of the company's revenues in the near term. "Any short-term spending slowdown in the Indian telecom market and/or India-Government segment could adversely impact the company's business," it said.  ALSO READ: Amber Enterprises up 7% on swinging to profit from loss YoY; revenue up 65%

 

The large size of the BSNL 4G order and short period of execution, are likely to keep the working capital intensity elevated and consequently increase the working capital debt in the near term. However, with execution of this order, the cash flow position is expected to improve, supported by healthy collections and liquidation of inventory. The improvement in the working capital intensity, thus, remains a key monitorable, ICRA had said in its rating rationale.

 

The company is exposed to stiff competition from other global players such as Nokia, Huawei, and Ciena, among others, who have a long presence and a more diversified product portfolio. Tejas Networks needs to continuously invest in R&D to remain competitive in a technologically-intensive industry, the rating agency said.