This telecom equipment maker is up six fold in one year while waiting for production linked incentives

• Shares of the firm have delivered 625% returns in the last one year on account of a spike in demand for broadband services in homes and at enterprises.
• Tejas Networks designs, develops and sells high-performance networking products to telecommunications service providers, internet service providers, utilities, defence and government entities in over 75 countries.
• The company, waiting for the government's approval for its application for production-linked incentives, has gained over 39% in last one month.

With increasing demand for internet services and growing trend in data consumption, Tejas Networks, the optical networking products maker for telecom and internet services providers, has given multifold returns to investors in the last one year.

In the last one year, due to pandemic and remote working scenarios across the world, investors spotted an opportunity in this space, which is why shares of the Bengaluru-based broadband service provider jumped 625% in the last one year.

The company ⁠— where marquee investor Vijay Kedia has 1.18% stake ⁠— waiting for the government's approval for its application for production-linked incentives has gained over 15% in just the last five days.

Tejas Networks designs, develops and sells high-performance networking products to telecommunications service providers, internet service providers, utilities, defence and government entities in over 75 countries.

As of January 2021, there were 4.66 billion active internet users worldwide which is 59.5% of the global population, according to Statista. This shows the vast opportunities in the internet services for such players.

Also, Tejas supplies products to the Government of India's BharatNet project to provide broadband internet to all of India's gram panchayats and has helped connect 40,000 villages so far.

5G rollout awards strong orders to Tejas Networks

The government’s plan to roll out 5G in the country brought visibility to the company’s services as Tata Sons approached stake in the company this year. In July, Tata Sons subsidiary Panatone Finvest said it will buy 69% stake in the company through an investment of ₹1,884 crore.


The company will utilise the capital infusion by Tata Sons to invest in research and development, sales and marketing, people, infrastructure and to enhance its manufacturing and operational capabilities to cater to this large market opportunity, and for other general corporate purposes. Tejas Networks sees a very large opportunity in the telecom sector both in India and global markets with the new cycle of investments in 5G and fiber-based broadband rollouts.

Moreover, telecom operator Bharti Airtel has selected the telecom equipment maker to expand its optical network capacity in key metropolitan markets.Bharti Airtel has been expanding its network capacity as part of its 5G readiness while catering to increasing data consumption by consumers.

Analysts expect strong future growth for the company because of a good order book and continuing demand for broadband services. “Strong order book of ₹6.79 billion provides revenue visibility for calendar year 2022,” said a report by Axis Capital.

“Q4 (Jan-Mar 2021) revenue was a positive surprise as it picked up better than expectations. Revenue may remain lumpy in the initial quarter of FY22 due to COVID impact and muted government business. However, we expect it to pick up during the year, as international business gains momentum post COVID. Company also stands to benefit from demand from home and office broadband, metro capacity expansion, network modernization and critical infrastructure,” added the report.

Approval in PLI scheme to add wings to the company

While, the government is trying to promote local manufacturing of telecom gear through the production-linked incentive (PLI) scheme, companies like Tejas Networks, Sterlite Technologies etc., stand to be beneficiaries.

Reportedly, curbs on Chinese vendors such as Huawei in India and many developed countries, including the US, UK and the European Union, over security concerns, have opened the door wider for firms such as Tejas to win business for cost-efficient equipment and software solutions.

Tejas has applied for a PLI application under the telecom equipment category, the company mentioned in its latest investor call.

The government has so far approved a ₹12,195-crore PLI scheme for telecom gear manufacturing in India.

The PLI scheme for telecom gear will cover manufacturing of equipment such as core transmission products, 4G, 5G radio access network and other wireless gear. Under the PLI scheme for telecom equipment, the government will give 4-6 per cent incentive to eligible companies on incremental sales of manufactured goods for five years.

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