Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tejas Networks Ltd (BOM:540595, Financial) reported its best quarter ever with Q1 FY25 net revenue of INR1,563 crores, an 8.3x year-over-year increase.
- The company achieved a profit after tax of INR77 crores for Q1 FY25, surpassing the full-year profit of INR63 crores for the previous year.
- Significant progress in 4G/5G RAN installations for BSNL's pan-India network, with over 27,000 sites shipped by the end of Q1.
- Strategic international deals secured, including a network modernization project with a Tier 2 operator in the US and a broadband rollout in Southeast Asia.
- Strong order book of INR7,091 crores at the end of Q1 FY25, indicating robust future business prospects.
Negative Points
- Other operating revenue decreased to INR67 crores in Q1 FY25 from INR156 crores in the previous quarter, primarily due to the absence of PLI receipts.
- Trade receivables increased from INR1,458 crores to INR2,052 crores, indicating higher outstanding payments from customers.
- Borrowings rose significantly from INR1,744 crores to INR2,844 crores, leading to a net debt of about INR2,200 crores at the end of the quarter.
- International business remained largely flat, contributing only 3% to the overall revenue for the quarter.
- The merger of Saankhya Labs with Tejas Networks Ltd (BOM:540595) is still in an advanced stage, pending final orders from NCLT, which could delay potential synergies.
Q & A Highlights
Tejas Networks Ltd (BOM:540595) Q1 FY25 Earnings Call Highlights
Q: What is the total universe of sites eligible for 4G/5G RAN for BSNL, and what is the cost comparison between 4G and 5G upgrades?
A: Arnob Roy, Nominee Director: BSNL's 4G expansion is ongoing, with a significant portion still to be deployed. The 5G upgrades will occur in two phases: upgrading existing 4G bands and a nationwide 5G rollout in the 3.5 GHz band. The cost for 5G upgrades in existing bands is a fraction of the 4G cost, while new 5G deployments will be comparable or higher than 4G costs.
Q: Can you elaborate on Tejas Networks' role in data centers and the timeline for targeting these players?
A: Arnob Roy, Nominee Director: Tejas Networks provides high-bandwidth connectivity between data centers, not equipment inside them. Our switches are used for building campus networks, not inside data centers. The data center interconnect market is a key area for us.
Q: How do you see the landscape evolving in the US, especially with the recent deal wins?
A: Arnob Roy, Nominee Director: The US market is seeing significant investment driven by cloud and AI data centers. The BEAD program for rural connectivity and modernization of legacy networks are key opportunities. We are targeting these areas with our technology.
Q: What is the visibility for GPON and DWDM business post-FY25, and how do you plan to utilize manufacturing capacity efficiently?
A: Arnob Roy, Nominee Director: Most of our GPON and DWDM business is outside BSNL, with strong demand from private operators and international customers. We have an asset-light manufacturing model, allowing us to scale efficiently. We are bullish on long-term growth in both wireless and wireline segments.
Q: What is the opportunity size for BharatNet Phase-III, and what kind of debt levels are expected for working capital?
A: Arnob Roy, Nominee Director: BharatNet Phase-III has an equipment budget of INR4,000-5,000 crores in the initial phase. Sumit Dhingra, CFO: Borrowings have increased for working capital, primarily for the wireless project. We expect working capital intensity to spike and then gradually decrease as the project progresses.
Q: What is the order book pipeline for upcoming opportunities like BSNL 4G/5G, BharatNet Phase-III, and utility network expansions?
A: Arnob Roy, Nominee Director: We have an order book of INR7,000 crores and are targeting large opportunities like BSNL 4G/5G expansion, BharatNet Phase-III, and utility network expansions. These opportunities will drive future growth and create a strong business pipeline.
Q: How do you see the competition from Chinese equipment makers forming JVs with Indian companies?
A: Arnob Roy, Nominee Director: Indian policies clearly define what constitutes an indigenous product, including design, manufacturing, and IPR ownership in India. We do not see JVs diluting these rules, and we remain focused on our indigenous technology.
Q: What is Tejas Networks doing to secure international orders, and what is the long-term outlook for international business?
A: Arnob Roy, Nominee Director: We are increasing our presence in international markets by setting up sales offices, support offices, and engaging in trials and RFPs. Our ambition is to grow our international business to be as large as our domestic market over time.
Q: What is the opportunity size for the Indian Railways Kavach project?
A: Arnob Roy, Nominee Director: The Kavach project covers around 15,000 sites for the entire railway network. Our role is focused on providing connectivity solutions, not the entire system.
Q: What is the potential of the data center business, and are the reported EBITDA margins sustainable?
A: Arnob Roy, Nominee Director: The growth of data centers drives demand for our communication equipment for data center interconnectivity. Sumit Dhingra, CFO: We do not provide margin guidance, but you can make assumptions based on current trends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
