Release Date: January 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 strong revenue growth of INR560 crores for Q3 FY24, more than doubling the revenue from the same quarter the previous year.
- The company's nine-month revenue in FY24 exceeded the entire FY23 revenue, indicating robust growth.
- Tejas Networks Ltd (BOM:540595) has a strong order book of INR9,028 crores, providing a solid foundation for future revenue.
- The company received significant purchase orders, including INR107 crores for BSNL 4G RAN shipments and INR96 crores from National Space India Limited for satcom transponders.
- Tejas Networks Ltd (BOM:540595) continues to see strong traction in both its wireless and wireline businesses, with successful deployments and additional orders in various sectors and regions.
Negative Points
- The company reported a loss of INR45 crores for Q3 FY24, indicating financial challenges despite revenue growth.
- EBIT for the quarter was negative INR56 crores, reflecting operational inefficiencies or high costs.
- There has been a marked increase in trade receivables, raising concerns about cash flow and collection efficiency.
- The company's inventory has grown significantly to INR2,683 crores, which could indicate potential issues with inventory management or demand forecasting.
- Margins in the wireless segment are lower compared to the wireline segment, which could impact overall profitability as the wireless business grows.
Q & A Highlights
Tejas Networks Ltd (BOM:540595) Q3 FY24 Earnings Call Highlights
Q: What kind of margins can we expect for the BSNL project and other government projects? Also, what has caused the increase in trade receivables?
A: While we don't provide project-specific margin guidance, the wireless segment may initially have slightly lower margins compared to the wireline segment. However, the overall project scale compensates for this. The increase in trade receivables is due to the significant revenue growth this quarter, and we expect these to be realized over the next few months.
Q: When will the BharatNet III project execution start, and what opportunities does it present for Tejas?
A: The BharatNet project is currently under definition, with specifications being finalized. We expect tenders to roll out in the next few months, targeting execution in the latter half of the financial year. This project presents significant opportunities for Tejas as our technology and products align well with the project requirements.
Q: Are there additional purchase orders expected for the BSNL project?
A: Yes, the BSNL project includes additional sites for coverage and a 5G upgrade for 40,000 sites. These additional orders will come as the initial network gets deployed. Maintenance services will also be required post-warranty.
Q: Why has the raw material cost increased more than revenue this quarter?
A: The increase is due to a product mix within the wireline segment, which leaned towards lower-margin products this quarter. Additionally, export revenues were lower, impacting material costs as a percentage of revenue. This is expected to normalize in the coming quarters.
Q: Can you explain the significant increase in inventory and its impact on working capital?
A: The increase in inventory is to secure long-lead items for large projects. While it may seem high compared to current revenue, it is necessary for executing our INR9,000 crores order book. This inventory will be used over the next few months, aligning with project execution timelines.
Q: What is the status of the Saankhya Labs merger?
A: The merger is progressing well, with upcoming Equity Shareholders and Unsecured Creditors meetings scheduled for early February as per NCLT directions. This is the next step in the merger process.
Q: How is Tejas managing the currency risk given the rupee revenue and dollar procurement for the BSNL project?
A: We actively hedge our currency exposure through various instruments. Additionally, we have significantly localized the components for our BSNL radio products, reducing the impact of dollar-denominated costs.
Q: What are the prospects for Tejas' international business development?
A: We are investing in international territories and leveraging partnerships with Tata Group companies to access global markets. While significant results take time, we are focusing on both smaller network opportunities and larger projects with Tier 1 operators globally.
Q: How does Tejas plan to manage the blend of low and high-margin products in its portfolio?
A: We constantly evaluate our products to improve cost efficiency and are open to partnerships where it makes sense. Having a complete portfolio increases our chances of winning deals and allows us to structure them effectively.
Q: What is the status of the BSNL 4G technology, and how does it compare to competitors?
A: The technology has undergone extensive trials and has been selected after rigorous testing. It is comparable to leading global vendors in terms of performance and robustness. The current concerns are more about the pace of network rollout rather than the technology itself.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
