INVESTMENT SUMMARY

Rating: BUY (Long-Term Investor)

Price Target (12M): Rs 1,080 | Current: Rs 554 | Upside: 131%

Tejas Networks represents a compelling investment opportunity at current valuations (1.1x FY27E revenue, 40% discount to historical multiples). The company has successfully completed the BSNL 100,000-site 4G/5G deployment, achieved government backing through PLI scheme (₹382 Cr received YTD), and secured strategic NEC partnership for global 5G/6G expansion. FY26 losses reflect accounting provisions, not operational deterioration. FY27 revenue recovery to ₹7,500 Cr with margin expansion should drive significant re-rating.

EXECUTIVE SUMMARY

Company Overview

Tejas Networks is India's premier telecom equipment manufacturer, designing and producing optical networking, wireless (4G/5G RAN), IP routing, and fiber broadband solutions. Part of Tata Group since 2017, the company operates in 75+ countries serving telecom operators, utilities, government, and defense entities.

MARKET OPPORTUNITY & TAM/SAM

Global Opportunity: The global optical communication and networking market reached USD 36.87 billion in 2025, projected to expand at 8.3% CAGR to USD 77.5 billion by 2035. Optical network equipment TAM is USD 25.2 billion (2024) expanding to USD 45.8 billion (2032) at 8.5% CAGR.

India-Specific TAM: India's telecom equipment market is projected at USD 22.5 billion (FY24) expanding to USD 49.7 billion (FY32), representing 11% CAGR. Passive Optical Network equipment market alone is growing from USD 890 million (2024) to USD 3.6 billion (2029) at 26.4% CAGR.

Tejas SAM: Conservative estimate of 15-20% of India's telecom equipment market (₹7,000-10,000 crore annually by 2030) across optical, RAN, IP routing, and broadband access. International SAM represents ~10% of global TAM in emerging markets.

KEY GROWTH DRIVERS

•       BSNL 4G/5G Deployment: Successfully completed 100,000+ sites worth Rs 7,492 crore. BSNL launching 4G in June 2025 with follow-on orders for expansion and 5G upgrade estimated at Rs 3,000+ crore

•       BharatNet Phase-III: Won 7 of 12 packages announced. Potential for 10+ additional packages in national fiber broadband project worth ₹5,000+ crore

•       PLI Scheme Support: Received Rs 382 crore YTD (FY25-26) from government's Rs 12,195 crore PLI allocation. Remaining tranches expected through FY27

•       NEC Partnership: USD 500 million MoU for co-developing 6G technologies and manufacturing 5G massive MIMO radios for global customers

•       Private Operator 5G Capex: Expected ₹2-3 lakh crore telecom investment cycle over 5 years offers significant backhaul and optical opportunities

FINANCIAL PERFORMANCE ANALYSIS

FY25 represented peak execution year with record revenue of Rs 8,923 crore (161% YoY growth) and PAT of Rs 447 crore, driven primarily by BSNL contract execution. FY26 reflects transition period with conservative warranty (Rs 24.35 Cr) and inventory provisions (Rs 190 Cr) following BSNL completion. FY27 expected to see revenue recovery to Rs 7,500 crore with margin expansion and PAT normalization to Rs 280+ crore as provisions reverse.

Key Metrics: Total Assets (FY25): Rs 10,462 Cr | Total Equity: Rs 3,846 Cr | Net Debt: Rs 3,349 Cr (Q3 FY26) | Order Book: Rs 1,329 Cr (Q3 FY26)

COMPETITIVE LANDSCAPE

Global RAN market dominated by top 5 vendors (Huawei 31%, Ericsson 20-22%, Nokia 15%, ZTE 11%, Samsung 2%) holding ~94% share. Tejas competes in niche of indigenous suppliers with government preference. Omdia's 2025 research specifically named Tejas as 'only supplier outside top five' that was a 'winner' in 2024, highlighting BSNL contract success.

Competitive Advantages: (1) Cost: 20-30% pricing advantage vs. multinationals; (2) Make in India: Government preference on BharatNet, Railways, Defense; (3) Localization: Reduced import dependency aligns with PLI scheme objectives; (4) Execution: Proven ability to deliver large-scale projects on time

Challenges vs. Peers: Limited international presence (<1% global RAN share), smaller R&D budget vs. Ericsson/Nokia, emerging portfolio in emerging markets

SWOT ANALYSIS

Strengths

•       Proven execution on BSNL 100,000-site deployment

•       Government backing (PLI scheme, preferred supplier status)

•       Tata Group support, strategic NEC partnership

Weaknesses

•       Working capital intensive (large government contracts)

•       Limited international scale, emerging portfolio

Opportunities

•       BharatNet Phase-III expansion (7 wins, 10+ potential)

•       BSNL follow-on orders (4G expansion, 5G upgrade)

•       Private operator 5G capex cycle, international expansion via NEC

Threats

•       Multinational vendors (Ericsson, Nokia) competing on scale

•       BSNL 4G stabilization delays, technology obsolescence

•       Macroeconomic headwinds (FII selling, tariff uncertainty)

VALUATION & PRICE TARGET

Current Valuation: Rs 467/share at 1.1x FY27E revenue (40% discount to historical 1.8-2.0x multiples). Market cap of Rs 8,308 crore

DCF Analysis: Assuming Rs 7,500 crore FY27 revenue, 11.3% EBITDA margin, 8.5% WACC, 10% terminal growth = Fair Value of Rs 1,080

Peer Comparison: Tejas trades at 32x FY27E estimated earnings vs. Ericsson (12x), Nokia (8.5x). Discount justified by growth potential and emerging market exposure

Price Target Summary: Rs 1,080 (12-month) = 131% upside. Achievable through FY27 revenue recovery, margin normalization, and working capital improvement

KEY RISKS & CATALYSTS

Downside Risks: BSNL 4G launch delays (20% probability, -20-25% impact); Warranty claims (-15%); BharatNet slowdown (-15-20%); Macro shock (-20-30%)

Upside Catalysts: BSNL 4G launch June 2025 (+15-20%); Q4 FY26 results May 2026 (+20-25%); BharatNet wins (+3-5% each); NEC ramp-up (+30-40%); Private operator capex (+20-25%)