Tag: telecom services

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Editorial

Is Tejas Networks Really Your Multibagger Stock?

The telecommunications industry has played a pivotal role in accelerating the growth of economies around the world. Telecom companies (such as Jio, Bharti Airtel, and Vodafone Idea) and other internet service providers have focused on providing high-quality services at affordable rates to individuals, business enterprises, and government entities in India. To ensure that communication networks are in line with global standards, certain companies provide essential networking products and services specifically for telecos. We are witnessing a surge in demand for their products amidst the Covid-19 pandemic. More people and businesses require faster connectivity than ever before.

Let us take a look at one such company that has developed sophisticated networking products and solutions over the past two decades— Tejas Networks.

Company Profile – Tejas Networks

Tejas Networks Limited is engaged in the design, development, and marketing of optical and data networking products for telecom service providers, internet service providers, and web-scale internet companies. It also caters to the large-scale network requirements of defense companies and government entities in India and several countries around the world. The company was established in 2000 and is headquartered in Bengaluru. It is the first deep-technology product company to be publicly listed on the Indian stock exchanges. Deep tech basically refers to technology that is based on cutting-edge engineering innovations or scientific discoveries.

Tejas Networks’ product portfolio consists of:

  • Integrated Optical Products: Used for optical transmission and broadband access
  • Wireless Products: Used for Long-Term Evolution (LTE)/5G wireless services
  • Switches: Primarily ethernet switches, used for building critical infrastructure (including data centers and cloud-based deployments) 
  • Network management software

The company is ranked among the top 10 suppliers in the global optical aggregation segment. They have deployed their products in more than 75 countries. Over the past few years, Tejas Networks have focused extensively on establishing a strong base in India, South & Southeast Asia, Middle East, USA, Mexico, Canada, and Brazil.

Strong Client Base 

Through its well-funded Research & Development (R&D) vertical, Tejas Networks has developed and launched a wide range of products for prominent Indian and international firms. It has received significant orders from RailTel Corp, L&T Construction, Airtel, Tata Communications, Power Grid, GAIL, BSNL, and Mexico-based GigNet. Notably, Tejas Networks helped build India’s first Metro DWDM network in Mumbai. This particular system helps increase bandwidth over existing fiber networks. The company has also built a smart communications network for the Delhi Metro Rail Corporation (DMRC).

It is interesting to note that Tejas Networks had developed an extensive smart city infrastructure for India’s first industrial township— Electronic City in Bengaluru. They are also known for providing smart LTE solutions for broadband connectivity in remote islands.

Financial Performance

Unfortunately, Tejas Networks has been posting inconsistent revenues since 2017. Over the past 5 years, its revenue has grown at a CAGR of 1.39%, whereas the industry average stood at 7.67%. The company had reported a whopping Rs 937.01 crore in total revenue in FY19. In fact, they had also posted a significant rise in profits as well. However, amidst the outbreak of the Covid-19 pandemic, it faced a steep decline in revenue by more than half to Rs 424.19 crore in FY 2019-20. Tejas Networks also incurred a staggering net loss of Rs 237.12 crore in the same financial year.

The company saw a strong turnaround in its financial performance for the quarter ended December (Q3 FY21). It reported a 3.68% year-on-year (YoY) increase in consolidated net profit to Rs 9.23 crore. Revenues jumped 55.6% YoY to Rs 134.88 crore during the same period. This can be attributed to the large inflow of orders from both domestic and international markets. As people were confined to their homes, there was a huge rise in demand for high-speed home broadband connections on optic fiber. Telecom operators had also turned to Tejas Networks to upgrade their backbone network capacities.

The firm’s Return on Capital Employed (ROCE) stands at -11.23%, which is very low when compared to its peers. However, the company is almost debt-free. Tejas Networks has only been able to secure a market share of 2.93%. The company faces stiff competition from its peers in the communication services industry (such as OnMobile Global, Sterlite Technologies, HFCL, GTPL Hathway). 

Stock Performance

The share price of Tejas Networks had been falling constantly since 2018. Moreover, the weak financial performance in FY20 was received negatively by investors. The stock hit a record low of Rs 28.90 in May 2020. Since then, it has surged by around 480% and is currently trading at around Rs 170-levels. This could mean that investors have regained their confidence in the firm based on its future prospects.

However, one important factor to consider is that the total promoter holding in the company is zero. Financial analysts have highlighted that the stock has become technically weak as a result of significant insider selling over the past few months. For example, in February 2021, R. Murali (a promoter) reportedly sold equity shares worth Rs 53 lakh for Rs 175 per share. This was the biggest insider sale of Tejas Network shares in the past year. Thus, retail investors have become very cautious about investing in this stock due to the lack of promoter confidence. This is clear from the low trading volumes shown in the graph below.

1-Day Chart of Tejas Networks. Source: TradingView

Conclusion

The poor financial performance in FY20 and the sale of shares by its promoter group had been a major cause of concern. However, Tejas Networks has shown a strong rebound in order size and product sales. Its R&D segment is constantly developing the latest networking solutions based on the current trends in the domestic and international markets. Going forward, the company is likely to show very gradual yet consistent growth. Let us look forward to seeing how the company has performed in the January-March (Q4 FY21) quarter and how it plans to expand in this highly competitive industry.

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Trending

Vodafone Idea increases Postpaid Tariffs

VI - Vodafone idea

Vi has increased their prices of Rs 598 and Rs 749 postpaid plans. The third largest telecom company in India has increased their prices of two postpaid plans by Rs 50. Considering their financial condition it is necessary for them to increase their Average Revenue Per User (ARPU). The ARPU of Vi is Rs 119 which is very low when compared with ARPU of Airtel and Jio, Rs 162 and Rs 140 respectively.

Vi is also trying hard to increase the users of their network but unfortunately they are losing more and more users as per the report by the Telecom regulatory Authority of India (TRAI). This might be the reason why the share price of Airtel is going up. There could also be a similar move from Bharti Airtel, they are also in need of funds to pay off their obligations.

The Q2 results of Vi has reduced its loss to Rs 7,203 crore from Rs 25,467 crore. The company is reeling from trying to pay off AGR dues. They are trying to get funds to expand and develop their network services and also to pay off their huge debt. The company had also announced that they would not be bidding in the upcoming 5G spectrum auction. There are also reports that claim Vi has become the fastest 4G telecom provider in India.

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Editorial

Tanla Platform’s Share Price Has Surged by 1,400% Since March. Here’s How.

An Indian company’s stock has surged by more than 1,400% so far in the current financial year. It is one of the firms that have shown immense business growth amidst the Covid-19 pandemic. They even have social networking giant Facebook Inc as one of its clients! The company we are talking about is Tanla Platforms. Let us understand what exactly the company provides as its services. More importantly, let us find out how its stock prices have shown an impressive rally this year.

Company Profile

Tanla Platforms Limited (TPL) is one of the leading cloud communication providers in the world. It was established in 1999 and was initially known as Tanla Solutions Limited. With its base in Hyderabad, the company offers messaging services to corporates around the globe. It is also engaged in the business of Short Message Service Centre (SMSC) and Vendor Management Systems (VMS). An SMSC is a portion of a wireless network that handles SMS operations, such as routing, forwarding, and storing incoming text messages. 

An interesting fact about the company is that it had secured orders from very prominent clients in the 2000s, just as it had started its operations. Their SMSC platform was deployed in companies such as Reliance Telecom, BPL, Airtel, Aircel, and many other telecom companies. As we know, most of these firms have quit operations in India, or have merged with other companies. In June 2009, Tanla acquired Finland-based mobile payments company OpenBit Oy, which was renamed Tanla Oy.

Over the years, they have developed simpler and faster modes of cloud-based solutions. They have been able to expand their operations to countries such as the United Kingdom, Singapore, and the UAE. Tanla, which was not very well known until now, has around 1,500 clients. Some of the prominent clients include Bharti Airtel, Vodafone Idea, LinkedIn, HSBC, and even Facebook Inc. An example of their services is the push notifications that you receive on the Swiggy app when your food has arrived!

Entry Into the Stock Market

Tanla Platforms had secured some very prominent orders since its inception. With the expansion of its business, it required capital to set up domestic infrastructure facilities. They needed to raise funds to ramp up research and development activities. Tanla also had ambitious plans to establish overseas marketing and sales facilities. With all these objectives in mind, the company decided to issue an initial public offering (IPO) worth Rs 378.86 crore in December 2006.

Tanla Solutions was listed on the stock exchanges on January 5, 2007. On the first day, Tanla was listed at Rs 189 on the NSE. Now, after 13 years, the company’s stock is showing an amazing rally. Let us find out why.

Chart showing the trend of share prices of Tanla Platforms from 2007-2020. Source: Trading View

The Surge in Tanla Platform’s Share Price

As we can see from the chart, the company’s stock price has shown a great upward movement since March 2020. The shares had gone down to a 52-week low of Rs 37.10 in March. Against all odds, the stock has now made an impressive comeback, and have surged by more than 1,400% to Rs 612 (as of November 27). An observation we can make here is that the lockdown imposed in March had created a high demand for digital communication services. As people were confined to their homes, Tanla’s clients required its support to provide customer-based services. The company began to get more orders, and there was a huge rise in digital spending. 

However, we can see that this has not been the only reason for the surge in Tanla’s stock price. Let us take a look at some more important facts:

  • In mid-2019, Tanla Platforms completed the acquisition of Mumbai-based Karix Mobile Private Ltd for Rs 340 crore. Karix Mobile is a leading mobile engagement and communications provider. This acquisition has helped Tanla to broaden its portfolio of e-commerce clients. 
  • In the same year, the company also made another strategic move and acquired Gamooga for Rs 48.5 crore. This is a leading AI-based marketing automation platform. This has helped Tanla to improve on the development of its products.
  • Route Mobile Ltd. got listed in September 2020. Its IPO was oversubscribed nearly 74 times on its final day. The stock of Route Mobile was listed at a 102% premium over its issue price of Rs 350. As the company received such an impressive valuation on its debut, it had a very positive effect on the stock of its main competitor, which is Tanla Platforms. Thus, the interest of investors in both telecom services companies has increased this year.
  • The company had also made significant changes in its management, and brought in well-established individuals in the telecom sector. Tanla managed to rope in Amrita Gangotra, the former director of technology at Vodafone Group Plc, as an independent director. Sanjay Kapoor, the former CEO at Bharti Airtel, also joined the company as a growth adviser in 2019. These changes in company personnel have helped Tanla Platforms to secure massive growth in 2020.
  • Another important factor is that Tanla Platforms was included in the MSCI India Domestic Small Cap Index on November 12. This has helped to increase the interest of its investors. They would have the confidence to pour in more funds into the stock.
  • Various foreign investors have shown great interest in the firm as well. Singapore-based Amansa Investments and American Funds acquired 3% and 6.34% stake, respectively, in Tanla Platforms. On November 26, the Massachusetts Institute of Technology (MIT), a prestigious university in the US acquired a 0.72% equity in Tanla. On the same date, Vantage Equity Fund bought 6.85 lakh shares or 0.5 percent equity.
  • In the last 6 months, the total promoter holding in the company has increased by 7.50%. This shows how Tanla’s promoters have increased their confidence in the business.
  •  The company and its various subsidiaries are debt-free. 

Conclusion

This is clearly a prime example of a company that has shown its willingness to adapt to the changing times. Even before the impact of the Covid-19 pandemic, Tanla Platforms had already realized its potential to grow its business. It has proved to be a firm that has instilled confidence in its promoters and investors. We could see much more foreign investment being infused into the firm in the months to come. We can also see that it has secured its position as a market leader in the app-to-person messaging ecosystem in India. 

All these factors mentioned in detail has contributed to the surge in its stock price. Will Tanla Platforms be able to continue on this streak? Let us wait and watch.