Tejas Networks Ltd (TNL) is an optical and data networking products company. It
designs, develops and sells products to telecommunications & internet service
providers, utility companies, defense companies and government entities in India and over 60 countries. TNL derives 63% of its revenues from domestic markets, while rest
comes from international markets. As of May 15, 2017, the company had 313
employees in its R&D team and had filled 333 patents applications across the globe,
out of which 56 patents have been granted.
Outlook and Valuation: TNL has reported strong revenue CAGR of 24.2% CAGR over
FY2013-17 and PAT of `64cr in FY2017 (loss of `79cr in FY2013). The RoE improved
from 8% in FY2016 to 12.9% in FY2017, primarily owing to ongoing capex on Optical
Network by Telcos, strong operating leverage with asset light business and strong
professional team with significant industry experience. At the upper end of the price
band, the pre-issue P/E works out to be 29.3x its 2017 earnings, 3.7x of FY2017 Book
Value. Moreover, the company’s debt free balance sheet post IPO coupled with the
government’s push for digital India would support the growth momentum. Thus, we
recommend a SUBSCRIBE on the issue.

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