Where Will Tejas Networks Share Price be in 3 Years?

Tejas Networks Limited (TNL) has been making waves in the telecommunications equipment space.

It's positioned well to capitalise on India's 5G rollout. The company specialises in optical networking, wireless products and broadband solutions. These are the segments expected to drive its growth over the next few years.

Recently, the Tata group enterprise entered into a Rs 5.3 bn technology collaboration with NEC Corp to develop advanced 5G and wireless solutions.

This partnership strengthens Tejas' position in the global telecom market. It aligns well with its broader 5G expansion strategy.

More importantly, it gives Tejas access to NEC's proven 4G/5G core technology. This will enhance its competitiveness in next-gen telecom innovations.

Stock Under Pressure

Investor sentiment in the stocks hasn't been bullish.

The stock has fallen over 40% in the last six months. It's trading close to its 52-week low of Rs 651.

While broader market trends have played a role, a key reason for this decline is the company's underwhelming quarterly results, which fell short of expectations.

Q3 FY25 Performance: Strong Revenue, Weak Margins

Tejas Networks reported Q3 FY25 revenue of Rs 26 billion (bn), an impressive 4.7 jump year-over-year (YoY).

This growth underscores the company's presence in government and private telecom projects.

However, profitability hasn't kept pace. Although the company reported a profit this quarter, in comparison to a loss in last quarter of the same year, its dropped by over 30% on a sequential basis. Net profit also fell by more than 40%, reflecting margin pressures on the company.

Additionally, Tejas Networks is experiencing a working capital crunch. Trade receivables have surged to Rs 47 bn and inventory levels have climbed to Rs 31.2 bn, pointing to delayed collections and stock buildup due to ongoing project execution.

While the company boasts a strong order book of Rs 26.8 bn, managing these financial pressures effectively will be crucial for sustained profitability.

Margins Under Pressure

Margins have fluctuated due to shifts in Tejas' product mix. Each quarter, different configurations are shipped across projects, impacting profitability.

The company also acknowledged that margins in its first wireless project with BSNL were lower than its traditional wireline business.

However, as international deals pick up and the order book broadens, margins are expected to recover in the coming quarters.

R&D Investments

With a workforce now exceeding 2,350 employees-over 60% of whom are in R&D-Tejas is doubling down on innovation.

Despite the challenges, the company is committed to its R&D spend of Rs 6 bn. The management has indicated that even if revenue growth slows in FY26 due to delayed orders, R&D investments will continue at current levels.

This highlights Tejas' long-term strategy to build differentiated telecom solutions, even as it faces short-term profitability pressures.

Short-Term Plans

In the short term, Tejas expects to complete BSNL's first one lakh site order in this financial year.

Beyond that, further 4G expansion, 5G upgrades, and standalone 5G builds in the n78 (3.5 GHz) band are in the pipeline.

Execution of these plans will be critical as the company positions itself for the next phase of growth.

Optimistic Outlook for Q4 FY25 and FY26

Tejas Networks remains optimistic about stronger revenue conversion in Q4 FY25 and FY26, driven by anticipated BSNL 5G orders, Vodafone Idea's network expansion, and international deals spanning the US, Middle East, Africa, and Latin America.

The company is investing in private 5G solutions, high-speed fiber upgrades, and AI-driven networking, These strategic investments are aimed at long-term growth.

To accelerate global traction, Tejas has expanded its leadership team, bringing in former Nokia India head Sanjay Malik and bolstered its sales force.

While profitability challenges persist due to high receivables, delays in large government and enterprise deals, and product mix shifts, the management views these as short-term hurdles rather than structural issues.

Key Projects Driving Growth

Tejas Networks is relying on major 5G, fibre, and network modernisation projects to improve financial performance.

The management's focus on sales expansion, leadership growth, and product diversification signals a clear long-term vision.

If key projects like BSNL 5G orders, BharatNet Phase 3, and private 5G enterprise deployments gain momentum in the next two quarters, profitability could improve. But execution risks will remain and cash flow management will be critical.

The company's R&D investments and leadership hires reflect confidence in future growth, but investors will want to see these translate into consistent profitability and strong cash flows.

BharatNet Phase 3 represents another significant opportunity, along with fiber upgrades for power and railway networks, which are transitioning from 100 G to 400 G+ technologies.

India Wireless Orders & Proof-of-Concept Trials

In India, Tejas has live proof-of-concept (POC) trials underway with Indian telecom operators.

The successful execution of BSNL's 4G contract has enhanced its visibility globally, attracting interest from international players.

Tejas is in discussions with tier-1 global operators. However, these deals require additional R&D and customisation for region-specific spectrum bands, resulting in longer sales cycles.

Regarding government incentives, Tejas has booked over Rs 5 bn in PLI incentives over the past year. The FY23 incentives were received in FY24 and the company expects to receive FY24 incentives in the current financial year.

The management is engaging with government agencies to expedite the approval process.

International Expansion & Regulatory Landscape

The company is actively expanding its presence in key international markets, including Indonesia, Malaysia, the Middle East, North America, and Latin America.

To strengthen its market position, it is leveraging local partnerships for in-country presence, language support, and customer relationships. These collaborations are crucial for network deployment, sales and ongoing support, ensuring seamless operations across diverse regions.

In North America and Latin America, Tejas does not foresee significant regulatory challenges. The primary requirement is certifying equipment for performance, safety, and radiation compliance through global agencies such as TUV and UL.

All necessary testing is conducted in India before shipping products internationally.

While potential tariffs remain uncertain, the company is prepared to navigate any regulatory changes. The sales cycle in these regions is typically long, involving multiple stages of lab testing, field trials, and commercial negotiations before finalising deals.

However, once a vendor is selected, the supply cycle often extends over multiple years.

Strategic Positioning in the US

In the US, Tejas is actively pursuing major government programs, including BEAD (Broadband Expansion in Rural America) and Rip and Replace (Network Modernization Initiative), a multi-billion dollar government programme.

The company is collaborating with local partners to secure a share of these projects. Additionally, Tejas is positioning itself as a leader in circuit emulation over packet networks, a crucial technology for modernising legacy telecom infrastructure in North America.

Past Financials

Over the last five years, Tejas Networks' sales have grown more than 5 times.

After five consecutive years of losses, the company turned profitable in 2024 and this momentum has continued into 2025.

For the first nine months of FY25, Tejas reported revenue of Rs 70 bn and a net profit of Rs 51 bn, reflecting strong business execution and improved profitability.

Tejas Networks' low Return on Equity and Return on Capital Employed stem from high working capital needs, with significant receivables and inventory tying up cash.

Margin pressures from the lower-margin BSNL 4G/5G project, rising depreciation, and heavy R&D investments also weigh on returns. Execution delays have added to the strain but better order fulfilment and higher-margin global deals could improve profitability.

Tejas Network Financial Snapshot (2020-24)

	2019-2020	2020-2021	2021-2022	2022-2023	2023-2024
Revenue Growth (%)	-54.80%	30.25%	7.40%	74.03%	145.33%
Operating Margin (%)	-13.80%	14.90%	-6.70%	10.30%	13.40%
Net Profit Margin (%)	-60.70%	7.10%	-11.40%	-4.00%	2.50%
Return on Capital Employed(%)	-10.90%	2.40%	-7.40%	-1.10%	3.80%
Return on Equity (%)	-20.30%	3.50%	-4.70%	-1.60%	2.10%

Source: Equitymaster

Valuations

Tejas Networks' stock has fallen about 42% in the last six months.

Its price to book (PB) stands at 3.6, slightly above its historical median of 3.5, suggesting the market could be reasonably valuing the assets of the company.

However, its EV/EBITDA has dropped to 10.9 which is significantly lower than the historical median of 21.4. This indicates concerns over short-term profitability and execution risks.

Conclusion

Tejas Networks has come a long way, with revenues soaring and a solid order book now in place. But the real test lies in execution.

Over the next three years, success will depend on how well the company converts orders into revenue, improves cash flows and sustains profitability.

If the BSNL 5G rollout, the private sector's 5G push, and global expansion, all play out as expected, Tejas Networks could see a significant re-rating.

However, working capital pressures, execution delays, or prolonged margin strain could hurt the stock. The opportunity is big, but so are the challenges.

Investors will need to track all these factors closely before considering a long-term investment.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...