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Top Stocks Riding the 5G Wave in India

Dec 3, 2021

Top Stocks Riding the 5G Wave in India

Back in September 2021, we wrote to you about how 5G will revolutionise the future of everything and how you can benefit from this upcoming technology.

We discussed the three strategies to capitalise on the 5G opportunities in India.

This time we are back with yet another feature addressing 5G technology.

We are all aware that one of the most significant near-term growth trends in the tech world is the deployment of 5G wireless networks and 5G capable devices.

As the 5G wireless era is gaining momentum, many telecom players have already started conducting 5G trials across the country.

It will allow for faster, higher-quality internet connections, greater global connectivity, increased capacity for advanced connected software applications, and low latency for users.

However, according to a report, there is likely to be a delay in the rollout of the 5G network in India.

The government had earlier suggested that the spectrum auctions for 5G would take place by the first quarter of 2022, but that is likely to be pushed further now.

This is because telecom providers have sought additional time until May 2022 for the spectrum auctions from the Department of Telecommunications (DoT), citing lack of readiness.

Meanwhile, the recently announced tariff hikes and improving bottomline along with the moratorium on government dues will provide telecom companies room to invest an estimated Rs 1.5 - 1.8 tn for 5G services over the current and next fiscal years, says a report.

Investors can take advantage of these fast-growing tech trends.

With the help of Equitymaster's powerful stock screener, we have shortlisted the best 5G stocks to look out for in the future.

Here are the stocks which came up when we ran the screener for best 5G stocks in India.

#1 Tech Mahindra

Tech Mahindra is the best-positioned Indian IT firm to benefit from the growing adoption of the 5G standard by consumers and businesses.

Due to the government's plan for an India-made 5G rollout, the company is expected to gain a significant portion of that '5G tech' pie.

Presently, the company is seeing faster growth in its communications vertical, driven by massive investments in building 5G networks by telecom clients.

Communications remains the biggest business vertical for the company, contributing over 40% of its total revenues.

Tech Mahindra is also starting to work with companies on enterprise 5G applications, an area where it has said it will see a lot of demand going forward.

#2 Indus Towers

The advent of 5G technology and competition between telecom operators to deliver high quality network experience provides a huge growth opportunity for tower companies.

Indus Towers is one of the largest tower infrastructure providers in the country and globally. It provides towers access primarily to wireless telecommunications service providers on a shared basis, under long-term contracts. It caters to all wireless telecommunication service providers in India.

The company has a market share of 31%. It has a nationwide presence with operations in all 22 telecom circles in India. As of 31 March 2021, it owned and operated 179,225 towers.

As the Indian telecom technology landscape evolves, tower infrastructure giants like Indus Towers will play a big role. It will tap into new opportunities like 5G, in-building solutions, smart cities, etc.

#3 Tejas Networks

Tejas Networks, a homegrown high-tech company, is on its way to becoming India's Huawei.

In the last week of July 2021, Tata Group acquired a majority stake in Tejas Networks in order to make an entry into the telecom equipment market. It acquired 43.35% of Tejas Networks through preferential issues of equity and warrants for Rs 18.5 bn.

According to a report, Tatas' are looking to develop its own 5G solution and take it to the global markets.

With the software and SI (software integration) capabilities through Tata Consultancy Services (TCS), Tejas helps to bring in the hardware capabilities and also leverage the incentives through the production-linked incentive (PLI) scheme.

The Indian government is also expected to prioritize Tejas Networks/TCS in the government deals because it would like to have its own 'national champion' in the telecom equipment sector like China did in the case of Huawei.

In the previous two decades, the firm has grown to become a significant high-tech player, specialising in optical networks, 4G and 5G telecom equipment, as well as switches and routers.

Moreover, Indian telecom service providers (TSPs) like Airtel and Tata Telecommunications have already started giving major contracts for the telecom infrastructure to the company.

#4 Sterlite Technologies

Sterlite Technologies has grown over the years to become the largest optical fiber and optical fiber cables manufacturer in the country with a market share of 45%.

The company is taking leadership in India in building end-to-end 5G technologies.

They have already partnered with companies like Facebook as part of Evenstar program to build 5G macro radios. The optical fiber company will be shortly launching those products for global operators and India.

Sterlite has already launched cables and connectivity solutions for enabling 5G globally, and hopes to play a significant role as operators start deploying these new age networks.

In a recent interview with a leading financial daily, Ankit Agarwal, chief executive of the optical business, said,

  • 'The right pricing of auction is an important discussion as it will enable massive investments to flow into building 5G networks, as opposed to large part of capital being used up for spectrum-related payments.

    The government should, therefore, provide right pricing for spectrum taking into account global benchmarks and health of the Indian telecom sector.

    Huge amount of network investment will be required in India for next 5-7 years to enable right experience on 5G'.

With its portfolio spanning optical fibre and cables, network design and deployment as well as network software, Pune-based Sterlite Technologies positions itself as an integrated solutions provider for global data networks, with optical preform, fibre, and cable manufacturing facilities in India, Italy, China, and Brazil.

#5 Bharti Airtel

In India, one of the leading telecom operators expected to be at the forefront of commercial 5G launch across the country is Bharti Airtel.

For months, Airtel has been conducting 5G testing using spectrum provided by the DoT.

Back in May of this year, the government granted the go-ahead to telecom operators such as Jio, Airtel, and Vodafone Idea to begin the much-anticipated 5G trial test alongside equipment companies such as Ericsson, Nokia, and Samsung.

In a recent development, Airtel has rolled out '5G for Business' initiative to demonstrate a wide range of enterprise grade use cases using high speed & low latency networks.

As part of '5G for Business', Airtel said it will join forces with leading global consulting and technology companies such as Accenture, AWS, CISCO, Ericsson, Google Cloud, Nokia, TCS to work with industry leading brands such as Apollo Hospitals, Flipkart and several leading manufacturing companies to test 5G based solutions.

Earlier this year, the telco demonstrated India's first 5G experience over a Live 4G network. It has also demonstrated India's first rural 5G trial as well as the first cloud gaming experience on 5G.

Snapshot of best 5G stocks from Equitymaster's stock screener

Here's a quick view at the above mentioned companies based on some crucial financial parameters.

Data Source: Equitymaster's Stock Screener

Please note these parameters can be changed according to your selection criteria. This will help you in identifying and eliminating stocks that are not meeting your requirements and give emphasis on those stocks that are well inside the metrics.

Is it a smart idea to invest in 5G stocks?

For many investors, the biggest reason to buy a 5G companies' stock is to become part of one of today's most invigorating disruptive technologies.

The buzz about 5G is growing, but it hasn't hit its pinnacle yet and won't for some time. As a long-term investment, it might be a good choice if you can handle the volatility.

Many 5G businesses are still in the planning phase, preparing for the future before some of the most cutting-edge and inventive technology becomes generally available.

Now is the time to keep a careful check on these companies to observe how they manage their earnings and make the best judgments possible.

When it comes to investing, the stock you choose must be credible. Investors should put their money into a firm that has a proven track record of success.

If there isn't enough confidence in the stock, it can make the initial investment weak and deplete it before it has a chance to grow.

Happy Investing!

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...

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