The 4G implementation drafted for BSNL.
https://www.financialexpress.com/industry/bsnl-launches-4g-services-in-pilot-mode/3058622/
Upadhyay also said that besides the C-DoT-developed core, the BSNL network would …
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Finally the order is received
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Can somebody pl explain to me the PLI scheme calculations…
Tejas is going to invest 750 crores and expecting a benefit of 3500 crores under PLI scheme @7% -8% of the additional turnover…
If we do reverse calculation…then their additional topline for next 5 years is going to be…3500/0.08=43750 crores
The mngt said that their first year under PLI scheme is over…with topline of 1000 crores…
So are they expective a total of 40000 crores plus sales in next 4 years?
If we take around 4500 crores topline for this year…then next 3 years will see huge cagr for topline…
Is this understanding / calculation correct?
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A deep dive into Tejas Network
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Deal amount not disclose
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I read the media announcement and it confused me.
If Tejas has already deployed it, how is it a new order?
it has deployed its TJ1400 series of carrier-class Fiber-to-the-x (FTTx) and Packet Switching Network (PTN) solutions for Tata Tele Business Services.
Last year, Japanese semi-conductor manufacturer Renesas Electronics Corporation, a premier supplier of advanced semiconductor solutions, entered into a strategic partnership with two Tata group companies – TataMotors Ltd (TML) and Tejas Networks Ltd (Tejas). This strategic partnership is focussed on developing semiconductor solutions for technologies across automotive, IoT and 5G Systems.
TJNW has been raising concerns regarding the availability of chips in their supply chain disruption. Was not aware of this strategic-partnership. If, and it is a BIG-IF, all this fabrication stuff does come through, it would be a fairly good development as a backward-integration step for TJNW.
This will take time - however the development can be perceived as the vision of Tata’s wrt TJNW and Sankhya Labs acquisition.
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A small correction on the PLI benefit. In the concall of Q3 FY 23 result. This is what the MD said. Quote:
“This can result into maximum eligible PLI incentives of close to 2800 Crores over the next five years of the PLI scheme, subject to of course we getting the higher revenues and so on” Unquote.
However your calculation on future revenues may turnout to be correct, if one is to consider the BSNL order of Rs. 15,700 where Tejas share could be quite high compared to the other partners, namely TCS and C-Dot. This is only my guess, as I have not seen anywhere what exactly will be Tejas’s share in the order. Of course, there will be balance order of some Rs 8000 Cr for the same 4G project and upgradation order for 5G.
Disc: Invested and largest holding in my portfolio
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Upgradation of BSNL 4G to 5g will involve only adding a few elements to the 4G stack supplied by Tejas… hence 5g order will not be much…maybe around 4000 crores for 1 lakh towers.
But the thing is 5G requires a denser tower coverage. Airtel needs around 5 lakh towers for Pan India 5G…so BSNL too would need to add atleast 1 lakh more towers just for providing 5G in metros and urban areas…and that will be a bigger order imho…that will be released after the next elections.
Tejas may keep getting significant orders from bsnl for next 3 -4 years…as BSNL increases coverage of 5g from metros to tier 2…tier 3 cities…that will give much breathing space to the new CEO Athteya to propel Tejas into international arena.
Once the selling by old promoters is absorbed over the next 2-3 months, Tejas price may go upto 900-1000…and by next AGM the price target would be around 1500-2000…anything below 1500 will be considered to be severe underperformance…
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I am given to understand that even ITI will place order for supply of 4G stack with Tejas. So out of their order of 5000 crores, around 1000 plus crore order will be issued to Tejas by ITI.
Therefore Tejas may get around 8000 crores from TCS and 1000 crores from ITI for hardware supply and another 3000 crores for services / maintenance…thus tejas share from total order would be around 11000-12000 crores…plus existing order book of 2000 crores.
So to get the full benefit of PLI scheme Tejas board / Tatas / Ganapathy Subramaniam must be banking on the new CEO Anand Athreya to secure big global orders in 4g /5g…twice or thrice the size of BSNL orders.
If Athreya succeeds in this, then we would be proud investors in a global telecom equipment company…a great achievement for india / indians
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Thanks @Mehnazfatima. My rough calculation comes to Rs 1500 as the target price. I am surprised that other than Nippon AMC, no other fund has invested in Tejas. I also notice that Tejas is not meeting investors or analysts in between the quarterly results. An aggressive company would have shared with the investors their share of the BSNL order and that would have created a lot of buzz in the market. In the absence of such outreach to investors, it has still not got the fancy of the investors. I expect that once the Q1 FY 24 results are out, investors will flock to this company.
Disc: Largest holding
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The telecom minister has been making a lot of statements about indian 4G/5G stack for the global market. My sense is that once BSNL’s 4G roll out is done, the government will push Tejas’s 4G to african countries. It will be interesting to see the Chairman’s commentary at the AGM on 20 Jun.
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I have a simple hypothesis, and I could be totally wrong here.
GoI allowed Tata’s to use BSNL as a playground by infusing truckload of public money for 4G/5G upgrade.
Why?
BSNL will potentially get a new life, India sort of becomes self-sufficient on telecom tech, and Tata gets a massive case study which they can use to market around the globe. Win-win situation for all.
Here is the thing though. Top line may look huge in coming quarters but it is unlikely that they would make a huge margin. If I am sitting on the GoI side negotiating and giving Tata group an opportunity of lifetime, I would squeeze every penny I spend. Imagine without BSNL, how hard it would have been for Tata group to get an order of this scale.
BSNL if successful will leapfrog Tejas, and that’s what make it a great future investment. BSNL implementation is just a stepping stone, and not a major money making deal.
Disc: Invested for long term in mind.
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Dont forget, as with any GOI spend, the payments to Tatas are not going to be on time. it will always be lumpy by which time the interest costs would eat significantly into profits margins for orders of this magnitude
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Hi srinivasa, how did you arrived at this price since at today’s price it seems to be highly overpriced. Even if we assume a topline of 1500 crore for FY 24 and also assuming that the high cost inventory gets exhausted fron the system which will lead to PAT margin stablisation to 15%, the resulting one year forward PE is 53. What growth rates have you factored in to arrive at this price ?
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My assumptions are as follows for FY 24 revenue:
60% of order book of 2000 Cr will be 1160 Cr
15700 Cr order of BSNL to be executed over 2 years. Assuming, 40% of the order will done in FY 24, of which Tejas share will be 40%, it comes to 2500 Cr, totally some 3600 Cr. On a PAT of 15%, you will have a PAT of 550 Cr, giving you a forward PE of 23. Further if it has to get the PLI benefit of 2800 Cr in the remaining 4 years including FY 24, it may have to do a revenue of 8500 Cr. I expect a lot of news flow to come in the coming months which you will give visibility to Tejas and a lot of missing pieces will fall in place. Till then, it can be an educated guess as to how far Tejas can go. As of now, there is no clarity on the BSNL order in terms who will do how much.
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Thanks for sharing your thought process around valuations. Much appriciated. You seems to be baking in quite bulliest assumptions but yes it may be feasible once we have the visibilty of Q1 fY 24 results. Hopefully this pans out as per your expectations.
Disc : invested since lows of 2020