Tejas Networks: A Rising Star in the Tata Group, Tata Elxsi 2024

Introduction

Tejas Networks – The Tata group, a leading business conglomerate, recently achieved a significant milestone by crossing a market cap of rupees 30 trillion. While the overall performance of stocks from the Tata group has been mixed over the past 12 months, there are a few standout performers. One such stock is Tata Investment Corp, which has witnessed a remarkable 154% growth. Other notable performers include Tata Motors (112%), Tata Power (88%), Titan (45%), and Tata Consumer (59%). However, there have also been stocks that have offered relatively modest returns, such as TCS and Tata Lexi.

The Dark Horse: Tejas Networks

Among the lesser-known companies in the Tata group, Tejas Networks has emerged as a dark horse. Tejas Networks is part of the Tata group, with Panton Finvest, a subsidiary of Tata Sons, being the majority shareholder. The company’s shares gained momentum after Tata Sons acquired a controlling stake in July 2021. Tejas Networks designs and manufactures high-performance wired and wireless networking products for telecommunication service providers, internet service providers, utilities, defence, and government entities. With a presence in over 75 countries, This company faces stiff competition from global players such as Nokia and Huawei. However, recent developments have created a favorable environment for the company.

In July 2021, Tejas Networks gained momentum after Tata Sons acquired a controlling stake in the company. This acquisition led to a significant increase in the company’s stock value. Panton Finvest currently holds a 55.8% stake in Tejas Networks, making it a crucial player in the company’s success.

Changing Landscape

The Indian government issued new security guidelines in June 2021, which restricted the import of telecom equipment from certain countries. This move significantly reduced competition for Tejas Networks and provided a unique opportunity for the company to expand its market share. Additionally, the recent “China plus one” mega trend has further benefited This company. The company has seen remarkable growth, with gains of over 50% in the past year, making it one of the most interesting stocks in the Tata pack.

Market Presence and Competition

Tejas Networks faces stiff competition from global players such as Nokia, Huawei, and others, which have a long-standing presence and a more diversified portfolio. However, the company’s position in the market changed when the government issued new security guidelines restricting the import of telecom equipment from certain countries. This restriction significantly reduced competition for This company, allowing it to gain a competitive advantage in the industry.

Additionally, Tejas Networks has benefited from the “China plus one” mega trend, where companies are diversifying their supply chains by reducing reliance on China. This trend has opened up opportunities for This company to capture a larger market share.

Global Presence

Tejas Networks manufactures its products in India through partnerships with reputed companies. It also has an in-house manufacturing facility that focuses on final integration testing and quality control. While the company generates around 36% of its total revenues from international markets, it faces tough competition from established players like Nokia and Huawei. Despite the competition, This company has managed to establish a strong foothold in various countries, including the US, UK, Mexico, Brazil, South Africa, Nigeria, Kenya, UAE, Bangladesh, Philippines, Singapore, and Malaysia.

Business Sustainability and Adaptability

For any technology-led business, sustainability and adaptability are crucial factors. Tejas Networks faces the risk of product obsolescence if it fails to undergo constant innovation and meet global tech regulations. However, the company’s management believes in humanizing technology and protecting the interests of end-users. By expanding the role of design to include customer delight, educational support, and increased work efficiency, This company aims to stay ahead of the curve and mitigate the risk of obsolescence.

In terms of adaptability to regulatory norms, This company may face growth bottlenecks in domestic and international markets as telecom regulations undergo significant changes. The company has yet to demonstrate its ability to navigate these challenges successfully.

Technology Tailwinds

Similar to Tata Elxsi, which benefited from the telecom tailwinds, Tejas Networks has also capitalized on the growing demand for telecom equipment. The company’s products cater to the emerging technologies such as big data analytics, cloud, mobility, virtual reality, and artificial intelligence. With a strong focus on research and development (R&D), This company has filed 350 patents and allocated 25% of its total revenues towards R&D in the financial year 2023. This investment is crucial for staying competitive and meeting the demands of global customers.

Financial Considerations

While Tejas Networks has shown significant growth potential, it is important to assess its financial viability. Currently, the company is experiencing losses, which can be detrimental to shareholder interest in the long run. Unlike Tata Elxsi, This company lacks the financial muscle to sustain its R&D initiatives. This can impact the company’s ability to develop futuristic platforms and keep up with demanding customers. However, Tejas Networks does have a strong order book, with an order value of nearly 100 billion rupees at the end of 2023.

Economic Viability and Valuations

Both Tejas Networks and Tata Elxsi, another Tata Group company, have reasonably sustainable business models and possess technology modes. Tejas Networks, with its high order book and visible growth upside, seems promising. The company serves various telecom operators, internet service providers, critical infrastructure, and government agencies. In December 2023, This company was granted a license for indigenous 5G Rand technology. This technology transfer from academia marks a significant milestone for the company.

However, when comparing the financial metrics of This company and Tata Elxsi, it becomes clear that Tejas Networks lacks the fundamental strength to retain its valuations. While the stock may have delivered impressive gains in the past, the company’s inability to generate profitable operations and sustain its R&D initiatives raises concerns about its long-term viability.

Conclusion

In conclusion, while Tejas Networks has witnessed impressive stock market gains in recent years, it faces challenges in terms of profitability and financial sustainability. The company’s promising business model, strong order book, and visible growth upside are overshadowed by its lack of profitable operations and limited financial resources. On the other hand, Tata Elxsi has demonstrated financial rigor and sustainable business practices, positioning it as a more reliable investment option. Investors looking for long-term stability and profitability should carefully consider the financial metrics of both Tejas Networks and other Tata group stocks.

Disclaimer: The information is only for information purpose only. It is always recommended to consult with certified financial experts before making any investment decisions. Follow busymoneyfreak.com .