26 February 2024

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Tejas Networks

Tejas Networks falls 8% as net loss increases due to rising costs

Tejas Networks’ stock dropped by 8% on July 24. The share price fell as the company announced a larger net loss in the April-June quarter compared to the prior quarter.

Tejas Networks reported a total net loss of Rs 26.3 crore for the April-June period, which is significantly larger than the loss of Rs 11.5 crore reported in the previous quarter. Furthermore, the company’s net loss in the same time a year before was Rs 6.6 crore.

The increase in net loss implies that the company faced financial difficulties over the stated time period. Such financial performance reports might influence investor sentiment, causing share price changes. Investors and market analysts will most likely keep a close eye on the company’s future financial reports and management actions to gauge its route to recovery and growth.

Tejas Networks’ shares were trading at Rs 804.90 on the National Stock Exchange at 1.06 pm, down 4.8 percent. The trading volumes on the exchanges were solid, with 19 lakh shares moved, exceeding the one-month daily traded average of 16 lakh shares.

Tejas Networks

Revenue fell by 37.2 percent sequentially in the April-June quarter, according to the company’s financial statements. This quarter’s revenue was roughly Rs 188 crore, down from Rs 299.3 crore in the previous quarter. However, when compared to the same period last year, the company’s sales increased significantly, increasing by more than 46 percent year on year.

The disparity in year-over-year performance shows that the company may have had obstacles or market swings during the quarter, which harmed revenue. The share price fall and high trading volumes show that investors are keenly monitoring the company’s financial performance and reacting to the latest earnings report.

Investors and market analysts may seek more insights from the company’s management and financial statements to better understand the factors causing these changes and the implications for the company’s prospects.

The switch to EMS (element management system) facilities was blamed for Tejas Networks’ revenue drop in the April-June quarter. During this time, the company experienced component delays since one of its EMS suppliers was in the process of transferring its facilities.

This change generated supply chain interruptions and reduced the company’s sales throughout the quarter. However, it’s worth mentioning that the problem has subsequently been rectified.

Tejas Networks’ EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) loss widened in addition to sales decline. The company’s EBITDA loss in the June quarter was approximately Rs 47 crore, a considerable increase from Rs 8 crore at the end of March and Rs 7.3 crore at the same time a year ago.

The growing EBITDA loss suggests that the company struggled to manage operational costs and generate profits throughout the quarter. This financial statistic is critical for investors and analysts to assess the profitability and overall financial health of the organization. Market participants and investors may request additional information from Tejas Networks’ management to understand the exact reasons for the increase in EBITDA loss and their intentions to resolve the financial condition in the future.

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Tejas Networks’ increased losses can be linked to several issues, including:

1. Employee Stock Option (ESOP) Charge: The company experienced an ESOP charge of Rs 31.3 crore, which relates to employee stock compensation plan charges. Employee stock ownership plans (ESOPs) are a type of employee incentive in which employees are given the option to purchase business stock at a predetermined price that is often lower than the market value. This cost has an impact on the company’s finances and may contribute to bigger losses.

2. Investments in Research and Development (R&D): Tejas Networks is going to invest heavily in research and development to improve and reinvent its goods and technology. While R&D is critical to a company’s growth and competitiveness in the telecom and data networking industries, it can result in increased expenses and have a short-term impact on profitability.

Tejas Networks

3. Increased Component Costs: To expedite fees and spot buys, the corporation may have paid more for components needed to create its products. This could be due to supply chain problems, such as component delays during the move to EMS facilities.

4. Ensuring Timely Delivery: The increased investments and expenses discussed above are most likely intended to ensure the timely delivery of key client shipments. Meeting client needs and completing orders on time is important for sustaining customer happiness and retention, but these efforts can be costly to the organization.

While these variables contributed to increased losses in the most recent quarter, management’s policies and initiatives are aimed toward long-term growth and preserving a market competitive edge. As supply chain interruptions are overcome and R&D efforts bear fruit, the company’s financial performance may improve in the future. Investors and analysts will closely follow the company’s performance and management’s activities in the next quarters to determine its direction.

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Positive aspects for Tejas Networks:

1. Strong Order Book: At the end of the June quarter, the company’s order book was at a healthy Rs 1,909 crore. This suggests that Tejas has a substantial client order pipeline, which provides revenue visibility for the coming quarters.

2. Execution of Orders: Tejas anticipates completing a significant percentage of its order book by the conclusion of the current fiscal year, with 50-60 percent likely to be finished by the end of the current fiscal year. This demonstrates the company’s confidence in meeting its commitments and meeting customer expectations.

3. Successful Commissioning of Pilot Network: Tejas Networks successfully launched a prototype network of 200 stations for BSNL’s 4G network in Punjab during the third quarter. This accomplishment demonstrates the company’s ability to provide telecom solutions and get contracts with reputable clients.

4. Prospects for Future Deployment: Tejas anticipates increasing its supply for deployment beginning in the third quarter. This shows that the company is well-positioned to expand its production and delivery capacities, allowing it to satisfy its customers’ requests in a timely manner.

These encouraging achievements demonstrate that Tejas Networks is actively addressing its issues and capitalizing on growth potential. The company’s order book and successful network commissioning are indicative of its market potential for future growth and stability. Tejas’ financial performance may improve in future quarters as it continues to execute orders and increase its customer base.