Shares of a Tata Group company plunged 8 percent to reach an intraday low of ₹ 777.00 apiece on Monday’s early trades amid a slew of developments. Its loss magnified three-fold and an investor sold a massive stake in the company. At 12:29 PM, its shares were trading at ₹ 805.40 apiece, down 4.72 percent.
East Bridge Capital Master Fund Ltd said that it had exercised a warrant resulting in a drop in its shareholding in Tejas Networks from 6.59 percent to below 5 percent. Recently on July 17, 2023, the fund sold more shares in the company and its current shareholding stands at 3.77 percent.
Tejas Networks is a global R&D-driven company that designs, develops and manufactures high-performance optical and data networking products that are used by telecom service providers, utilities, government and defence networks.
The wireless telecom and data networking products company reported a wider-than-expected loss in the April to June quarter (Q1FY24). On a consolidated basis, the company’s net loss magnified three-fold to ₹ 26.29 crores in the latest quarter, as compared to ₹ 6.64 crores in the corresponding quarter of the previous year (Q1FY23). However, its revenue from operations increased by 49.40 percent to ₹ 187.89 crore in Q1FY24, against ₹ 125.76 crore in Q1FY23.
Multiple factors like a ₹ 31.3 crore Employee Stock Option Plan (ESOP) charge, continued investment in Research and Development and increased component costs to expedite fees and spot buys to ensure critical customer shipments led to the widening of its loss.
On a sequential basis, its loss increased by 129.21 percent to ₹ 26.29 crores in Q1FY24, as compared to ₹ 11.47 crores in the January to March quarter (Q4FY23). Moreover, its revenue decreased by 37.32 percent to ₹ 187.89 crores in Q1FY24 from ₹ 299.32 crores in Q4FY23.
The decline in its quarter-on-quarter (QoQ) revenue was attributed to the transition to the EMS (element management system) facilities. The company said that it faced a few component delays during the June quarter as one of the EMS suppliers was shifting facilities, but the issue has now been resolved.
The Tata Group company’s order book stood at ₹ 1909 crores towards the end of the June quarter. 50 to 60 percent of this is likely to be executed within the current financial year. Moreover, the company has successfully commissioned the pilot network of 200 sites of BSNL’s 4G network in Punjab and expects to ramp up supplies for deployment from the September quarter.
With a market capitalization of ₹ 14,334 crores, Tejas Networks is a small-cap company. It has a negative return on equity of 1.49 percent but an ideal debt-to-equity ratio of 0.02. Its
shares were trading at a price-to-earnings ratio (P/E) of 202.57, which is higher than the industry P/E of 24.11, indicating that the stock might be overvalued as compared to its peers.
Written by Simran Bafna
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