Tejas Networks IPO: Brokerage Views & Runup to IPO

Tejas Networks IPO
This post on Tejas Networks Limited IPO tries to bring out consolidated brokerage views opinions, IPO Review / Analysis, Note/ reports and recommendation of brokerages , Analyst, Business New papers, Management views, information on Anchor investors, Subscription etc on Tejas Networks IPO and shall be updated continuously till the closure of the issue. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Tejas Networks Limited IPO or not.

Related Posts: Tejas Networks IPO Review
Tejas Networks IPO: Grey Market Premium etc.

14/6/17 Grey Market Premium Rs. 30-32  ,  Kostak (Application rate) –  Rs. 325
14/6/17 Grey Market Premium Rs. 30-31  ,  Kostak (Application rate) –  Rs. 300
12/6/17 Grey Market Premium Rs. 20-22 (Thin deals) ,  Kostak (Appl. rate) –  NIL

Subscription: Tejas Networks IPO  ( x times)
  QIB NII Retail Total
Day 3        
Day 2   0.33  0.02  1.1  .38x
Day 1 0.06 0.01 0.38 0.11

Complete Anchor List

Tejas Networks has raised Rs 350 crore through issuance of shares to 17 anchor investors which include Abu Dhabi Investment Authority Behave, Amansa Holdings Pvt Ltd, Columbia Emerging Markets Fund, SBI Life Insurance Company Ltd, Kotak Tax saver Scheme, Reliance Nippon Life Insurance Company Ltd, BNP Paribas Arbitrage etc. Click here for Complete Anchor List

Consolidated opinion of Brokerages, Analysts, Business New Paper Reports, Management Views on Tejas Networks IPO .

Angel Broking: “Tejas Networks Ltd (TNL) is an optical and data networking products company. It designs, develops and sells products to telecommunications & internet service providers, utility companies, defense companies and government entities in India and over 60 countries. TNL derives 63% of its revenues from domestic markets, while rest comes from international markets. As of May 15, 2017, the company had 313 employees in its R&D team and had filled 333 patents applications across the globe, out of which 56 patents have been granted. Outlook and Valuation: TNL has reported strong revenue CAGR of 24.2% CAGR over FY2013-17 and PAT of  Rs. 64cr in FY2017 (loss of `79cr in FY2013). The RoE improved from 8% in FY2016 to 12.9% in FY2017, primarily owing to ongoing capex on Optical Network by Telcos, strong operating leverage with asset light business and strong professional team with significant industry experience. At the upper end of the price band, the pre-issue P/E works out to be 29.3x its 2017 earnings, 3.7x of FY2017 Book Value. Moreover, the company’s debt free balance sheet post IPO coupled with the government’s push for digital India would support the growth momentum. Thus, we recommend a SUBSCRIBE on the issue.”

Prabhudas Lilladher: “Tejas Networks operates in a industry in which companies needs to keep pace with technology shifts. The industry is also dominated by larger players (Huwaei, Alcatel‐ Lucent etc) which have a larger product portfolio. We see potential for near term growth led by traction in government initiatives to expand Data reach into Rural India. Government initiatives on expansion in Rural Broadband could help Tejas get contracts from Bharat Broadband, BSNL etc. However, we believe this
business is prone to cyclical volatility. During the phases of Technological shifts, Tejas
has written off Capitalized R&D expenses which has also impacted profitability.  Valuations are also a tad higher in our view (24x FY17 AEPS and 15.5x FY19E EPS).We would Avoid the issue.”

Jainam Wealth: “Recommens investors to “AVOID” to the Tejas Networks Ltd IPO considering high working capital intensive nature, 58.81% of revenue contributed from top 5 clients, 45.12% revenue contributed from PSU customers in India, long receivable collection cycle with 40.76% are receivable of FY17 revenue, lower return ratio, lower interest coverage, higher competition from international players and ~10% of fresh issue will be for funding of salary of R&D staff. Company available at P/E of 27x on FY17 EPS on upper price band which is available at premium valuation compared to it’s peers. “

Ashika Direct: ” Though, telecom sector is reeling under pressure amid fierce competition and mounting debt in balance sheet, it is expected that rising smart phone penetration and a massive increase in data traffic, global optical capital expenditure is likely to increase from USD 14.6 billion in 2014 to USD billion by 2020. Further, company holds second position in optical networking products in terms of market share in India, with a market share of 15% in the overall optical networking On valuation front, the issue is valued at post issue P/E multiple of 36x on FY17 diluted EPS. Given, professional management, strong client base, cost & capital efficient business model, leadership in fast growing Indian optical equipment market and improving financials, we are optimistic on company’s long term growth story. Thus we recommend our investors to ”SUBSCRIBE” the issue from medium to long term perspective.”

Capital Market: ” Score 38/100, Financial performance is highly fluctuating. There was consolidated loss of Rs 79.04 crore in FY2013, net profit of Rs 2.76 crore in FY2014, loss of Rs 17.87 crore in FY2015, net profit of Rs 29.01 crore in FY2016 and net profit Rs 63.22 crore in FY2017. A large part of the operating expenses is fixed. Any fall in revenues due to loss of client or any major order can affect the margins and profitability.”

GEPL Capital: ““Tejas Networks Ltd stands to gain from operating leverage. At a P/E of 27.34x of FY17 EPS. We believe that it demands a discount to its domestic peers. We assign a Subscribe rating to the IPO.”

SSJ Finance: “Tejas Networks Ltd has reported a CAGR of 24.2% and 40.9% on the sales and Ebitda fronts respectively over FY2013-2016. On its upper band of price of Rs 257, the issue is priced at P/E ratio of 28.8x of its FY2017 EPS of Rs 8.9. We believe that the IPO is overpriced leaving little for the investors. Hence, we recommend toAvoid the IPO.”

SMC : “Rating 2.5/5 Considering the P/E valuation on the upper end of the price band of Rs. 257, the stock is priced at pre issue P/E of 29.28x on its FY17 EPS of Rs. 8.78. Post issue, the stock is priced at a P/E of 36.40x on its EPS of Rs. 7.06. Looking at the P/B ratio at Rs. 257 the stock is priced at P/B ratio of 3.70x on the  pre issue book value of Rs.69.50 and on the post issue book value of Rs. 106.16 the P/B comes out to 2.42x. On the lower end of the price band of Rs.250 the stock is priced at pre issue P/E of 28.49x on its FY17 EPS of Rs. 8.78.Post issue, the stock is priced at a P/E of 35.41 on its EPS of Rs7.06. . Looking at the P/B ratio at Rs. 250 the stock is priced at P/B ratio of 3.60x on the pre issue book value of Rs. 69.50 and on the post issue book value of Rs. 106.16 , the P/B comes out to 2.35x”

SP Tulsiyan website: “At Rs 257 per share, company’s market cap will be Rs. 2,350 crore while EV will be Rs. 2,536 crore, which discounts historic FY17 performance by a PE multiple of 27x and EV/EBITDA multiple of 14.6x. Estimating 20% growth in FY18, PE and EV/EBITDA mutiples are 19x and 12x respectively, which is quite stretched. On Rs.1,000 crore topline, sales multiple of 2.5x for actually a software cum hardware company is quite steep! While the company does not have strict listed comparable, smaller peer D-Link, being an MNC enjoying debt free status, is ruling at FY17 sales multiple of 0.45x, EV/EBITDA multiple of 11x, and PE of 18x. Tata Group’s smaller IT networking company Nelco is also ruling at FY17 EV/EBITDA multiple of 10x and sales multiple of 1.3x. Thus, Tejas Networks IPO is steeply priced, in addition to a weak balance sheet.Citing poor fundamentals and expensive valuations, avoid this IPO.”

Hem Securities:t price band of Rs 250-257 ,co is bringing the issue at p/e multiple of around 29 on FY17 Eps. Although co’s business model looks quite attractive but looking after valuation , issue looks expensive at current level. Hence we recommend “Subscribe” on issue for long term.”

Economic  TimesTejas IPO: A high-risk bet on India’s digital future 

Financial Times: Tejas Networks IPO: Strong research, patents make issue attractive but risks abound

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