The Rise of Tejas Networks: Tata’s Bet on India’s Indigenous Telecom Networking Future

Tejas Networks is an Indian telecommunications company specializing in designing and manufacturing high-performance networking products, particularly for telecommunications service providers, internet service providers, utilities, and defense companies. Founded in the year 2000 by Sanjay Nayak, Tejas Networks started with a vision to create indigenous networking products that cater to the needs of India and other emerging markets, competing with global giants in the telecom sector. Their products are used by telecom service providers, utilities, governments, and defence networks in 75+ countries.

Tejas Networks has expertise in Wireline products like FTTX, Optical Transport, Switches & Routers
and Wireless products such as 5G RAN (Radio Access Network), SATCOM, Broadcast Radio.

Early Journey and Purpose
The initial purpose of Tejas Networks was to fill the gap in India’s telecom infrastructure by developing world-class optical networking and broadband access products locally. During the early years, the company faced challenges in establishing itself in a market largely dominated by international players such as Cisco, Huawei, and Nokia. Convincing clients to trust a newly-formed domestic player for critical networking needs was a major hurdle, especially when foreign vendors were offering well-established solutions.

Early Struggles
The company had to navigate various challenges during its formative years. Funding was a major issue, as raising capital for a deep-tech startup in the early 2000s wasn’t easy in India. Additionally, the technology landscape was highly competitive, and being a new entrant required Tejas to prove its technological prowess repeatedly. However, through innovation and determination, Tejas Networks gradually gained traction, earning contracts from key customers in India and expanding its footprint globally.

Major Funding and Investments
Tejas Networks secured its early funding from prominent investors such as Intel Capital, Mayfield Fund, and Sandstone Capital. The infusion of capital allowed the company to invest in research and development, which became the backbone of its technological advancements. Later, Tejas Networks went public in June 2017, raising around ₹776 crore through its Initial Public Offering (IPO). This IPO helped Tejas to strengthen its financial position, expand its global footprint, and invest in further R&D.

Tata Group Investment
A significant development in the history of Tejas Networks occurred in 2021 when Tata Sons, through its subsidiary Panatone Finvest Limited, acquired a controlling stake in Tejas Networks. The Tata Group invested approximately ₹1,890 crore to acquire a 43.3% stake in the company, with an additional open offer to acquire up to 26% more shares. This investment by Tata was strategic, aligning with its goal of creating an indigenous telecommunications and networking ecosystem to support 5G infrastructure and other digital initiatives. The Tata Group’s backing added credibility to Tejas Networks, increasing market confidence in its ability to grow and succeed in the competitive telecommunications space.

The MOAT of Tejas Networks
Tejas Networks has a few key factors that make up its MOAT (i.e., its competitive advantages). The foremost is its focus on R&D and innovation, which has allowed the company to develop cost-effective and flexible products, especially in the optical and broadband networking space. They have more then 300 granted patents over the years. Their products are based on a software-defined hardware approach, which makes them highly configurable and adaptable to different network requirements. Another important advantage is its indigenous nature. With an increasing emphasis on self-reliance (Atmanirbhar Bharat) in the Indian telecom sector, Tejas Networks is well-positioned to capitalize on government initiatives and contracts that favor domestic players over foreign companies.

Recently Saankhya Labs, a Tejas subsidary received approval under Semiconductor Design Linked Incentive (DLI) scheme for Development of a System-on-Chip (Soc) for 5G Telecom infrastructure equipment.

Competitors
Tejas Networks operates in a highly competitive market with several global and domestic players. Its main competitors include:

• Cisco Systems: A global leader in networking hardware, software, and telecommunications equipment.
• Huawei: The Chinese multinational is one of the largest players in telecom infrastructure, offering a wide range of networking products.
• Nokia and Ericsson: These European telecom giants have a significant presence in the optical networking and wireless infrastructure space.
• Sterlite Technologies: An Indian company that also operates in the networking and telecommunications domain, offering products and services similar to Tejas Networks.

Recent Results
Tejas Networks recently posted FY25 Q2 results

Q2FY25 Net Revenue: INR 2,811 Cr (1.8x of Q1FY25; 7.1x of Q2FY24 YOY)
Q2FY25 Profit After Tax: INR 275 Cr

Recent News and Order Pipeline
Tejas Networks currently has a significant order pipeline, which includes a notable order worth INR 7,492 crore for supplying Radio Access Network (RAN) equipment to BSNL for its nationwide 4G and 5G network expansion. This contract involves supplying, supporting, and providing annual maintenance services for the RAN equipment across approximately 100,000 sites in India. The order is expected to be executed during 2023 and 2024, with support and maintenance services continuing for nine years after the warranty period​

The company is also working on expanding its presence in international markets, with significant orders from Southeast Asia, Africa, and Latin America. Moreover, the Tata Group’s support has enabled Tejas to work on critical projects related to 5G infrastructure and private networks, positioning it as a key player in India’s 5G rollout.

Additionally, the company has taken proactive steps to address supply chain challenges, such as signing with three new electronic manufacturing service (EMS) vendors and increasing inventory procurement to manage chip shortages. These actions aim to ensure timely fulfillment of large pending orders

Order book at end of Q2FY25: INR 4,845 Cr

Future Growth Prospects
The future growth prospects for Tejas Networks look promising, driven by multiple factors:

1. 5G Rollout: With the global rollout of 5G, there is a substantial opportunity for Tejas Networks to provide high-capacity optical and broadband solutions to telecom operators. The Indian government’s focus on rolling out 5G services further strengthens this opportunity.
2. Government Support: The push for an Atmanirbhar Bharat and the government’s Production Linked Incentive (PLI) scheme for telecom equipment manufacturing provide a favorable environment for Tejas to grow.
3. International Expansion: Tejas Networks is also focusing on expanding its international footprint, which could lead to significant revenue growth if successful in tapping underserved markets in Africa and Latin America.
4. Tata Group Synergies: Being a part of the Tata Group opens up opportunities for collaboration across Tata Communications and Tata Consultancy Services (TCS), providing end-to-end telecom solutions and services.
5. BharatNet Phase 3: Tejas Networks is participating in the bidding for the BharatNet Phase 3 project, which involves a tender worth approximately ₹65,000 crore. This project is aimed at enhancing last-mile connectivity and upgrading infrastructure across over 164,000 gram panchayats in India. Tejas is competing alongside other major players like Ericsson and HFCL for this opportunity, which could further strengthen its position in the rural broadband segment if successful.
6. Indian Railways – Kavach (Collision Avoidance System)
7. Private 5G application for large enterprises in India

Risks
Despite the promising outlook, there are risks that Tejas Networks must navigate:

• Competition: The company faces intense competition from global giants like Cisco, Huawei, and Nokia, which have far greater resources and established market presence.
• Supply Chain Issues: As a hardware company, Tejas is vulnerable to global supply chain disruptions, which can impact its ability to source components and fulfill orders on time.
• Dependency on Government Orders: A significant portion of Tejas Networks’ revenue comes from government contracts. Any delay or cancellation of these contracts can negatively impact its financial performance.
• Technological Changes: The telecom industry is dynamic, with rapid changes in technology. Tejas Networks needs to consistently innovate to keep pace with advancements and stay relevant.

Conclusion
Tejas Networks has come a long way since its inception in 2000, navigating challenges and establishing itself as a key player in the telecommunications equipment space. With a strong focus on R&D, a growing order pipeline, and backing from the Tata Group, Tejas Networks is well-positioned to capitalize on opportunities arising from the 5G rollout and the push for indigenous telecom solutions. However, the company must remain vigilant about competition, supply chain challenges, and the rapidly changing technological landscape to continue its growth trajectory.