Tejas Networks Limited (TEJASNET) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Tejas Networks Limited Q3-FY26 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Mishra from ICICI Securities. Thank you. I am over to you, sir.

Thank you, Samit. Good evening, everyone. Thank you for joining on the QCFL26 results conference call of Tejas Networks Limited. We have the management of Tejas Networks on this call, represented by Mr. Arnog Roy, Executive Director and COO, Mr. Sumit Bhingra, CFO, Dr. Kumar and Sibarajan, CTO, and Mr. Sanjay Malik, Chief Strategy and Business Officer. I would like to invite Mr. Arnog Roy to initiate with opening remarks, post which we will have a Q&A session. Thank you, and over to you, sir.

Thank you. Welcome, everyone, to our quarterly earnings call. In Q3, we had a revenue of 307 crores, and the quarter revenue was driven largely by the sale of wireline products to India private operators and to international customers. We have multiple trials ongoing for our wireless products, both in India and in international markets. Many of them started in Q2, and many of them have progressed to the commercial negotiation stage and are expected to close in the coming months. Before we go to an extended commentary of the quarter, I would like to hand you over to our CFO, Sumit, to walk you through the details of our financial numbers.

Good evening, everyone. Wish you all a very happy new year. Our results for the quarter 3 FY26 were revenue of 307 crores compared to 262 crores of revenue in the previous quarter. This is a growth of about 17%. Profit after tax for the quarter was negative 197 crores, and order book at the end of the quarter stood at 1329 crores compared to 1200 crores in the previous quarter. Revenue broadly comprises from Indian customers about 85% and international about 15%. The order book is predominantly Indian as of now with about 90% of the Indian customers. The profitability for the quarter, the EBIT for the quarter was 239 crores negative compared to 394 crores of negative EBIT in the previous quarter. I think expenses for this quarter mainly include provisions for past service costs related to placidity and compensated absences on account of the new labor code that was notified recently, and warranty expenses for 24 crores based on potential fault rates, repair requirements, and the warranty claims. A bit on the balance sheet side, our inventory for the quarter probably was at the similar levels as compared to the previous quarter at 2,363 crores. Trade receivables at the end of the quarter were 3,284 crores versus 4,026 crores in quarter two. Our net debt at the end of the quarter was 3,349 crores versus 3,738 crores in quarter two. This has come down mainly due to lower working capital, which gets partly offset by the capex during the quarter, and the gross debt's put at 3,885 crores. I think with this, I'll hand it over to Arnab to take it forward.

Yes, thanks, Omid. And so over to some of the key updates for the quarter, as far as for our wireless business, while we have not closed some of the deals as of yet, but we are seeing an increased number of international engagements for our 4G, 5G, RAN equipment, including multiple ongoing POCs. We find many of them have moved to the commercial negotiation stage. And as I mentioned, we expect some of them to close over the next few months. We have been selected as a 5G RAN supplier on a section of the Delhi-Mumbai Railway Corridor for a pilot on the Kavaz project that you are all familiar with. We just do with the network for enhancing the safety of our railway operations. We have multiple wins for our private 5G deployments in India for applications in ports and mines. And finally, you know, for the big BSML 4G add-on PO for the 18,000 sites that we have been working on for quite some time, we have a delay in the receipt of this PO, and, you know, from what we know, from what we hear, is that those are still in the works, and, you know, the expansion order will come to us at the appropriate time for BSML. For our wireless business, as I said, the quarter was driven largely by shipments for our wireless wireless products. We won additional packages for BharatNet, and we became one of the largest suppliers of IPM pillars routers by the number of packages, and we won the maximum number of packages that have been announced so far. We received expansion orders from leading-type telcos in India for both our WDM as well as our Vipon equipment. And then a couple of significant international wins have been winning of a WDM backbone network for the build-out order from a broadband ISP in Africa and a network transformation project for our MPLS-TP products for a power sector company in Southeast Asia. Another significant one was the first win in a sovereign data center networking application in India for switching products. This is the first time we won a networking application inside a data center, where most of our data center business has been through the interconnect. So from that point of view, we look at it as a significant first win. Now, the other updates for the quarter is that our Converge Broadband product won the Excellence Award for the Most Innovative Product in the conference in a great show in Dubai. We received 84.85 crores as PLI incentives for Q4 and cumulatively 397 crores of PLI. We filed 26 patents in Q3. Cumulatively, we filed 613 global patents of these 370 have been granted. In summary, our long-term outlook remains positive. There are strong drivers for our business caused by rapid transitions, technology transitions, as well as the demand data growth, which is driven largely – a lot of it is driven by AI applications, which are driving a massive growth in traffic in the networks. There's a lot of – we see a lot of expansion of 4G networks and new deployments of 5G networks in emerging markets, and which are driving most of our engagements and POCs that I refer to. Investments in AI data centers are driving huge connectivity requirements, which are driving business for our optical products. We see increased production of our new products in India and in international markets. The wireless products are starting to lead our international engagements in Europe, Latin America, and Africa. We are seeing increasing adoption of our wireless products in private telcos in India. And apart from our direct engagements, we are also increasing, increasing engagements with international customers for our wireless products through partnerships with NEC and Rakuten. Okay. And strategic wins in Europe, Africa, and Asia for optical products gives us a good momentum for expanding our international business. So, with that summary, I'd like to open the floor for questions.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touchstone phone. If you'd like to remove your request, please press Press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then one.

Our first question comes from the line of Rajakumar Vaidyanathan from RK Invest. Please go ahead.

Yes, sir. Please go ahead. Yeah. Yes, Rajakumar. Go ahead, please.

Hello.

So, Rajagumar, your line is unmuted. Please proceed with your question.

Can you hear me?

Yes, sir, we can hear you now.

Yeah. Sir, my question is, what is the path to profitability? Because you have been reporting significant losses for the last two quarters, and even if I see the last five years, bottom line numbers, if you have still not made money in the last cumulatively, so what is the path to profitability, if you could just elaborate on that?

Yeah, I think, as you can see from our financials over the year, we've made significant investments in growing our business, right, right from investments in our products, in R&D, and developing, expanding our portfolio with a large set of wireless products, right? So all of that investment, as well as our investments in supply chain and sales, have been with the intent and with the expectation and anticipation of growth of our business internationally. And we expect our business to scale. As you know, last couple of years, a lot of focus has gone into developing the product and execution of the BSNL 4G project. And with that, we have scaled up our systems and processes in our country, in our company. So what we expect is on the back of the new products that have come and the success that we've had, you know, it's like this is kind of the time when we are kind of, I would say, refreshing our overall business In terms of with our new set of products going to international market, and the path to profitability will be when that business really scales up, both internationally as well as in India, led by our wireless products as well as our wireless products, and getting to the business size and to the critical business size, which would be able to support the investments that we have made in our business. Yes. So that is really the part, I mean, just growing our business, and we see the opportunity for doing that over a period of time, right? I mean, it hasn't happened as fast as we would all expect, but that was a period of execution of this large project, and it's like kind of, I would say, replanning our business for the next few years.

Yeah, sir, if you could also indicate a timeline, is it like two years, three years, when do you think you will reach a positive bottom line? Because what we want to know is in the last five years, you have not made any positive bottom line cumulatively. So are you still in an investment phase or the investment phase is over and now the focus is on, you know, improving the profitability? So where exactly Tejas is standing?

Yeah, so we are in a business, we are in the technology business, so continued investments never stops, right? I mean, the technology is a treadmill, and it keeps on evolving, so we cannot stop our continued investments in R&D. I mean, the growth in investments will be, of course, be tempered based on the business that we realize, But we are not going to reduce our investments over here because of the nature of business that we are in. But I think when we talk about when we achieve that business growth, I think that's going to happen over a period of time. I think all efforts and investments in growing the business are happening, and it will be a period of time. But all of us are keen to get to that stage as quickly as we can. And we believe all of that will happen. So that's the reason why we continue to, you know, invest and focus in what we are doing.

Okay. I think, yeah, so the second question, with regards to your inventory and the orders in hand, I mean, your inventory is almost twice the amount of orders in hand. So I just want to know what is the idea behind holding so much of inventory, and also, if you can also comment on when do you think that the data will be, you know, brought to the normal zone?

Yeah, so as we have spoken earlier, a lot of this inventory has actually been procured for executing on the DSLR 4G add-on order, right, for which our partner PCS has received an APO, They have also communicated the LOI to us for that project. And so a lot of this procurement really happened for that. That's why we are sitting on this large inventory. But we know, since we know that this order is going to come, as you can see in so many announcements from the SML as well as the ministry. So we have to hold on to the inventory with the interest of being able to execute on this project as quickly as we can once we receive the PO. So this inventory will deplete very rapidly once you receive the PO and start executing on the project.

Yeah, so the worry is you have a very long cycle because you are holding inventory for so many quarters, and then after that you bill, and then the government takes their own time to pay you. So you have a very long working capital cycle. So, I mean, you know, by design, I mean, the agent is not currently the way you guys are executing it. I mean, you know, the shareholders will never see a return, you know, in the near future. That's how it's been, you know, I mean, that's how what I, as an investor, I can make out. So, correct me if I'm wrong.

I think the current inventory, obviously, as we mentioned, is in context of the additional order, Expected orders does not get reflected in the order book, and while this was expected, I think there have been delays in sort of getting the purchase orders, and hence this has led to the accumulation of this inventory. If you see the years prior, over the last year or the last few quarters, there was a corresponding execution that was going on for the BSN project, and hence the inventory levels continue to Now, to your point on whether the working capital cycles or the inventory cycles are high, yes, they're currently high for this specific reason. I think, as Ardab earlier pointed out, I think it is important from previous point of view that we have an increased share from private and international customers where the overall working capital cycle may be better, and that would lead to improvement in working capital in general. And I think we're also taking steps to continue to improve on the working capital or the inventory management in particular to get this down. So it's a focus area for us as well, and we continue to work on this.

Okay, sir. But I think it's a big concern. I mean, I'm not sure whether we're articulating it. Sorry to interrupt.

Mr. Rajakumar, for any follow-up questions, may we request...

No, I'm not asking a follow-up question. It's just a comment. So let me just give me one minute. I will just complete it. So the concern is, you know, this is kind of happening for many quarters. And, you know, I don't know what model Tejas has, you know, because this model has to earn money for the shareholders at the end of the day. And you are executing such a big project and still the bottom line is bleeding. And that is really a concern, sir. So I hope the shareholders are also taken into consideration. Their interests are also taken into consideration when you execute such big projects. That's my comments. Thank you. Thank you so much for the opportunity. Thanks.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please restrict yourselves to two questions each. You may rejoin the queue for follow-up questions. Our next question comes from the line of Pranav Shatria from MK. Please go ahead.

Yeah, thanks for the opportunity. I have a couple of questions. Firstly, you talked about, you know, in the first quarter of, you know, this financial year that you would, you know, sort of be looking to reach where you were in FY24, and that, you know, is what, you know, you would be looking to reach. So that number, and if I compare nine-month number, I think there is a fair bit of gaps. So how should one look at it? I understand that, you know, Treasurer's network business tend to be very lumpy. But do you think, you know, it should be possible to reach that kind of level in this year or, you know, that can possibly reach in the next year? That's my first question. Second question is that, you know, there is a good increase in the number of patents filed, and, you know, would like to know a little bit more about, you know, in which area are these patents more, you know, are these patents more on the wireless product side or more on the wireline product side? So those are my two questions.

Thank you. Yeah, so I'll take the first question, and the second part I'll hand it over to our CTO, Dr. Kumarshan. So, FY24 levels this year, as you can see, our expectation was the execution for this year was the execution of the add-on project from DSML, and while that happens, that we build on our international business for wireless, I think what happened, since that order got delayed, and we have built the inventory for it. So that's the reason why you would see that we have not been able to reach the level of FI24 yet. And in this year, I don't think we'll be able to execute the project also because when the add-on order comes, it takes time to mail in and ship and all this kind of thing. So this project, whenever that comes, is going to be executed in the next financial year. So that delay has really affected our business this year, and the transition that our business is going through in terms of really transitioning to a lot more of the Indian private telco as well as the international operators, I think that thing is going well. And, you know, we expect to see, and I only think that this takes time. So that's the reason why we are seeing a longer period of time for closing on all those opportunities. But, you know, on the positive side, we see all those opportunities for engagements, and we see we are in a market which is growing. You know, the customer demand, network build-outs, capacity build-outs, I mean, all of that. I mean, we are in a globally growing market, including India. So we do see the opportunity of, you know, getting to that growth level at some point of time, you know. And I think we have, from an investment point of view and the readiness point of view, we are kind of there for leveraging every opportunity that comes our way. Okay. So, that's the first part, and regarding the patents, I'll like Dr. Komato to go over.

So, while we file patents in both wireline and wireless areas, the majority of patents are related to 5G advanced and 6G technologies. Specifically, even within that field, these are what are called standards-related patents. So, we closely follow the upcoming standards in 3GPP for 5G Advanced and 6G. Currently, like Release 19 is being discussed in 3GPP. And in anticipation of what's going to get standardized, we file patent applications. So, the majority of these patents are in that category. It's mostly 5G Advanced and 6G-related patents that are being provided.

Sure. Thank you so much. This is useful. I just have one follow-up on the first part of the question. So, how would you put, you know, the performance of Tejas Networks, you know, for X of that BSNL contract? Because I understand that, you know, that was one of the main things which is getting derailed. But overall, if you look at, you know, whatever plan you had laid out for FI25, for non-BSML part of the business, especially given, you know, there is a strong rollout which is happening on the data center where your products could be useful, how do you see that panning out for this year and also going forward?

Yeah, I would say the BSNR project, which we were planning to execute this year. The other part, there were other two major initiatives or major targets for the business. One was growing our wireline business to the Indian private telcos as well as internationally. So that transition is happening well. We are seeing a lot of the business growth this year, whatever the business that we had this year, has been driven by mainly our wireline products. And we see good adoption of that and good growth of that. So that part of the business is going very well. The other part of the plan was during the year, you know, get a lot more, you know, get ready for a lot more international business, especially for wireless. by getting to the trials and POCs and all those kind of things and get to some business closures during the year or early next year because this is a long cycle and we are a new player in this market. So even that part of the thing, I would say, is going very well because also if you see based on the credibility of our performance in BSNL, that's where we've got a lot of international partnerships going, right, with NEC and Rakuten and so on. So those opportunities came to us because of the credibility we built over there. So, yes, I understand that, you know, the DSM project last year was a huge sharp spike in our business, resulted in a lot of revenues and required a lot of investments from us that gave us the platform to really mature our products, building products, and go to the – take it to the international market. So that part of the story has played out pretty well. I think we are quite satisfied with that. The part that has not played out to expectation was the expansion and all those kind of things. And we didn't know what to happen. We know that's going to happen. That's why we have all the inventory. And also that is the part that got a bit delayed. And that's kind of showing in our financials. But once we get past that phase, I think we expect the rest of the business plan to play out as we were hoping to do and we were planning to do. So it's just that the transition phase has been taking a longer period of time than we expected.

Okay. Thank you so much for your answers and wish you all the very best. Thank you.

Thank you. Thank you. Your next question comes from the line of Karan Raja from 54 Ventures. Please go ahead.

Yeah, hi. Good evening, and thank you for the update. I noticed that it's been about three quarters since Mr. Anand Atreya resigned from his post as CEO. So I wanted to understand if there is any urgency in filling that CEO spot and what we can expect from the board and coming out of the resolution with regard to that.

Yeah, I think the board is working actively on an appointing CEO going forward. And, you know, so that's what the board is working on. And I think at some point of time, soon, there will be a CEO appointment for the company. But independent of that, I think none of our business goes on as planned, and our regular business operations are not really affected without the filling of that position. So I think the board will take its time, and he's on the project, and we'll be appointing a CEO at some point of time.

So, can we expect that in this financial year, or is this something that would be in the next financial year?

Yeah, it's not in my place to answer that question right now. But obviously, as you can understand, that there would be an active project, active work going on in filling this position. So, I'm not aware of the exact timeline. Understood.

The second question that I had was with regard to the delay in the 4G expansion. This leaves a couple of calls we had, and so did know that this delay. Is this delay attributed to the customer side? Is there something with the system integrator, so something to do with TCS? If you can give us some color on what this delay is attributed to. Because, obviously, answering the previous question, you did mention it was a big disappointment for you all as well, that this order has not come into execution in this financial year. So, what exactly is this delay attributed to?

Yeah, it is mainly to do with the operational readiness of DSNL for rolling out the network. They also have to be prepared with their site readiness and all those kind of things. So that's what is basically holding up the rollout of this project. And as you know, in multiple forums, both BSNL management as well as, you know, the DOT or the ministry has commented that expansion is going to happen, that's going to happen very soon kind of a thing. So the only reason right now is the readiness of BSNL to take the equipment and deploy it in the network.

Understood. So is it safe to assume that there is no issue with our products or any integration efforts by our system integrators, which is TCS?

Yeah, those are not that have changed in this project. Understood.

I think one other question that I had, because we have spoken about some of the other wins, you know, The 5G, private 5G across mines and some other locations and also the data center opportunity. Can you please share some light on the market opportunity in these two? What is our right to win there? And what kind of market share are we hoping to achieve in the next maybe three years?

Yeah, so it's hard to answer the market share kind of thing. But we see these new application wins are something very encouraging because we're seeing a lot of this private 5G wins for deployments in mines and ports and, you know, some campuses and all those kind of things. So, and having a few set of reference wins in India can help us in, you know, in marketing and selling this globally as well. So, our right to win is the products that we have. You know, as you know, our current BSN product is a 4G upgradable to 5G. So, both our VVU as well as radios are software and hardware upgradable to 5G services. So, it's basically the same set of products which are getting deployed for 5G applications because, you know, the bands in which they are getting deployed are same or similar to what we have right now. So, with small adaptations, we're able to meet those bands in which the private 5G rollouts are happening. So that's one part of it. I talked about the data center application also. As you know, we have our enterprise switching portfolio of products, and which we have scaled up a lot to larger products for data center switching as well. And even though that was not an initial target segment, but now with our new set of products and the data center opportunities opening up, We saw a good reference win for the networking inside a data center. While, you know, the interconnect of data centers, that's the market we have been, you know, we are playing all along, and our optical products have a very strong play in that kind of applications. This is the first time we have been inside a data center with our switching products, and that's a very encouraging sign for us. So we are going to try to replicate this win, this solution, in as many applications that are accessible to us.

Understood, Mr. Roy, but I will have to push the envelope here because obviously internally you all would have certain targets that you all would want to hit with private 5G and with data centers. So, you know, if you can share some light as to what even the estimates are, because obviously you all have had a few deployments, you all would know how many such accounts can be achieved in a given year. So, something that gives us, you know, at least the direction in which the company is going or what we're chasing, where we're fighting, you know, at least something that gives us a sense of, you know, what are the internal metrics based on which we can judge sales.

So, as I said, we don't have any specific target in terms of how many wins and all those kind of things. And in most of our, you know, every product line that we have, right, I mean, we go by the engagement that we have, the customer opportunities that we see, you know, And where we find opportunities and how we can pitch our products and solutions. And we set targets more from overall, you know, business growth and business win kind of a thing, not specific to any particular application, right? And these are new markets that we're getting into. I mean, as you know, our wireless play has been mainly in the macro area for mobile operators. And that's where the larger deals are. The private 5G applications are many in number. Each of them are relatively small deployments. You can understand the territory or the area over which it is deployed. Those are fairly small, right? So the larger deals are, of course, for the macro. But the good thing is that with this, this opens up a new application for us, right, The private 5G space. So from the point of view, it gives us mileage, credibility, and visibility in this space. So that's probably the largest benefit. And as I said, as of now, we don't have any target which says that we have to achieve this kind of numbers using this particular application or the other one. I mean, these are initial wins, and that's the reason why we'd like to kind of share it with you all, I was saying that these are new applications because on an ongoing basis, you know, the standard applications of mobility or FWA for wireless or for broadband or data center interconnect or, you know, metro aggregation, those are standard applications which are ongoing and which are driving our business. We thought that these are new, significant events that have happened that can open up opportunities. But right now, at this time, we don't have the opportunity to really size up and set targets in this area.

I understand. I would hope that, you know, over the next perhaps couple of quarters, once there's more clarity on this, we do have something more concrete. Obviously, a big risk factor for our company is the heavy dependence on a single anchor customer and that anchor customer being a government sector undertaking. So, you know, obviously, I would expect that, you know, in a couple of quarters when we have a little more experience in these realms, we would have more realistic targets or, you know, expectations of our market. Thank you so much for taking my questions. I'll go back in the line.

Thank you. Thank you. Our next question comes from the line of Pratap Malival from Mount Intra Finance. Please go ahead.

Hello. Hi. Am I audible?

Yes, Pratap.

Hi, sir. Thanks for taking my questions. I just had a question regarding the BharatNet order that we called out that we've won about 7 out of the 12 packages announced so far. And I believe the company's notification said that it will be deploying over 50,000 plus routers. So I just wanted to understand what would be the approximate order size of the BharatNet cumulatively and over

what duration do we see this being implemented?

Sorry, what was the last sentence?

Duration over how many years? Over how many years? Yeah.

Yeah. So, okay, so this particular order is for Phase 3, BharatNet Phase 3, and for all the routing products. I would say implementation period is over next two years. Yes, but what would be the order? Yeah, order size, I think it's, again, because it is multiple circles coming from multiple SIs. So it's a large order size, but difficult to give the numbers.

I understand the point, but see, if he's called out that, you know, we'll be deploying over 50,000 plus routers, and, you know, I mean, you know that at what rate we'll be supplying, surely you'll have some idea. So, if you can just give us some ballpark figure, not an exact figure, but just some ballpark idea of where the auto site could be, so that we have more clarity of how much businesses we can actually expect to come in, you know, how the auto book can build up.

Yeah, so actually

there are few of this which we have received the orders, and then few which are in the negotiations still. But I think because we are working with multiple SIs, it is not from one particular person. So, yeah, I'm sorry that it would be difficult to share the numbers there on the deal side. Normally, we don't do customer-wise deal size announcements.

Okay, so does our order book currently involve any orders from BharatNet?

Yes, the current order book which was shared by our CFO, Sumit, that includes BharatNet orders also.

And we expect a significant ramp-up, or is it like we've got the initial orders and we expect a large ramp-up, or just some color around that, even if it's purely qualitative, just so we can understand the detection?

Okay, so we got seven circles, or seven packages, as we mentioned, and a few more are still expected.

I also wanted to add that this is connecting the network at the block level, and so this is forming the backbone of the BharatNet Phase C network. So there is the last mile of BharatNet, which is to be built, and that will largely be built using G-Bond equipment and all. So, that rollout, you know, some parts will happen and some parts will be happening. So, there is a lot of build out that in Bharatan phase 3, which will be connecting the last mile, the villages, basically. So, that will be another part of the project, and this is mainly for building the backbone connecting the blocks. Okay, understood.

And just one final clarification regarding our international expansion. You said that, you know, we are in the final stages of some commercial negotiation. So, is this including the one, the deal that we may be pursuing through our partnership with Rakuten, or is it more in the nature of G2G deals, you know, just some color around that?

If possible, then what could be the expected size of the deal?

Okay. So, on that, again, as Arnav was mentioning, that previous quarters, we were involved in some of the trials which were happening, And those are moving towards commercial negotiations. And the deals are basically the mixed kind of deals. There are some of the deals where we are positioning our equipment directly. There are a few of the deals where it is in relationship with either NEC or with Rakutan. So, it's kind of a combination of, I would say, all the three kind of solutions which we have. Closures should be happening in the coming months. Again, varying kind of deal sizes, varying kind of number of sites, multi-band, single-band, those kind of variations are there. But, yeah, so that's expected in the coming weeks. Yes. Okay.

And would we be considered for any network expansion from Vodafone's side? Because I believe that there was a news article where an official from Vodafone had said that they are trialing pages equipment. So, is there any news on that side?

Yeah, so this was basically a comment from Vodafone Idea Management, which was there. Yes, we have been trialing out, but again, the further news on that, we will be able to give only after discussions with them.

Okay, sure. So, thank you for taking my question.

Thank you. Thank you very much.

Thank you. Our next question comes from the line of Dhruv Shah from Ambika FinCAP. Please go ahead.

Hi, sir. Sir, is it possible to quantify the opportunity size of the POCs or the commercial discussions?

See, as I said, from a geography perspective, these are some of the deals which we are working out across Asia Pacific, then in Latin America, in Africa, and in Europe also. So, varying There is, again, different stages of negotiations which are there, and I would say a significant number of sites also, but difficult to quantify the number as of now.

But do you expect anything to come from next year onwards? Is it possible?

As I said, yeah, coming in, it would be expected in coming months, because what happens is that in all these discussions, there is, number one, from the proof of concept itself, it has to integrate with the existing environment, we have to show all the parameters, those kind of things, and even from negotiation perspective, it always depends upon their deployment plan. So, when exactly it will get close, I think, again, difficult to say that, but expected in the coming months.

Thank you, sir. One question for Sumit. On a current cost fund rate, have we thought that in how many quarters runway do we have before we actually start thinking of fund rates considering our current cost base is almost, you know, we are making almost 150 crores of EBITDA. So, have you thought of any fundraise do we need or do you think that we have sufficient cash and we will not need any other fundraise?

I think the evaluation of capital structure is sort of an ongoing exercise. And right now there is no proposal of fundraise that we've discussed or that is in discussion at the board level.

And there's no discussion on cost-cutting as well.

No, we've taken a lot of cost. I won't say cost-cutting, but there are a lot of cost-optimization, cost-dationalization efforts that have happened through the year. And we've also actively looked at optimizing or planning the capital performance in line with the product development, and that's an ongoing effort. But a lot of it has happened through the course of this year. But at the same time, I think, as Arunab also alluded earlier, a lot of this cost is on account of investments that we're doing in this product development. And we've come to a certain stage over the last two, three years in terms of making... While we continue to focus on investments, but at the same time, there's a lot more optimization in terms of how we go about it.

Okay, because if I do a rough math on a reverse calculation basis, we X of, let's assume, BSNL, 4G, whenever it comes, we need almost a 3,500 crore annual turnover X of BSNL just to have a bit break even if my calculation serves me right on a higher gross margin. So that's why my question pertains that do we need a fundraise because, you know, our order book stands at 1,300x of BSNL. We are nowhere close to that 3,000 figure for an EBIT break even.

Yeah. Look, I think I mentioned this in one of the earlier calls as well. I think that it's a function of, yes, you rightly mentioned revenue, but also to some extent, margin expansion. That, you know, with the international business in particular, we would expect to see. And that would essentially respond to the revenue requirements for profitability to come down.

Thank you. My next question comes from the line of Feren Kumar, Takudlal, Besai, and Investor. Please go ahead.

Yeah, my question is mainly for Sumit. A few clarifications on the income statement. So, I see depreciation and amortization as a fairly sizable expense, 104 crore in current quarter. Is it correct to assume that most of this is actually amortization on the R&D capitalization?

Yes, a significant portion is on account of amortization.

And one more question is on the other expenses line. So that number also seems pretty significant. So can you throw some light on some kind of a breakup?

So see, I think we mentioned over the last couple of quarters, There have been certain one-offs that have come in particularly related to certain required provisions, et cetera, which get reflected in the warranty provision, which becomes part of these other expenses. And then they're also related to, you know, part of the inventory or the consumables provisions that we had to do in the previous quarters. Some of that is coming under other expenses, and hence you see a bit of higher number there.

Okay. These numbers are pretty high even during, let's say, year-ended. I mean, FY25, and I mean, it has been there for many, many quarters. So, I mean, do we have some site, some time in future where these numbers can come down to some reasonable numbers and where this can be?

So, I think just want to clarify on that FY25 numbers being high, I think it was also on account of the higher revenue at that time. So, one part of this other expenses is related to shipment logistics related expenses and travel related expenses. Some of these are variable in nature, which were higher during the last year as we were going through the execution of the contract, the BSNL 4G contract.

The second question is on the side of gross margins for wireless POCs that we are engaging. So, for example, as you mentioned, this quarter was largely wireline. I can observe that gross margins are pretty good compared to what they were during the wireless business. So, whatever we are trying in international markets or Indian private markets, can I expect that the margins on those, whenever they materialize, will be quite a bit better than what we had seen in BSNL business? Yes.

Yeah, hi, Ren. This is Arnav. Yeah, as you know, that the SML deal and the India market, you know, because of the sizes and the ARPU challenges, you know, it's a very, very competitive market. So the price levels in India are quite different and quite challenging as compared to international markets. So, yes, in the international markets, wherever we are engaging and whenever we are in commercial discussions, the prices are at a much different level, and the margins are also at a different level. We have time for one last question.

Sure. We'll take the last question coming from the line of Venkat Suresh Kumar from Buram's Financials. Please go ahead.

Yes, sir. Good evening, sir. Sir, I am an investor of stages from the three years. Sorry, two years. Actually, continue three quarters is loss making, sir. Only for at the time of the SML 4G, you will see good profit. Right. In future, that type of business will come or it will be continued to losses in so many quotas. I have purchased shares around 1,300 rupees. I lose a lot of money at the investor point of time. But I am not asking, but you can consider shareholders a concern.

You can tell me.

Yeah, yeah, I understand. I understand. I understand your question. And as I said, the BSNL project, that one big thing that we did, while it was a big spike in your revenue, and I also heard a comment about BSNL being an anchor customer, I don't see BSNL being an anchor customer for the company. I would say the BSNL project was an anchor project to really develop and mature our products and scale our operations, you know, to a large extent and build our – and being a really good platform for building our wireless business. And this is a business that we also want to – we see a lot of international opportunities for, and we want to take it out there. And as you can see, that we have made some progress. Of course, the proof of the pudding is when we actually convert into business. But the way I would look at it is that in the phase of this transition, our strategy was, you know, while building on the BSML business and the add-on order and so on, we used this year and the transition and be able to build a lot of wireless business globally, right? So, from that point of view, I think we have made a lot of progress. Yes, this transition is taking a lot of time, and in between, in the meantime, our financials are not showing the way we would all like it to be because, you know, the delays of some of the add-on orders and all, but, you know, we don't see that BSNL and BSNL projects are the lifeline or the anchor for Tejas, right? They were a platform. They were an excellent platform for us, and we are very grateful for having got that opportunity. But I think the plan for the company is really to take this global, to private telcos, to international operators, and so on. We are on the way to doing that, and we are all very bullish about reaching them there at some point of time, And that's the reason why, you know, we continue to invest. We keep our head down and basically try to execute and take our business forward in all that direction.

So with that, I'd like to thank you all for attending the call.

One question, sir. Last question. So actually, you 5G upgraded in DS and L contract. That size of order, huge or small, and in question, your data center business, you can do single company, your company doing only for your business products, you do for value and to communication, cybersecurity and data products. You are marketing or your own products? You are tied up with Valiant, cybersecurity, data center products. Your own or Valiant products? And BSNL 5G, how much size of this is upgraded? Please tell me.

So, okay. Okay, so first of all, I'll answer the Valiant question. So, the data center switching products are our own. Whenever you see we are selling with Valiant products, those are mainly in the utility networks where we are doing the optical fiber, the communication part of the optical fiber, and they are on what is called the teleprotection application. So both of these two come together, our products and Valiant products come together for building solutions for, sorry?

Cyber security products, Valiant cyber security forces, you are marketing?

No, no, no, no. We don't market the cyber security products, mainly the teleprotection products. So this combination works for the utility market for smart grids and all those kind of things. The other part about VSML 5G, there are two parts to VSML 5G. One part is the upgrade of selective sites to 5G, which is part of the existing tender. And we have done trials, and there are some ongoing trials as well. So we don't have visibility when that upgrade will happen on the selected site. Size of 5G business. Yes, that's what I was talking about. There is a part called the 5G upgrade of the DSML network of a select number of sites, and we do not know. And that's going to be an upgrade on our existing equipment. We do not know the sizing or the timing of that. kind of thing, how many sites they're going to upgrade, but BSNL is also looking to build a nationwide 5G network at some point of time, and when that comes, there will be fresh bidding and new opportunities for us, and those will be another nationwide build-out when that happens, right?

This is the 4G size of business, this is the 4G size of business in 5G upgrade, not a little business.

Well, any nationwide rollout will be of the size, right? And it depends on, as you know, the last project had 100,000 sites, 1 lakh site, so it depends on the number of sites they're going to roll out 5G on, and you can estimate what would be the size. So if there's a nationwide rollout of so many sites, that, yeah, the project size will be of that magnitude, right? It could be more or it could be less, depending on how much the rollout is.

You take, you take seriously, try to develop business, shareholder, actually, you see shareholders also comes in, sir.

Of course, you know, that is, we are all here because of our shareholders. We really appreciate your support for the company. Thank you. Thank you for being with us. I understand this is a difficult time because of our business and the stock price and all, but all I can say is that we are bullish about our business. We are doing everything that we can to execute on this, and we are confident that we get there. It's a transition period which is taking longer than we would have liked. Thank you very much. Thank you very much. Thanks, everyone, for attending the call and look forward to interacting with all of you at the end of next quarter. Thank you.

You can expect next quarter positive soon.

Hello?

Sorry to interrupt, sir. The line for the management has been dropped. Please stay connected while I reconnect the line for the management. Ladies and gentlemen, we have the line for the management reconnected. Yes, sir, please go ahead.

Yeah, no, as I said, I made my concluding remarks on, you know, thanking all the shareholders for... Thank you.

Next quarter will be coming positive, sir. Next quarter will be coming positive.

It's, you know, we don't give guidance on future performance, unfortunately. Unfortunately, I'm only giving you the outlook, the guidance for our future over a period of time, but, you know, quarter-to-quarter guidance we do not give. We are not in a position to give right now. So thank you once again to everyone for attending the call, and look forward to interacting with all of you at the end of next quarter.

Thank you very much. On behalf of ICICI Securities Limited, that concludes this conference call. Thank you all for joining us on Human Outers Connect Your Lines. Thank you.

Thank you.