Tejas Networks, India’s second-largest telecom networking product maker, opens its IPO issue for subscription today, with the goal of raising Rs. 780 crore. The firm's IPO has received mixed reviews from analysts, with some pointing out the strong growth prospects of the optical networking industry, particularly in India, which is Tejas' major market. India contributes to over 63% of Tejas Networks' revenues, and is expected to grow annually at 14%, thanks to rapidly rising government spending and data consumption.
On the other hand, Prabhudas Lilladar issued an avoid call for the IPO, citing "volatility" in company growth and profitability. Tejas Networks also depends significantly on PSUs including Bharat Broadband Network Limited, BSNL, Power Grid Corporation of India, and Railtel Corporation of India Limited, for revenue - this segment contributed to 44% of net revenues for FY17. This segment provides lower margins than the private sector, where Tejas has to compete more heavily with international firms such as Huawei for business.
Tejas Networks, as analysts point out, also has a very long net working capital cycle, at 166 days as on FY17. This coming with cyclical volatility may lead to unpredictable periods of growth for shareholders.