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Hello Readers


Next week, a telecommunication company, Tejas Networks Ltd is coming up with an issue. Let's take a quick look at the issue :



Issue Opens : 14th June 2017

Issue Closes : 16th June 2017
Listing on : BSE, NSE
Issue Price Band : 250 - 257
Minimum Bid : 55 shares
Maximum Bid : 770 shares
Minimum Investment Amount : Rs. 14,135


The Company 


Tejas Networks Ltd is an India-based optical and data networking products company with customers in over 60 countries. They design, develop and sell high-performance and cost-competitive products to telecommunications service providers, internet service providers, utility companies, defence companies and government entities (collectively, “Communication Service Providers”). Its products are used to build high-speed communication networks that carry voice, data and video traffic from fixed line, mobile and broadband networks over optical fibre. Currently, India is its largest geographic segment which accounts for 65 % of revenues, whereas it caters rest 35 % from International market. The Company is positive about boost in growth through opportunities arising out of the Digital India and the Make-in-India programs of the Indian Government. 


The IPO comprises fresh issue of shares worth Rs 450 crore and an offer for sale of 1.27 crore scrips by existing shareholders. Shareholders who would sell stake in the initial public offer (IPO) include Cascade Capital Management Mauritius, Intel Capital (Cayman) Corporation, India Industrial Growth Fund Ltd and Sandstone Private Investments. 


POSITIVES


  1. Tejas is the second largest optical networking products company in terms of market share in India, with a market share of 15% in the overall optical networking market.
  2. It has posted an excellent compounded growth of 33% in revenues in last 5 years. In 2012, the consolidated revenue stood at Rs.2014.22 Mn. which during the year ended Mar 16 stands at Rs. 6274.57 Mn 
  3. Apart from financial positives, Tejas is an renowned brand in various states in India.
NEGATIVES
  1. At price of Rs.257 the P.E is at 54.5, which makes it a very expensive stock to hold, moreover if we take an average EPS of last 5 years it comes out to negative. Also, EPS for year ended 31st March 2016 is highest in past 5 years as shown under : 
    Year Ended
    2012
    2013
    2014
    2015
    2016
    EPS
    -15.09
    -12.84
    0.45
    -2.90
    4.71

  2. The Company has failed to generate positive cash flows during past 2 years which too is a matter of concern.
  3. Moreover the company manages to earn a very low profits, it has made losses in 3 out of past 5 years. Investors should only look upon for the companies which maintain a stability in earnings.
Conclusion

The Company has priced the issue very aggressively and in no way it will be in favor of investors to invest in the company. The Company has not been able to earn decent profits except last year which i prefer to avoid (as there may be manipulations considering that they had to come up with an issue). I therefore, would prefer to stay away from such an highly priced issue.

For More Insights you can have a look at its draft prospectus filed with SEBI. Copy & Paste the link :  http://www.sebi.gov.in/filings/public-issues/feb-2017/tejas-networks-limited_34180.html

Disclaimer
I do not have any interest in this IPO. This article is purely for educational and awareness purpose and should not be taken as an recommendation to Buy or Sell the stock. Please consult your investment advisor before making any investment.

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