More than 450% Gains for Tejas Networks in the Past Year. What Next?

Shares of telecom equipment maker Tejas Networks are in focus of late, falling as much as 12% in the past two trading sessions.

This comes as the company has a multi-year contract to build Afghanistan's high-capacity national optical transport network.

In the ongoing Afghanistan-Taliban crisis the deal might get jeopardised.

On 15 August, the Taliban captured Kabul, almost 20 years after the US launched its global war on terror. The city fell to the Islamist insurgents without even a fight as Afghan President Ashraf Ghani fled the country.

Despite the recent fall in Tejas Networks' shares, they are significantly up on a year to date (YTD) basis.

So what has aided the stock?

Factors aiding the stock

Tejas Networks has been on an uptrend after Tata Sons' subsidiary Panatone Finvest picked up an 8% stake as part of the Tata group's plan to acquire a controlling stake in the domestic telecom equipment maker.

This stake was picked for over Rs 1.9 bn through an open market transaction, on 3 August. The shares were bought from Samena Spectrum Co, at an average price of Rs 258 a share.

Tejas Networks had informed the BSE that Panatone and some other companies of the Tata group would acquire up to 40.3 m worth equity shares, representing 26% of the emerging voting capital in accordance with market regulator takeover regulations.

The company's CEO Sanjay Nayak said this association with Tata group will accelerate the realisation of this vision and enable it to address the large market opportunity.

The deal with Tata Sons comes as a great positive as recently, Tata Sons entered into a 5G deal with Bharti Airtel. Under the deal, Airtel will pilot and deploy the Tata Group's locally developed solutions as part of the telecom operator's 5G roll out plans for India.

There's also positive news on the rating front. Rating agency ICRA has placed Tejas Networks ratings on watch with positive implications.

Given the huge opportunities in 5G space, the company is set to benefit.

Tejas Networks has a presence in global markets and has several competitive products and expects to leverage them in the 5G market.

Why the stock is under pressure lately

Shares of Tejas Networks came under pressure this week, ending in the red for the past three trading sessions due to the Afghanistan-Taliban crisis.

It hit 5% lower circuit on Monday and fell another 5% yesterday. The stock is set to end lower today as well.

Recently, Afghanistan's president Ashraf Ghani resigned and the Taliban are now in control of the country. Tejas Networks' multi-year contract to build Afghanistan's high-capacity national optical transport network is jeopardised.

Since the announcement of this deal, shares of the stock has seen a spike, as this was deal quite important. The company's stock price has almost doubled since this deal was announced in January 2021.

In January 2021, Tejas Networks had announced that it had signed a multi-year contract with Asia Consultancy Group (ACG), a leading independent private company providing telecommunications infrastructure, managed and engineering services across Afghanistan.

ACG with its headquarters in USA, is a full life-cycle managed network service provider in Afghanistan for last many years.

As part of this contract, Tejas was supposed to supply its state of the art products to establish a high-capacity national backbone and packet access network in Afghanistan.

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Clarification to exchanges

After touching lower circuits for the past two trading sessions, the company issued clarification on having business exposure in Afghanistan.

Tejas Networks said it has no customer orders from Afghanistan that are pending for execution.

Also, there are no outstanding receivables from customers in Afghanistan and no assets of the company are located in the region.

Stock performance

Tejas Networks share price opened the day down by 3.5% at Rs 361 on the BSE against its previous close of Rs 378.70.

It hit lower circuits for the past two trading days.

After opening with a downside gap, it soon went up and made an intraday high of Rs 391, logging around 3.5% gains.

These gains can be attributed to the clarification made by the company to exchanges.

Shares of the company have a 52-week high quote of Rs 439 touched earlier this week on Monday, 16 August.

They have a 52-week low quote of Rs 56 touched on 4 September 2020.

Over the past one year, shares of the company have gained a whopping 464%.

Even on a YTD basis, the stock has turned into a multibagger, gaining 173% since 1 January 2021.

At the current price of Rs 370, the company commands a marketcap of Rs 34.7 bn.

Interestingly, as per the shareholding pattern, prominent investor Vijay Kedia has investments in Tejas Networks through his company Kedia Securities.

Kedia Securities holds 3.9 m shares of the company, which is to the tune of 4.17% of the total shares.

To know more, check out Tejas Networks' latest shareholding pattern.

About Tejas Networks

Tejas Networks is among the earliest telecom product companies that has built homegrown technology products in networking and optical backhaul crucial for high speed broadband.

It was incorporated in the year 2000.

The company designs and manufactures optical transmission products, which find application in cellular backhaul, high-speed broadband and backbone network of telecom service providers for the transportation of data and voice over optical fiber.

The company's products are also used in defense communication networks and by utility companies.

Tejas Networks successfully completed its IPO in June 2017 and is now a listed company.

To know more, check out Tejas Networks company fact sheet and quarterly results.

For a sector overview, read our telecom sector report.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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