Bengaluru-based Tejas Networks, the second biggest player in the Indian optical equipment market (having 15 per cent market share), plans to raise Rs 776 crore through an initial public offer (IPO), which opened on Wednesday. The Tejas Networks IPO is a mix of both fresh issue and offer for sale by existing investors. The Tejas Networks IPO, priced in a band of Rs 250-257, will be open for three days till June 16, (Friday). Investors can apply for the issue in a lot size of 55 shares. Tejas Networks on Tuesday raised nearly Rs. 350 crore from 17 anchor investors at Rs 257 per share. The IPO was subscribed 96 per cent as of 12.30 pm on Friday.
1) The Rs 776 crore IPO of Tejas Networks comprises fresh issue of Rs 450 crore and an offer for sale of Rs 326 crore by existing investors and management, who want to sell 1.27 crore shares to the public. Post the issue, promoters and institutional holding in Tejas Networks will come down to 66.2 per cent from 100 per cent now. Out of the issue proceeds of Rs 450 crore, the company plans to use Rs 303 crore for working capital requirement, Rs 45 crore for research and development and the remaining Rs 102 crore for general corporate purposes.
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3) Less than 20 per cent of cell towers in India are connected with optical fibre, as compared to 70-80 per cent in developed countries. Further, evolution of high speed internet technologies would require existing telcos to upgrade network capacities for higher data traffic, which augurs well for the growth of the company. Domestic brokerage Angel Broking says the optical network capex in India is likely to grow at 14 per cent compound annual growth rate (CAGR) over FY2014-20.
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5) At the upper end of the price band, Tejas Networks' shares are valued at 29.3 times its FY17 earnings and 3.7 times its book value. Angel Broking has a "subscribe" rating on the issue. "The company's debt free balance sheet post IPO coupled with the government's push for digital India would support the growth momentum," the brokerage said. High client concentration, some outstanding legal and tax proceedings to the tune of Rs 159 crore and currency fluctuations are key risks in the business of Tejas Networks, the brokerage said.
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