E I D-Parry (India) Ltd

NSE:EIDPARRY

Ladies and gentlemen, good day, and welcome to the Tejas Networks Limited Q3 FY '25 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Mishra from ICICI Securities. Thank you, and over to you, sir.

Good evening, everyone. Thank you for joining on Tejas Networks Limited Q3 FY '21 Results Conference Call. We have Tejas Networks management on the call represented by Mr. Arnob Roy, COO and Whole Time Director; Mr. Sumit Dhingra, CFO; and Dr. Kumar N. Sivarajan, CTO. I would like to invite Mr. Arnob Roy to initiate with opening remarks, post which we will have a Q&A session. Over to you, sir.

Thank you. Welcome, everyone, to the Q3 FY '25 earnings call. I'd like to -- at the outset, I'd like to mention that our CEO, Anand Athreya is not doing well and he is unable to join today's call. So we will be taking the call between me, Sumit, the CFO; and Dr. Kumar Sivarajan, our CTO.

Just to get started, I hope you got a chance to look at the slides. I think we were a bit -- took some time to upload. So the -- I'm in the first slide, so the Q3 net revenues were INR 2,642 crores, which is a significant growth, and it was flat quarter-over-quarter, but significant growth over FY '24. The Q3 PAT was INR 166 crores and the order book at the end of the Q3 was INR 2,681 crores.

In terms of the highlights for the quarter, some of the significant events that have happened. For the wireless business, we have completed RAN supplies for 27,000 sites in this quarter, leading to a total of 86,000 plus sites delivered till date in BSNL's 4G, 5G network. I want to take a little bit of time over here and kind of share the incredible magnitude of this achievement that we have done with our team.

So these are radios developed over 5 different bands from 700 megahertz to 2.6 gigahertz. The single band, dual band radios and achieving not only the design of this product, but the volume manufacturing of supplies, reliable supplies to the network, which has been deployed. This has been an incredible achievement. And as you all know, BSNL themselves have reported that more than 65,000 sites have been deployed and are radiating and they are getting increased customer traction and adoption in the network. So all in all, it has been a tremendous achievement by the company, and we're all proud about the customer success that has come along with this.

So apart from this, with our end products, we have some -- we started a few, and we have a few ongoing POCs with domestic operators for 4G and 5G. This POC cycles because they are new products, these POC cycles usually take some time because they need additional functionality development, additional KPI parameters and all these kind of things. So there are some cycles or evolution that happens in the product during the POC cycle. So this takes some time.

Apart from this, in this -- in Q3, we had started major engagements with multiple international operators for our high-power 5G radios. And they have mainly been -- we've seen a lot of interest in our high-power radios, and we see interest in doing country-specific band customization for these radios for both mobility as well as fixed wireless access applications.

For the wireless business, one of the highlights has been signing a 3-year contract with Vodafone Idea for supplying equipment for their pan-India 4G and 5G mobile backhaul network. This win was a result of very extensive testing and qualification of the equipment, both in the lab as well as the field. And this has been mainly our packet transport as well as our optical DWDM equipment. So we have already started the supplies and the deployment is happening as we speak. And this is a very significant achievement for the company and the success can mean a lot of replication of this business and not only in Vodafone, but in other customers as well.

We have been selected as a broadband equipment supplier for state-led BharatNet Last Mile Connectivity in Tamil Nadu. And this has been another significant win, and this is around our -- mainly our [indiscernible] equipment based on GPON. We also successfully completed the POC and received the initial purchase orders for a network modernization win in the U.S. We had earlier reported the solution win, and then we had a successful POC and first office application in the network. And based on that, we have started receiving the orders for the larger deployment into the network. We think that successful deployment of this network can lead to many other opportunities in the U.S. with similar network modernization opportunities.

From our existing customer in Asia, we received, again, major orders for the expansion of the mobile backhaul network, and this has been for, again, our packet transport and WDM equipment. From a corporate update point of view, as you've seen from our press release, Sanjay Malik, who was former India Country Head of Nokia has joined the management team as EVP, Chief Strategy and Business Officer. Sanjay comes with a very extensive experience in our industry, and he has led Nokia's business successfully in India over a long period of time, and we really value -- very excited to have him on board and really leverage his experience and skills in taking the company's business forward.

I have been elected as the Chairman of TEPC, the Telecom Export Promotion Council for '25 to '27 and succeeding N.G. Subramanyam, our Chairman, who was the past Chairman for TEPC. We have won the Global Connectivity Award for Best Hardware Innovation at the Capacity Europe Conference in London, and this has been for our ultra converged broadband access equipment.

We have significantly expanded our office and manufacturing facilities in Bangalore, in line with our business and headcount expansion and we have almost doubled our floor space capacity, both for our R&D as well as for manufacturing. And as part of this, we have set up the center of excellence for wireless communications in our new facilities for advanced research in frontier technologies and stand-alone architectures for next-generation wireless networks. I will now hand it over to our CFO, Sumit Dhingra for walking us through the financials for the quarter.

Thanks, Arnob. Good evening, everyone. For the quarter 3 FY '25 done a revenue of INR 2,497 crores and operating -- other operating revenue, which is mainly the PLI incentive of about INR 145 crores. So total revenue from operations is INR 2,642 crores, which is roughly about 4.7x of the previous year. Quarter 3 EBIT was INR 260 crores, PBT of INR 211 crores and PAT of INR 166 crores.

You see the margins or profitability a bit lower than the previous quarter, and that's mainly on account of lower change in product mix. And also, there are certain provisions for old inventory and higher depreciation for certain R&D equipment that we've taken in this quarter.

Moving on to the next page, our inventory levels stand at INR 3,127 crores, come down marginally over the previous quarter. Inventory continues to be high mainly due to the ongoing project execution and also certain procurement for high lead items, high lead time items that we do on an ongoing basis for future projects. Trade receivables of INR 4,730 crores, again, there's an increase in receivables, but this needs to be also looked at in context of our revenues that we've done over the last couple of quarters in particular. And as we go along, as the collections go up, we would see the receivable numbers coming down.

We've collected about INR 2,000 crores during this quarter. And the other thing I want to highlight is this receivables are essentially gross of the advances that we received from customer. So while the advances are in current liabilities, corresponding receivables are covered under trade receivables. So as we -- as and when the milestones occur and those -- the receivables will get adjusted against those advances, that are there in the current liabilities. Closing borrowing position was around INR 3,157 crores and cash of INR 643 crores. Borrowings are mainly on account of working capital purposes. With this, I'll hand it over to Arnob to take over the rest.

Thanks, Sumit. Moving to the next slide. I'd like to give some color about the business of Q3. So in terms of revenue mix, in the India government business has been 3% of our revenue, and there has been a year-over-year decline of 40%. And as you know, government business is tender-driven and lumpy. So there are seasonal variations of revenue based on where we are in project cycle, and this is a reflection of that. India business has been the dominant part of our revenue.

But again, I like to mention as in the past that this is dominated by the 4G shipments to BSNL network, but shipments to TCS, who are the final system integrator. The other parts of the private business also has been Vodafone and a few other private operators in India and international. The international business has been 3%. It's still a small percent share of our overall business and our -- we have -- while we have a lot of focus in growing in terms of business, I mean, this is still something which is going to take some time to really mature. I mean a lot of really good engagement, a lot of really good trials and all those kind of things happening. I mean there's a slow and steady increase in the business traction that we see, but we see in the longer cycles of business conversion into revenue.

Our closing backlog was INR 2,681 crores. As you can see, a small segment of smaller -- relatively small portion for the international business. And a lot of the backlog, we had anticipated a larger backlog over here driven by some of the key opportunities, large opportunities that we were targeting, which is one of them was the expansion of BSNL's 4G network and 5G upgrade, BSNL's 5G SA network build out. This is for the 5G the performance bands. And like Indian Railways, the collision avoidance system. The private 5G application for a large enterprise in India, where we have done extensive trials and we've done successful trials and discussions are in advanced stage.

And then the band customization that I talked about for 5G radios for a few tier 1 international operators. Those are some of the large opportunities that we are working on wireless. For wireline, BharatNet Phase 3, which has been in the news recently, where the results for the tenders have been announced and are still getting announced and the system integrators have bid.

I think most of their the tender results have been announced and some of them, the orders have also starting to get replaced. And this is at a stage where the SIs are going to start starting to engage with us with the OEMs in terms of the product supplies, and this is the phase that we are in right now. And over this quarter and early next quarter, we expect this to happen. Then the expansion of WDM backbone for the utilities segment, we expect significant investment to happen over here but the large tender opportunity over there have got delayed. And then we talked about FTTH and network modernization deal with multiple operators in Middle East, Africa and Americas and the Metro network expansion for private operators in India for mobile backhaul and enterprise services. These are the key opportunities that we're targeting.

Some of the large tender-driven opportunities which the expansion -- I mean, on the government opportunities, the expansion network, 5G, tower, et cetera, BharatNet, I mean they are all live opportunities, which are maturing as we speak, and we expect them to convert Q4 and Q1 of FY '26. And that should contribute to our business for FY '26. So at the end, I would also like to kind of recap. We still see very strong drivers for our business, both in India as well as internationally. We see continued investments in fixed and mobile technologies worldwide.

The drivers remain the same that we discussed, mainly the cloud enterprise, digital transformation, 4G and 5G have a long deployment cycle. There's a long runway of 4G deployment also, long tail of 4G and 5G deployments globally. Massive investments in broadband connectivity, both in India as well as worldwide in Europe, U.S. and all other geographies. Modernization of utility networks in for -- across -- and this is also a phenomenon. This is across the world digitization of cities and economies.

And on top of these, I think the new -- the new major investment that is happening is setting up AI data centers and the networking within the data center as well as the connectivity. This is going to be a major driver for networking business for us. You've heard about very recently, the announcement of about $500 billion of investment in building AI infrastructure. So similar kind of investments are happening across the globe in all geographies. So that's also expected to be a major driver for our business.

So what it means to us is our investments in line with those are for wireless, of course, developing state-of-the-art 5G RAN equipment, supporting diverse bands, which are the spectrum, which is available across the world, including massive MIMO radios, fixed wireless access solutions for the N78, to 3.5 gigahertz as well as the millimeter wave bands, support for both 3GPP and ORAN standards in our products and product architectures to support with any kind of configuration or architecture that the operators choose and we are starting to see a lot more traction happening for ORAN-based applications for 4G and 5G radios and all products are designed to support both architectures.

And by leveraging a lot of our -- the technology that we have from Sankya Labs in satellite communications, we are building advanced nonterrestrial communication capabilities in our 5G RAN equipment. And a lot of this is going to be part of 5G advanced as well as 6G standards. And we have a layup in terms of the access to the technology that we can have for maturing our -- evolving our RAN products.

From a wireline perspective, it just means higher speeds and speeds, higher capacity. So the state-of-the-art of 400 gig and 800 gigabits per channel has to evolve to 1.2 terabits per channel, and that's going to come out in this calendar year.

We're evolving our gigabit GPON to 10 gigabit and 50 gigabit PON standards. We are seeing a lot of adoption of FTTX PON technologies for enterprise and mobile backhaul applications because they offer a much more cost-reduced architectures for large-scale networks, and we are seeing the evolution from not only for residential broadband, but also to enterprise and mobile backhaul applications.

And that requires building additional technologies and protocols and stuff like that for our PON equipment, which we are investing in. And then evolving our converged broadband product, which is one of our flagship products, which provides a convergence of multiple access technologies providing broadband capabilities.

So these products we are upgrading, which is to support LTE for fixed wireless application. We're evolving it to support 5G, and we are upgrading our GPON to XGS-PON and higher speeds. So these are the initiatives that are going on in terms of supporting the business drivers and the growth that we see, the growth drivers of our business worldwide. We are also investing significantly in our business development and sales and one of the key initiative over here has been bringing Sanjay Malik on board and leveraging his experience in our field and his relationships and experience and to drive strategy as well as business development within the company.

We expanded our sales teams in North America and LatAm regions, which is a special focus area for us, and we are seeing quite a good success that we can build on. We have also expanded our partner networks in Europe, Asia and ANC regions as we build our -- start to build our business in this region incrementally. So with this, I come to the end of our presentation, and I'd like to open the floor for Q&A.

[Operator Instructions] First question from the line of Vimal Jamnadas Gohil from Alchemy Capital Management Private Limited.

Congrats on a good quarter. My first question is for Sumit sir. Sumit sir, if you can just help me understand on the gross margin front, while you've highlighted what are the levers that have impacted the margin this quarter. But if you can just help me understand what was the change in mix like in the wireless piece? My assumption is that when you say mix change, it would be the increase in the wireless equipment sale that would have happened this quarter.

So if -- and most of it would be coming from BSNL. And given the fact that BSNL would be at the fag end of execution, should our gross margins be much better going forward? That's question number one.

The second question is on -- if you could help us with an update on how is the overall business piece or the pipeline looking like ex of the BSNL deal, both in India and abroad. I do understand we have won some deals, but if you can just help us with some time lines, et cetera, that will give us better clarity. And lastly, just one data point. If you can help me what is our headcount like at the end of the December quarter?

So I'll take the first question on gross margin. And so basically, like I think we've mentioned also in our earlier conference calls, while difficult to comment specifically on project by project, but what it means by changing product mix is that even as part of one project, there could be various types of products, different configurations that we ship and depending on the product -- depending on the margins of the products that get shipped within a particular quarter, whether it be one project or across multiple projects, that would drive the margin movements up or down.

And the other point related to your BSNL project as again, mentioned this in the past, given that this being a first wireless project, margins were marginally lower than what you would see, let's say, in typically wireline business. As we go along, as our international business picks up, as we're able to widen our order book, we would expect margins to improve over the next few quarters. On your second question about the business pipeline, I think I'll ask...

Yes, yes. So -- our business pipeline has 2 portions. One is, of course, the run rate business from existing customers, which have long-term contracts, like an example is like the Vodafone Idea deal, where it's a 3-year contract for supply. So with most of the private operators, I mean that's what we have, and that's not there in our order book, right? We don't show that in our backlog order book. But the major components that we are banking on in our order book are the projects that we talked about for the expansion of BSNL's 4G network and 5G upgrade.

And as we speak, there are -- there is a lot of movement and progress happening over there. This is also something that we -- is going to be one of the significant opportunities that we are planning to close in this quarter and next. The other one is, if you are aware, BSNL is also planning on building their stand-alone 5G network in 3.5 gigahertz band. So that's another area that we have a very strong opportunity of [indiscernible].

And the third one was the Railway's Kavach, the collusion avoiding system. We did a successful POC over there for our 4G products, and we also wanted to try out 5G. And those testing has also been done successfully. We are waiting for the tender to come out and bid over there. Then I talked about private 5G application.

This is also a deal where we have completed the POC and we are in commercial discussions. The other one, we're talking about the engagement with a few tier 1 international operators, I mean that's a little longer cycle during the year because we are in advanced technical discussions and there will be some amount of R&D work required for the customization for these products. And for the wireline, the BharatNet Phase 3, I think that's been in the news and you're aware of it, and we have an opportunity for our [indiscernible] products, these projects.

We're also expecting very large deals for the utility segment for the power rail segment where they are -- there for the Telco business, they are significantly investing in growing their nationwide backbones, WDM backbones. And a lot of that has been built using our equipment. So as they upgrade it to from 100 gig to 400 gig and above, this is another major opportunity that we are lining up for. And the others, of course, the run rate, the Metro network expansion and all those kind of things. So that will happen consistently quarter-over-quarter over the year.

So these are some of the key deals in the pipeline that will go into adding to our backlog that we have and will contribute significantly, we expect to contribute significantly to our FY '26 business. The first question was about headcount. So as of today, we are upwards of 2,300 people, 2,350 plus to be exact and more than close to 60% of that is actually investments in R&D, the R&D people who are part of this team, part of the 60% of that is part of our engineering team.

And sir, one last question. On the BSNL deal, given the fact that our initial deal that we had with BSNL was for 1 lakh towers for their 4G equipment. We have already completed 86,000. Would it be fair to assume that next quarter, we'll see this execution being complete for the 4G part and post which in FY '26, we should see the 5G part ramping up. Is my understanding correct?

That's correct. I think this initial 1 lakh site order should get executed in this financial year. So what we expect to see is, again, an expansion of this 4G network because I think there is still some way to go for them to get coverage across the country wherever their plans are. So there will be expansion of this 4G network and upgrade of this network to move 5G as well.

And then separate opportunities for 5G in the performance band in the N78, 3.5 gigahertz bands. So there are multiple opportunities. One is the 4G expansion itself. There's a 5G upgrade of the existing network and then the 5G build-out in the performance band.

The next question is from the line of Ritesh Poladia from Girik Capital.

Sir, on BSNL, can you comment how is the working of this 86,000 sites? I assume substantial would be already operational. So are they working as per your expected parameters and managing peak process?

Yes. As you can see, we only report what we supply, which is more than 86,000 sites. But BSNL themselves have reported, if you see yesterday or day before that they have already 65,000 of these sites are live. installation is a little more than 65,000, but 65,000 are actually live and radiating and actually serving customers. So as far as we are concerned, I think BSNL is quite happy with the performance and quite happy with the customer acquisitions that we are doing.

So yes, I would say it has been quite successful as far as we are concerned, both in terms of the equipment supplies as well as the performance in the network.

So the product doesn't need much of tweaking. In terms of also feet traffic, it's working as per the parameter...

Yes, yes, yes absolutely. I think those things performance has been tested extensively during the POC that happened before we got awarded the contract. There was almost a year-long POC that happened, right, where every aspect of our equipment's performance got compared with the state-of-the-art that has been deployed in the country. So only after that, we got awarded the contract. So I think there is no concern on that front at all.

So POC and reality is same?

Sorry, what and reality?

POC performance and real performance is same.

Absolutely. And by the way, I mean, just to let you know, POC is not just some testing in the lab. POC has been across many sites in Chandigarh for more than a year, okay? It was built across the Chandigarh City, across many sites and testing has happened extensively over there. So it's not just a small lab testing, which has happened. So I mean, there is no -- so that kind of POC testing and the production equipment will have to be identical with the kind of testing that has happened.

Second question on R&D spend. I think roughly company is spending about INR 600-odd crores on R&D. Now if the company doesn't win substantial contract in next few months, so there is a possibility of revenue decline. So in that scenario, do you think in FY '26, the R&D spend can be curtailed? Or will you still maintain your R&D as whatever are your plans?

So I think without commenting on the revenue visibility and outlook, from an overall long-term investment perspective, I think we'll continue to build our products, continue to invest in R&D. As I mentioned in earlier conversations as well, it's an important part of what we do in terms of the industry that we operate in and our overall plans that we continue to build on the products and while we would always look at optimizing it and controlling the spend in general. But yes, at an absolute level, the investments in R&D will continue.

Then lastly, sir, what would be your import content in the materials? Or now is the domestic sourcing is higher?

Yes. So we have localized a lot of the components that go into our products, especially in our 4G, 5G radio. But having said that, I think most of the electronics -- active electronic components are imported and it varies from product to product. The amount of it can vary between 40% to 60%, 65% in terms of the active electronics that gets imported, the semiconductor chips. But a lot of the key ingredients in terms of enclosures, in terms of accessories, cables, connectors, mechanical items, a lot of the [indiscernible] components, a lot of that has been localized in India, including the entire manufacturing and assembly, which includes the PCB assembly as well as system assembly test and all those kind of things. So a significant part of the entire manufacturing operations are actually in India.

We have the next question from the line of Rishab Gang from Sacheti Family Office.

I want to understand on the international order front, I think we target tier 2 and tier 3 vendors. So how do we ensure that we win the orders from these kind of customers and the order does not go to the foreign players like Cisco, Ericsson and Nokia. Also, what kind of cost advantage do we really have? Because these players also have Indian R&D and manufacturing setup, right? So what is the cost advantage we have? And what can be the reason for maybe not winning an order and maybe Nokia, Cisco, Ericsson winning it? Like I want to have some granular insights on it, sir.

Yes. So when these equipment are selected, all the same equipment from different vendors are not identical. I think all of them are built with their unique thinking in terms of the network applications they want to optimize and serve well. So what usually happens is that based on the application and a particular architecture really wins. For example, as we've spoken before, our -- if you compare our equipment with other wireless equipment, right? I mean the kind of technology integration that we have done, for example, our -- the baseband unit integrates the transport functionality, right, the backhaul.

So in typical RAN equipment, an operator would need to have the radio, the baseband unit and a separate backhaul unit in terms of a router or some other transport equipment at the tower to really backhaul the mobile traffic. And we have done a very unique architecture where we integrated the entire backhaul network. And with that, that gives the operator significant savings in terms of his network deployment, right? So similarly, the baseband unit is also a converged network product, right, where you can also plug in additional modules, which can do broadband services for enterprises and homes and stuff like that, right?

So given a footprint in a particular area under -- with a tower, by adding those modules, the operator with a very incremental cost can actually reach out to many customers in that area for serving them with broadband services, right? So if you look at this, the technology still remains 4G or 5G from a radio perspective, but the total cost of ownership, the total cost of solution for building the network and the other applications that come along with it gives our implementation and architecture, a unique advantage, right? And that is where the cost advantage comes in.

The cost advantage is not in terms of if I use a particular component and my competitor use a particular component that do I procure it at a cheaper cost and kind of thing. That's not where the advantage really comes in. It comes into the architecture of the product, how you have designed it and what kind of applications it serves more cost effectively. So I just give an example of that.

And so similarly, I think we have many other examples even for our wireline products of how we build in the convergence of access and transport and all those kind of things, right? So I hope I've been able to answer this question. And that when actually operators value that kind of optimization, that kind of cost optimization that we get in the network, that's the key reason that we in.

So what kind of lifetime value, right, maybe a customer saves, right, because of all this integration and all? Like can you give some more granular insights on that, like some numbers or some percentage?

Well, it depends on the application, okay? The integration of radio with transport is one kind of optimization, the access to transport, that's another kind of optimization. And so -- and the cost savings are not only in terms of the cost of the equipment, but also in terms of the OpEx cost, right, being able to manage a single equipment with a single management software gives them a lot of operational savings in terms of their own training, in terms of power management, all these kind of things.

So you may get a cost of goods advantage of maybe 20%, 25% to that extent, but you get a larger benefit in terms of the OpEx also in terms of running an aircraft, which is converged or integrated equipment, right? So it's like it really varies, and these are just kind of indicative of where the benefit really comes from.

Very helpful. what would need to happen, right, for us to win India wireless orders, right? So I wanted to understand what is the status of ongoing POCs, right? When do you think the outcome of these POCs will come through? Also, if such POCs are happening for international orders, what do you think about that?

Yes. So as I mentioned that the live POCs are going on for operators in India, and we think probably in this quarter or in Q1, we should be able to see some success in that in terms of additional orders and additional deployment. For international customers, we have a lot of engagement. I mean they -- obviously, our success in BSNL has given us a lot of visibility globally.

And people see our equipment and see our architecture and the efficiency of our product, and they are very interested. And there's a lot of discussions which are going on in terms of how do we customize it for their specific bands, which are there in their countries, right? So that's what is going on. So those will take a little longer to really convert because that will require some amount of customization as well. But that's the kind of engagement that is happening for -- in the international market for our wireless equipment.

Just one last question from my side. On the international front, right, we have said that we are expanding teams in North America and LatAm region and partner networks in Europe, [indiscernible]. Can you give some numbers, right, or some insights on how we have performed -- how we have expanded versus last year, right, or maybe 2 quarters before. Some numbers on headcount in the sales team outside India or partner networks outside India like that?

Well, with respect to last financial year, we have grown our teams by more than 50%, 60% in those regions, right? We have added at least in the U.S. and LatAm, we've added at least 6, 7 people, both in terms of system architects, senior sales, marketing people as well as account executives. That's a significant increase in headcount. Partner network in other regions. In every region, we've added 1 or 2 partners based on their geographical territories. So that's roughly an example or quantification of how we have invested in terms of sales.

And how does this partnership work? Like do they -- how do they help you in getting the orders? Just if you can give some insight on that?

So the sales partners, basically, they are people who have operations local to the region. And there are many countries where you need to -- the business is done in the local language, right? So they are people who are set up over there who have the expertise of building telecom networks, who have the expertise of supplying. They understand the technology well. They have the customer relationships.

They have the experience of building networks using these technologies. We have countrywide presence in those countries, whether Indonesia, Malaysia, maybe in the Middle East and all, where we need on the ground presence and country presence for building networks because that's how our equipment is deployed. So we need that we need local language support for dealing with the customers as well as for handling business at remote locations within the country.

So those are the nature of the partners who are there, people with significant in-country presence, significant local language support and significant customer relationships in those regions. So those are the people we work with in terms of partnering, in terms of sales and supplies and deployment and support.

The next question is from the line of Advait Lath from Nippon India Mutual Fund.

So just congrats on a solid set of numbers. Just picking up from the previous question. I just wanted to know what is the environment we are dealing with in the North American continent and LatAm in terms of the regulatory environment, especially because of regime changes, et cetera, and also the tariffs that we might be getting incurred upon us because of this and how we are going to deal with it and also the lead times within these continents?

Yes. So in terms of regulatory issues, there are really no issues. I think the only regulatory thing we need to meet is the performance of the equipment because these are advanced equipment, and they have to meet the global standards or the North American and LatAm standards, the country-specific standards in terms of their performance, the safety, the radiation, all those kind of things. Those are the kind of -- the FCC and UL and those kind of agencies which are there. And you have to have your equipment certified against those standards before we ship to those markets. And when we design our equipment, before we take it to production, we make sure that we have tested for those standards in various markets. Many of them are very, very similar.

A few of them have one-off extra features, but we make sure that the equipments are designed to meet the regulatory requirements of performance, safety, radiation and all those kind of things right and operator safety, all those kind of things for various markets and also make sure that we get those certifications for our equipment, which we put on our equipment before we ship from there. And that testing happens actually in India because all those global certification labs like TV, UL and all those kind of things, they actually exist in India, right? I mean they have expensive infrastructure.

And so they test and certify and we put those for FCC, TV, UL and all this kind of things on our equipment. So that's as far as regulatory is concerned, compliance is concerned, right, for global standards. Now as far as tariffs and all are concerned, it's still an open question. We really do not know. I mean nothing has been announced, so nothing has come up. So until that time it comes up, it's all pure speculation from -- in this front. In terms of lead time, I think lead time, it's very similar for customers everywhere. There is a process of lab testing, there is initial technical engagement, you make presentations, go through extensive technical discussions on what is the value that we're providing to the customers.

And then there is a cycle of the lab testing, sometimes they do remote demo and testing sometimes then followed by lab testing in their labs. And then when you often they actually deploy the equipment in their network in the field to see the performance equipment, and that takes some time. And after that, I think that's when we get into commercial discussions and get into an agreement. And if all of that works out, then that's how the deal progress. That's the reason why from a start of investment of a particular opportunity cycle to closure is usually it takes a long time. But when you are selected, I think if your performance is okay, the supply cycle is also a long one. It's like it's a year, it's not a multiyear cycle or it's a major project deployment that happens because the operators also invest a lot in going through the testing process in selecting a particular vendor.

Got it, sir. And just a follow-on question. This has to do with our Vodafone and Idea -- Vodafone Idea deal. So just wanted to ask what are the terms of the agreement, if you can share some detail on that?

Yes, yes. It's a very standard agreement that we have with any other private operator, which is to do with supplies for our equipment for a few set of states for set of circles. So we are building the entire network for the state across multiple states. And the contract includes supply and deployment and commissioning of the equipment, including supply of network management and getting the equipment live and connecting it to their mobile 4G, 5G networks and getting the traffic running. So there's the entire scope of the equipment and we are getting paid as we do the supplies.

Got it. And this will be in tandem with TCS or this would be an independent contract?

No, these are independent contract with us directly.

The next question is from the line of Sunny Gosar from MK Ventures.

Congratulations on the very quick execution for the BSNL project over the last 3 or 4 quarters. My first question is related to the PLI incentive. So we have booked about INR 500 crores plus of PLI incentive in the last 4 quarters. Have we been receiving the money on a regular basis? Or is this still completely outstanding as on December?

We received the PLI incentives for FY '23 in FY '24. And typically, the payment happens in the subsequent year. So what you would see in recognized as revenue in FY '24 is what we would expect to receive this year. The process for that is on. We've submitted documentation. There is back and forth from [indiscernible] and thereafter with the ministry. So we are hopeful of getting the incentive for FY '24 soon. And then for FY '25, the corresponding incentives are something that we would expect to get in the next year.

Got it. That's quite helpful. In the earlier part of the call, you alluded to a few opportunities like the Kavach program, the 5G -- private 5G application, the BharatNet Phase 3 project. Will you -- like if you could give some color on the quantum of some of these opportunities, some ballpark numbers or some indicative color on how large some of these opportunities could be? And like on an annual basis, how much revenue opportunity that could lead to over the next few years?

These are very significant 5 projects. I think all those BharatNet projects and all the overall budgets and all have been -- have public information in terms of what is the budgets. And I think all of them, the equipment opportunities for us ranges from several hundred crores to several few thousand crores as well. There's a wide range and a lot of it, but each of them are fairly significant size opportunities. And what will turn for us depends on how much of each of those opportunities we win. But each of them are very, very significant size.

Got it. And in terms of the conversion of these opportunities or proof of concepts into actual orders and then eventually into revenue, can you like give some kind of indicative time lines or which of the projects are more closer to conversion as compared to some of the others? So some indicative color because the order backlog now is about INR 2,600 crores and most of it is related to BSNL, which would mean that post Q4, assuming that no new orders come in, there could be a temporary dive in terms of the revenue. So how should we look at this in terms of continuity of revenue and the future outlook in that sense?

Yes, yes. So first of all, backlog right now, a lot of the BSNL backlog rundown -- order book rundown has happened. And a good part of the backlog is also the non-BSNL business. But having said that, you're correct in the sense that it is still significantly small compared to what we had at the beginning of the year. So yes, so these opportunities that we're talking about, most of the -- whether it's BSNL network expansion, 4G, 5G or the Kavach or the other thing of BharatNet and all. Most of them, we expect to see conversion in this in Q4 and Q1, right? Q1 of FY '26 and a significant part of that should be executed in FY '26. So once -- if we are successful in most of the opportunities, it will lead to, again, a significant bump or significant refilling of our order book.

Got it. And one last question.

I would also like to make it the last question of this session, if you don't mind. I think we're running out of time. So please let's take this last question.

So one last question from my side. Basically, the BEAD program in U.S., which is like a multibillion-dollar government program and also the Rip and Replace initiative that the U.S. government has announced. So are we likely to be beneficiaries of those programs? And what kind of opportunity do we see in the North American market?

Yes. I think both of those programs, we are trying to address with our local partners, both BEAD in terms of the broadband rollout in the rural areas, there's a significant amount of investment. And a lot of the investment is happening in phases, and we are working actively with our sales team as well as partners over there to win part of this business. So the same holds for Rip and Replace. Rip and Replace, I mean, it doesn't really come in terms of there is some equipment to be replaced. I think it comes along with as customers and operators expand their network in those regions. And along with that, I think the replacement of equipment and expansion of the network really coming.

I think that's also there. But I think the bigger opportunity, one of the significant opportunities that we are seeing in North America is this network modernization because the network -- many of the networks which are there in North America have been built over many, many years using old TBM technology. we optimize for voice. And as they modernize the network to a more modern database packet-based infrastructure, they cannot really replace all of their endpoint connectivity so easily.

So they require the special technology that we have using circuit emulation over packet networks for being able to modernize the heart of the network and slowly transition their older networks to more modern interfaces. That is, I think, a very unique technology that we have. And that is something that we also, along with the BEAD and other optical transfer opportunities. We are seeing this as something giving us a lot of traction because also this is something very unique for us.

Got it. That's quite helpful. And thanks for the detailed answers on all my questions.

So with that, I would like to thank everyone for joining the call and hope -- and thank you for your questions, and hope we've been able to provide a good insight to our business and look forward to our discussions talking to you guys again next quarter. Thank you very much.

On behalf of ICICI Securities, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.