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Tejas Networks Ltd
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Ladies and gentlemen, good day, and welcome to Tejas Networks Q1 FY '24 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rushad Kapadia from ICICI Securities Limited. Thank you, and over to you.
Good evening, ladies and gentlemen, and welcome to the Q1 FY '24 results con call for Tejas Networks. We have with us from the management, Mr. Anand Athreya, Chief Executive Officer and Managing Director; Mr. Arnob Roy, Chief Operating Officer and Whole-time Director; Mr. Venkatesh Gadiyar, Chief Financial Officer; and Dr. Kumar Sivarajan, Chief Technology Officer. So without further delay, I would now like to hand over the floor to the management for their opening comments. Thank you, and over to you, sir.
This is Arnob Roy, the Chief Operating Officer of the company, and welcome, everyone, to our quarterly earnings call. I'll start with on the first slide, we start with a quick update for the quarter. So we had a net revenue of INR 188 crores for Q1 and as opposed to INR [ 126 ] crores in the Q1 of FY '23. We also had a loss of INR 26 crores as opposed to loss of INR 7 crores in FY '22, Q1 of FY '22. We are a zero-debt company and with the cash and cash equivalents of INR 943 crores. And we also have a healthy order book at the end of Q1 at INR 1,900 crores.
Some of the key highlights that happened during the quarter is that our business momentum for wireline continues to be strong. Some of the significant events for receiving initial orders for deployment of our GPON OLT supply to a Tier 1 telco in India, and this is for the nationwide deployment.
We also commissioned a nationwide end-to-end Tejas products-based network across GPON access, packet aggregation and OTN/DWDM core for a large customer in Italy. This is a very significant showcase network for us in Europe, and it is managed, end-to-end network is managed by our network.
We also for highlights has been turning up a very high-capacity DWDM longest connecting data sectors for an operator in Africa, using our state-of-the-art 400 gig per channel WDM technology. In the wireless business, the highlight was the successful commissioning of a pilot network of 200 sites for BSNL's 4G network in [indiscernible]. And so -- and from this quarter, we will be ramping up volume supplies from this quarter onwards.
And -- the BSNL has also announced a successful better network -- a better launch of the network on July 15 based on this 200 sites that we deployed. On supply chain front, we've appointed Sembian, Venkatesan as our Chief Supply Officer. Sembian is an industry veteran of 30 years in manufacturing and supply chain management.
We also expanded our capacity significantly or executing the large -- the upcoming large shipment volumes for BSNL Services. We have also recognized the several awards during the quarter. We're awarded Dataquest's Pathbreaker of the Year Awards for our outstanding work and contributions to India's ICT industry. Saankhya Labs received a Mark Richer Industry Leadership Award from ATSC for their contribution to the standards as well as the innovative products in this area. We also granted 15 patents -- were granted during the year, taking our total patents down to 250 patents.
I'll now hand it over to our CFO, Venkatesh Gadiyar, to walk us through our dedicate numbers for the quarter.
Yes. Thank you, Anand. We'll have a financial update for Q1 FY '24. Our revenues were -- net revenues were INR 188 crores. We saw a year-on-year growth of 29 percentage. While we have ramped up our revenues during the 4 quarters of the last year we were during this quarter, especially Q1, there was a disruption in the EMS planned transition and also there were a few components arable delays has resulted in the over in years.
This was a short-term issue, and we have faced with in this quarter, and we have fixed this now and will improve on our supply chain deliveries from Q2 onwards. And in addition to this, we had to pay further some spot by charges to secure our companies and where costs could not be passed on to our customers fully and the margins remain challenged in this quarter. And we have been reviewing closely and talking to our vendors, and we believe the situation is expected to improve at the close of this financial year.
And the EBIT loss and the PBT loss for the quarter was INR 81 crores and INR 66 crores respectively. In terms of the cost, we have been continuing to invest upfront primarily on account of the -- on hiring on the R&D front, which is meant for the future readiness. We had incurred the losses during the Q1 as we could not absorb some fixed costs which are fixed in nature, and the product margins have been impacted due to the increased component prices.
And the backlog includes the additional deferred tax credit on account of the tax loss and the net credit amounting to INR 18.7 crores, which has been recognized during the Q1. And the earnings loss 1.56 per share.
Next slide. Yes. The cash flow from operations for the quarter was -- the cash outflow from operations for the quarter was INR 289 crores, primarily due to increase in the inventory. We continue to build an inventory higher and we have secured a long lead component for expediting the delivery of several critical large orders. Inventory has been increased by INR 225 crores during Q1 and the total inventory stands to INR 872 crores as of 30th June 2023.
The working capital has been increased in Q1 by INR 263 crores, primarily due to increase in the inventory, which has been built up for the expanding delivery of current critical large orders. And receivable has been marginally came down and the closing receivables as of 30th June was INR 501 crores. And we have a healthy cash and equivalent as of 30th June 2023 is INR 943 crores, and we don't have any tax. And finally, the net worth is a strong net worth of INR 2,984 crores as of 30th June 2023.
With this, I'll hand over to [indiscernible].
Thanks, Venkatesh. We move to the next slide. So this gives a profile of the business that we executed in Q1. The right-hand side slide shows that the run rate revenues were 79% of our overall business in Q1. There was growth in all segments of our business, including India government, India prices and International. However, while the run rate business is 79% right now, we expect the government sector to dominate for the next 12 to 18 months because of the large BSNL 4G orders.
We also have a healthy closing backlog of INR 1900 crores and about 50% to 60% of this will be executed in this financial year. And we have also a state of largely the backlog is in India, and a portion of that is for the international sector.
Next slide. Yes. This is just to refresh for those who are not -- have been tracking our products and business. So we have now have comprehensive end-to-end portfolio across wireline and wireless.
In wireless, we have a comprehensive solution of 4G and 5G products where we continue to invest and grow our R&D investment. In Wireline, we also have products that can build end-to-end networks for carriers and service providers across access with a wide variety of access solutions and metro aggregation solutions is around packet technologies and OTN and the metro core and long-haul technology built on high capacity, WDM transport and for OPN specifically.
So with this portfolio, we address a very large addressable market globally. And so with this portfolio, we can -- we have the ability of building into a Network across wireless and wireline and the ability to provide optimized solutions to customers which reduce their CapEx and OpEx stock.
Yes. So in summary, with a healthy order book of INR 1900 crores for wireline business and with the outlook for a significant wireless business this year, we expect to accelerate our quarterly revenue growth significantly. We have successfully commissioned the pilot network of 205 BSNL 4G. The product is working very well.
And with the state of the network, BSNL has launched [indiscernible] of networks and we expect to ramp up our supplies or deployments from this quarter. We continue to make significant investments in R&D and manufacturing operations as we scale up our business and look forward to healthy business growth over the next few quarters and years.
So I come to the end of the presentation, and we'll open the floor for questions.
[Operator Instructions] The first question comes from the line of Vimal Gohil from Alchemy Capital.
And formally welcome Mr. Anand Athreya on his first earnings call at Tejas. Sir, just wanted to understand, I mean, the company has had -- or last couple of years company faced numerous challenges in terms of raw material shortages with vendors because of which they could not execute their order book. How different are the challenges at this point in time? And given the outlook that you've offered, do you see us crossing our quarterly revenue run rate of INR 300 crores next quarter? That would be my question number one.
So that's the quarterly revenue guidance. But yes, as you mentioned, that there were components solid challenges in the past. And they are there while it is coming down slowly. We are still there. However, this quarter, we also had a onetime event of one of our EMS partners moving transitioning their plant from one location to another. So that caused the onetime disruption of our supply chain business, but we hope to catch up on our shipments for supplier and shipments in the subsequent quarters.
And sir, would you be able to quantify this impact?
Yes. No. The quantifying to impact of the EMS transition, do you mean?
Yes, yes, sir. And what was the impact of this transition of their vendor transitioning to --
Yes, I would not like to quantify that, but we would have had larger quarter for sure, with this impact of 6 to 7 weeks that we had. And so this is behind us now, and we have got up and [indiscernible] right now. So we'll be in a much better shape than before.
Right. No, because if I were to look at the quarterly decline, it's quite larger, close to 40%. So majority of it has come because of that discovery?
Yes. That's correct.
Understood. Now coming to the order book, sir, over the last year in FY '23, we had consistently reported improvement in our cable order book. We started FY '23 at about INR 1,200 crores of order book and ended at almost INR 2,000 crores. This quarter, we have not seen that order accretion which we would typically expect on a quarter-on-quarter basis. So why has that happened? That is part number one. And the second part is just one clarification. This is just a wireline order book, right? This does not include the wireless at this point in time.
That's correct. That's correct.
Okay. So this does not include the wireless business, right?
This does not include the wireless business.
Okay. Okay. And sir, so what would be the reason why we're seeing a slight decline in the order book on a Q-o-Q basis?
Yes. So there is -- see, first of all, we do not give [ complete ] numbers. We just give the outstanding order book. And so what are the reasons is that, of course, we executed on part of the order book. And secondly, because of our outstanding supplies to many customers, right, what is happening is that a lot of the customers are waiting for the shipments to happen for backfilling the order book as -- so that should -- it should come back, it should get filled up soon, as when we start executing and delivering on our supplies.
So Q2 of FY '24 should also see some improvement in the order book outstanding also. Fairly assessment sir?
Yes. Well, it's -- I don't want to quantify that right now. But yes, our bookings and all as we progress along the year, yes. Order book will remain strong from the business outlook that we see our order book will remain strong for the year.
Understood, sir. And the last question for me is on margins. I understand. I mean, in terms of component prices, what we have been reading probably if you can correct us we have been reading about the raw material prices pulling down for several components. Whereas our margins don't really reflect that. So what is the issue here at hand? When can we see a significant improvement in margins purely because of reduction in your prices of [ raw materials ] coming down?
Yes. So yes, while we have been hearing and experiencing improvements in the fixed supplies, but has not happened across the world enough for us to be able to control the process. This is that what happens on cost of goods or margins is that when we don't get time to supply, we have to look around and source components at higher costs with [indiscernible] on foreign buys and all, which are basically onetime one-off events doesn't reflect our product cost and margins. But basically the lead time is basically is what leads to this. As and when this corporate supply situation and lead times situation comes under control, our product margins will come back to normal.
Next question comes from the line of Sugandhi Sud from InCred Asset Management.
I wanted to understand the channel of -- there is a lot of information on the scope of the contract that and already --
We lost you, Sugandhi.
We have lost the line of Ms. Sugandhi. Next in line is Mr. Vimal Gohil.
Yes, sir. So sir, my follow up would be in terms of the breakup at this point in time. Would it be fair to say that our entire revenue is coming from Saankhya, which is about INR 20-odd crores, that would be wireless business and the rest of the INR 167 crores will be wireline. Would that be a fair breakup of our business for wireless and wireline?
Yes, that would be a fair break up. I mean, there are wireless is a combination of the different products they have for broadcast and platform and all those combination of that. And all of this -- the business is entirely wireline.
Sir, just one clarification. In the India government piece. I think last year or last quarter, we saw about INR 87 crores worth of orders for India government, which has fallen quite substantially despite at servicing some of the government or rather BSNL contracts. So why has the revenue fallen? Is it that we have executed the order and did not build them? Or is it that the money is yet to come from that?
So the question was, why has the India government business fallen, you're saying?
Yes, yes. That's it.
As compared to last quarter yes. So one of the reasons was that last quarter was the initial -- the ramp of the major supplies for one particular customer where the major shipments happened for this project. And so that time we saw a big jump -- that a bigger number over there because the majority of supply has happened in last quarter and the tail-end of that and other dominant supplies happened in this quarter. So that's why it's kind of a one-off event.
Right. Sir, can I go ahead with one more if it's okay?
Sure.
Yes. So sir, in terms of the EMS supplier that we are working with, I'm sure these are not exclusive suppliers, they will be working with some of the other players as well. So is it that for temporary, maybe our size is a bit of a disadvantage with our scale and our competitors in this space will be much larger -- so they would probably be given more priority in some sense, in terms of component, in terms of tech component supplies. So is it an industry-wide problem? Or is it that our scale is a bit of a disadvantage for the [ union ]?
Okay. No. First of all, I think the EMS partners, they manufacture. The forcing of component suppliers are different from the EMS partners that we have who basically put the product together, run that significantly and stuff like that. So those people have a lot of capacity. One is each of this -- are with large EMS vendors who have a lot of capacity, and we have not seen any shortage of capacity from them to execute on our business. I think whatever shortfall we have is because the components did not arise in time, okay? And so that has -- that is the root cause and not the capacity at the EMS.
However, having said that, because in anticipation of much larger shipments happening over the next 3 quarters, we have proactively scaled our power unit capacity also by signing up for three more EMS partners in addition to what we have right now, okay?
Understood. And sir, what would be our order book in the wireless segment right now?
Yes. So we don't state that. And as you know, as we mentioned that our current order book that we mentioned is entirely in wireline and wireless order book will be driven by largely BSNL 4G among others, but that would be the dominant part. And we are yet to disclose that right now.
Okay. So in future, are we looking to disclose that?
We will disclose that as and when we -- as I said, we are ramping up for supply this quarter. The process of the PO and execution is happening as and when the POs are coming in, we will start to [ disclosed ].
Next question comes from the line of Aashka Trivedi from Kedia Securities Private Limited. Ms. Trivedi, please go ahead with your questions.
Sir, am I audible now?
Go ahead. Yes.
So my question is that we've seen the initial orders on GPON OLT supplies from a tire I [ GPON ] India. So can you quantify the order size for this order?
No, because this is also run rate customers and with run rate customers, we have a multiyear agreement for sourcing quarter-by-quarter. So while we have an idea of the business that we're going to execute over the next 3 years in the 3-year cycle. There is no onetime order or a onetime number that we can talk about, and we also don't disclose the customer specific business. We just wanted to indicate that the Tier 1 customer because that certainly is a long procurement cycle and a long-term price contract as well.
So as far as what I understand is that it is an incremental order like this is not a onetime order, right?
So this is like the Tier I process happened like that. Once you get qualified and once we finish our free trials and early deployments because we have an agreement in terms of the number of years or quarters of supply, and they keep buying every quarter and deploy, okay? There's no onetime buy, which happens for 1 year or 2 years kind of thing. It's not a tender. It's like a running forecast and run rate order, which happens. So there is no -- so that's how it happens. I mean it's not -- it's not really as we termed as incremental. It is a run rate order, which will happen quarter-over-quarter over the next 3 years.
Okay. And sir, we have successfully launched EBITA launch of BSNL network in Amritsar. So sir, what is the plan going forward, like which city are we targeting next? If you can just highlight that?
Yes. So the deployment, the supply deployments will happen as per ESMS plan. So they are doing a nationwide rollout. So they are kind of telling us circle wise where they will be deploying and what quantities and what brands and all those kind of things. So as and when we manufacture, we will be shipping as for that requirement. So it is not a target for us to say that this city or that city. It will -- the next few surprises will happen. Requirement will happen across multiple cities at the same time based on their deployment plan.
Okay. And sir, apart from supplying the wireless, we are also doing maintaining contracts for BSNL?
So maintenance contracts, yes. For any product supplies also always follow with service orders, AMCs and stuff like that. For supporting the products and the networks that we have supplied, that's typical that always happens with any product supply. So yes, that should also be part of our business.
Thank you. Next question comes from the line of Sugandhi Sud from InCred Asset Management.
Yes, sir. Am I audible?
Yes, Sugandhi. You're audible now.
Okay. Thank you. So I wanted to understand the wireless contract for BSNL. Is there any -- can you give us an indication of the pace of rollout the broad scope of the contract over the next 1 to 2.5 years, how do you want -- how do you expect to paste it out in terms of 30%, 20% per year?
Yes. So I'll give you an overall idea. The entire supply and rollout is expected over 12 to 18 months. And this range will depend on how fast the supply and how fast BSNL is able to deploy, but there is a very aggressive rollout plan as of now because BSNL wants to roll out that network very quickly and get into the 4G business. So 12 to 18 months is our what is our understanding and agreement. Is the time line for supplying and deploying the network.
Sir. And I understand. So how can we expect -- what kind of impact should we expect on the -- in terms of your inventory situation or the receivable situation given that this would be a compressed order -- in terms of -- we're seeing some pressure on receivables in the past with government-related contracts. So if you can give us some indication of what kind of broad terms of the number of DSO days, et cetera, that can be expected or compared to where we are currently, how would that trend?
Yes. You asked several questions over here for both with respect to the inventory situation. As you have seen and as Venkatesh mentioned, we have already started pulling in components, started manufacturing for executing the volume supply. So definitely, what happens is that manufacturing happens in a particular quarter and shipment happens towards the end of the quarter or early next quarter. So you will see a lot of inventory buildup as well as shipments happening over the next few quarters along with this network, right?
And so as regards payments and all our concerns, that we have -- we fully understand the milestone-based payment of supplies in this project for supplies and deployment, et cetera. And we have worked out our processes along with CCS or [ SI ] partners to ensure timely project execution and collections.
Got it. So another bookkeeping question is in terms of last year, you had capitalized R&D to the tune of around INR 180 crores. And I noticed that your R&D headcount has also doubled -- nearly doubled. So could you give us an outlook of how much more capacity creation you would be doing over the next 2 years on the employee front?
Yes. No, I think we're in a significant investment mood right now because what we are seeing, the opportunities right now is basically the start of what we see -- what our plans are for the people. We want to definitely see it on the back of our current business. We want to go international scale our international business significantly. And also part of this expand our product portfolio as well.
So in that kind of a vision, we are continuing to invest to continue to grow. So the growth of R&D headcount supply chain capacity will certainly happen over the next few quarters. That's certainly going to continue over the next few quarters.
So we can expect similar terms of growth visuality?
Yes, yes.
And could you give us some idea about how the government is becoming a very large portion this year would impact your gross margins? I mean component -- changes in component supply side, if that was to remain as it is today, what kind of margin change can we expect?
Given the size of the business, given the size of the volume of the government orders and given that we knew that what was coming and what was generally manufactured, we are working closely with our component suppliers to be able to manage costs and optimize costs because based on this large volume, yes, it is a challenging deal, but we are managing it with our design optimization and our negotiation with our partner. So overall, I think the margins will be well within our expectations, and we are fully prepared to manage this.
Sir, my question was more on the lines. Traditionally, you've done 40% sort of gross margins and wireless becoming is an international business for us and -- this is our first quarter. So as an investor, what kind of impact can we expect the changing product mix to have on the gross margins?
So see, the product drops slightly in terms of mix and because of this government, because you understand the business size is also very large, right? So given the business size is large, we can also work with slightly lower product margins because of the overall size of the business, right?
But as I said, the impact of this in terms of being able to negotiate with component vendors and having a slight impact of our other business also with common components. Overall margin, the blended margin for our business will not be impacted. I think there will be -- it will be as we see it right now.
Next question comes from the line of Ritesh Poladia from Girik Capital.
Sir, on wireline business, that GPON world is for broadband or the application is different?
Yes. The application is residential and interface broadband.
Okay. Yes. Sir, on BSNL 4G, one of your other consortium partner has already declared for INR 3,900 crore purchase order. So why there is a delay to sign up a purchase order with Tejas?
No, no, no, there is no -- okay, we are not aware of that, but the consortium has received the purchase order from BSNL as you are aware, right? And you know the full scope of their order as well. So what is happening is that because our purchase order is like based on circles and deliveries to each and every circle kind of thing, right? So we are expecting our purchase orders to come circle wise.
So that's the reason why it's not a onetime order. And as and when these orders come in, we'll be sharing with you the business that we're getting for BSNL 4G. So there is no delay. It's basically breaking up the plan into smaller units based on state and circles and all these kind of things. And that's what we will receive. We'll keep receiving as we execute our projects.
So apart from that consortium partner, all the sites would be done by you? Or will there be also another partner be sharing it?
So all of the RAN, Radio access network equipments the radio and the baseband units and all the sites, all of that will be supplied by Tejas. There's other consortium partner in Tejas will be supplying to core, the core software, that's what they will be supplying. And we'll be supplying the RAN, the radio equipment is what will be supplying, but for the entire network.
Okay. I'll be a little clear. See, there is extreme filing by ITI Limited. And they have said that they will manufacture the RAN for the 23,633 sites. So if you can give us some clarity on this?
They are -- basically, they are going to manufacture Tejas equipment, okay? Our equipment is what they're going to manufacturer, and we are manufacturing agreement with them, so to manufacture and supply for their purchase order, but it's going to be on all of Tejas equipment.
Okay. So ITI is going to manufacture Tejas equipment only?
Yes, yes. That's correct.
Okay. So this INR 3,900 crores order book for 23,000 sites, so this would be the ITI portion or some of that will come to Tejas also?
So the ITI portion is going to be executed with Tejas equipment for the equipments portion of that -- a large portion of that is going to come to Tejas.
Okay, out of this also will come to Tejas only?
Yes, yes.
Okay. So all the -- about 1 lakh sites, that's what the newspaper is talking about. Everything is made by Tejas. Some portion will go to ITI and they will supply to the BSNL base?
Yes. So the supply, all of it will be Tejas equipment, some of them supplied by ITI, some of them and most of them supplied by TCS.
Next question comes from the line of Mukul Garg from Motilal Oswal Financial Services.
First on this whole ITI versus [indiscernible] issue of -- so just to understand this better than ITI kind of sharing that they will have specific amount of production capacity for this order. Does that [indiscernible] how much is revenue?
Yes, Mukul, can you come a little bit closer to the mic. It was a little faint.
Is this better?
Yes, yes.
Sorry. Yes, so I was just trying to understand the ITI part of the equation. I understand for the other part, the shareholder approval has happened, and I think the final purchase order is still not in place. But for the ITI, what they have announced the order portion, their portion of the order, does that mean that you have received the order from them? Or is it mostly indicative side from their end?
Yes, it is -- like, as you know, the consortium has also received the purchase order, right, of a very large amount of -- what was the purchase -- so INR 15,000 crores were published at the consortium. So they need a whole entire deal size, they are published. And similarly, ITI has published their size of the order. But when it comes to supplies, that will be broken down into certain-wise purchase orders as well for ITI, okay. So it will be the same mechanism, except that here, ITI will be the supplier, and the TCS will be the suppliers, and we will be the equipment supplier to both of them.
Right. And is it fair to assume that the inventory buildup which has happened over the last few quarters is mainly to kind of prepare for this large order given that the time lines will be quite compressed.
You got it right. That's exactly, that's correct. Distribution of complete delivery time lines. We have ordered and we started building up inventory of components and company goods so that we can deliver quickly.
Understood. Second question was on this DWDM order in Africa. Is it fair to assume that this is a long-haul order?
Yes. So basically, it is -- it is for one of our regular customers. It is not -- I mean, there are just 1 order. This -- as you know, we build pan-African network for this customer. It is more of where -- the point was more of a -- some of our new technologies has gone into turning up some of the links or some of the very high capacity link connecting data centers of some of their web-scale customers.
So this was a kind of a new high-end technology. And so this was something significant milestone from our side. So that's was highlighted. But it's not a single order. The same technology is going to be rolled out across their network across Africa.
Right. But does this imply that you guys have expected it to be long fall set of optical network as well with this kind of client confirmation and that would kind of expand your addressable market there? Or is it more of a client-specific thing? And you really are not putting too much on the long haul side of the equation?
So we are in long-haul WDM,okay? This was more of a capacity expansion with high-speed data carrying wave, let me put it that this way, right? So like people build the long-haul network, they can build it with100 gig lambdas or waves or 200 gig or 400 gig, 100 gig, so we have all the technology. So this was more of a building a show-case network for demonstrating a very high-capacity long-haul WDM technology. But we have been in the building long-haul networks with our WDM technology for a while.
Okay. Coming to this, the GPON OLT order each order, which you have received, what sense this was in the pipeline for a long time? Are you kind of getting signs from this customer that they are finally starting to accelerate meaningfully? Or is this still the visibility on this client spending accelerate it is quite low?
No. I think they have started their roll out significantly. We are getting rolling run rate orders kind of quarter-over-quarter. So now the rollout is now accelerating right now, and our business with them is growing. So we have passed the initial phase of the supplies and pilot it for government and trials and then software integration and all those kind of things. I think Basically, this means that we have passed all that phase. And now it's just ramping up supplies and renting of deployment for the customer. We are in that phase right now.
Thank you. Next question comes from the line of Sohan Joshi from ASC Consultants.
Am I audible, sir?
Yes. You're audible.
I just want to ask, when are the benefits from our partnership with Renesas is going to come. I mean what were the partnership with Renesas, was it into manufacturing, designing or end-to-end solutions or is it going to help in sorting our profitable supply chain because the government has intended to spend more on BharatNet and with massive strength like private telcos and CapEx for 5G, the opportunity is massive. I just wanted to understand -- I mean, the Renesas, the management of Renesas recently on visit to India and also by the top official of government. So did we progress more on that partnership just wanted to get the color of it.
Yes. I think Renesas partnership was -- had 2 dimensions. One was as a supplier to our new products, especially in wireless. So they are one of our suppliers. So that's one part of the partnership. The other part of the partnership is also a joint development of some new technologies, which we cannot disclose right now. But we are also working with them for specifying and what the next integration -- integration of semiconductor components which we are going to use. So we are getting into specifics. So these are the 2 dimensions of our partnership agreement with.
Okay. Okay. That's it from my side. Thanks thanks. I wish you good luck.
Next question comes from the line of Vimal Gohil from Alchemy Capital.
Yes, Sir, I have a slightly long-term question, given the fact that we are seeing a lot of growth ahead. Of course, that comes with the opportunity that is present at this point in time. How is the top management who seem to balance revenue growth and profitability -- is it -- are we taking that approach that we want to capture as much growth as possible. And probably after that, we will be looking to stabilize our profitability goals, or will it be a balance of both, how should we look at this over a longer period of time?
Yes. So no, absolutely. I think this is a good question. And yes, the short answer is yes, we are driving towards profitability over the year, and we have taken all steps, we understand. So we have -- right now, we have some short-term challenges. The products are very well optimized and designed and we expect our standard margins that we have been having over the years.
Post-COVID, we've run into this component supply challenges. And very recently, some of our EMS partner challenges, logistics challenges. But these are all -- we expect these are all one-off events, there are short-term events and very soon, things will stabilize, and we'll be back to normal business with a normal margins that have been doing all along. So it's not -- this is not a question of buying out the business with 0 margins and then looking how to improve our margins. It's not like that. I think we are working with healthy margins.
So some of the deals might be initial margins might be lower than our standard, but we have a clear cut -- in this deal with a clear cut margin recovery plan so that over time, we get back to -- get back to normal and recover our margins. And so we are not distracted by short-term events happening that have been addressing our supplies and the business and margins. But long time -- long term, we don't see any issues going away and the coming back to steady state with our normal operations and normal cost.
So it's going to be growth along with profitability -- it's not either or?
Absolutely, absolutely.
Great to hear that. Thank you so much, and all the best.
Next question comes from the line of [ Mubasher Hussain Ansari ] from Hyderabad Investment Forum.
Yes. My concern is also about the margins. Recently, the CEO of TCS has given an interview saying that this 4G projects of BSNL is for nation building and it is not for margins? So in this context, are we also going to get some margins? Or is it going to be like a [ communist ] enterprise? Just focus on the top line and don't get any profit. So I need some clarity on this.
Yes, yes. I think that was a general comment from his side, which basically indicated the commitment of TCS towards this business towards building this network. And so just to qualify that, he kind of said that, which is more important than anything else and profits and all this kind of thing. And this is more of a general comments about the vision of the business, but no one is in this business for losing money or not making any money. And certainly, not us, I can assure you that.
And our products are designed that even in the competitive business we have that we will be profitable. And the good thing is that the large volumes as well to be able to drive down product costs to ensure that we are healthy and profitable in this field.
Next question comes from the line of Aditya Mehta from G.K Capital.
So my question is with regards to BSNL 4G order that the consortium has seen. So what will be the Tejas share in overall order? And how much do we plan to execute in this financial year?
As far as execution is concerned, as I said, the goal is starting from this quarter, it will be within 12 to 18 months. Regarding specific share of the orders that the consortium has received, I mean I cannot -- we cannot share any numbers right now. But what as we told you that we are going to receive the circle-wise and start shipping. And as and while we received this deal, we're going to share, we disclose the size of the business from here. Upfront, we don't want to disclose the absolute numbers, the size of the overall deal, and you can work out whatever the equipment portion and all those kind of things.
Okay. So this INR 15,000 crore order that advanced purchase order that we have received, would it cover 1 lakh sites because there were some articles that the deal value will be around INR 24,000 crores.
This covers 1 lakh sites of 4G equipment.
So that INR 24,000 crores order has been revised to INR 15,000 crores?
Yes, because it's 100,000 sites and it's 4G. And as and when the sites, number of sites increase, I mean those will go up. But I think once we start executing on the orders, all those things will come.
And last question on our receivables. So we will be getting payments on the BSNL or via consortium?
We'll be getting payments from TCS.
Next question comes from the line of Venkata Suresh Kumar from [ Puram Financials ].
My two questions. My question is that Tejas is going to planning to take over of Saankhya Labs. You are going to semiconductor? This is my first question. Second question is --
I couldn't hear your first question. Your voice slipped in between. Something related to semiconductor you are saying? Could you please to repeat?
Sir, your takeover the Saankhya Lab in Bangalore. You are planning in the going for business transient in semiconductor, semiconductor business?
Yes. So I think as you know, we are -- for our products, we are very big consumers of semiconductors, right, in designing our products. And so with Saankhya's capability, that also gives us the opportunity to design, to optimize our products as well as begin to serve other markets, where semiconductors are required, right?
So we are kind of crafting our strategy in this space. But yes, we do intend to use Saankhya's capabilities in semiconductor design and manufacturing to both grow and impact our business as well as other opportunities in other sectors as well.
Okay. And one another question. Actually, you got the BSNL long-back tower. You are making total equipment, your Tejas is making any other partners like ITI and Valiant, CT somewhat is giving another orders? We will give a bit stimulated. You can understand my question?
Yes, yes, I can understand. So basically for this BSNL 4G order all of the radio access network equipment that is equipment will go into a base station to the tower, right, which includes the radio equipment at the top of the tower and baseband equipment at the bottom of the tower. All of that equipment is only biggest equipment, completely designed and manufactured by us for all the 100,000 sites.
As I mentioned, ITI is another partner like CCS, who's going to source equipment from us and they're going to supply. But all of the requirement is going to be a pure Tejas equipment.
Okay. Okay. Any other CT consultants and Valiant also at the partner -- if any equipment, any other orders, sir, CT...
Not in this network. We do work with Valiant for other applications in our wireline sales, but in this particular application, again, there is no partnership with Valiant for this only...
Only for wire [indiscernible].
For our wireline business, we have some partnerships for some complementary equipment, but not into the wireless space inside the safety piece?
And Cybersecurity.
Cybersecurity?
Cybersecurity products in some Tejas market incoming stall in conducting U.S.A exhibition with an unit.
No, we are not into making cybersecurity products. We have the cybersecurity products, but we do not make cybersecurity product software or hardware. We don't do that.
Actually, you are conducting a stall in U.S.A, Tejas and joint [indiscernible]. You're conducting the stall. That company only for -- your joint same that products.
You were talking about the trade show in the U.S. So I think one of the trade shows is for the utility sector, we participate in that. And as I said, some of our solutions in the wireline space, especially for the utility section is in partnership with Valiant, where we make complementary products, which work together for the smart grid. And that is the solution we demonstrated in 1 of the U.S. trade fairs.
Okay. You are a utility partner, utility sector joint venture of...
No, no, there is no joint venture. There's a joint solution with our product solution, yes, yes.
Our next question comes from the line of [ Hiren Kumar Thakur Lal Desai ], an individual investor.
Yes. My questions have been more or less answered. I have just one question. So to be able to build this huge BSNL order inventory, will you be required to take on some debt on our book.
Take on what?
Some debt loans.
So as of now, I think we have planned our cash flows or balancing our supplier payments and our receivables and our collection. So as of now, we have worked out the cycles that ensure that we will be able to manage our working capital properly for exhibiting these orders. So maybe one last question, please.
Thank you. Should I take the last question?
Yes.
All right. Next question comes from the line of [ Pavia Doshi ] an individual investor.
Yes, I have 2 questions. One was on the geopolitical side. We are seeing some U.S. banning some chips and China banning some new materials that is going to be affect some semiconductor supply. Are you seeing any component disruption happening within our supply chain? Is there any early kind of stress? That was one. And second, if you can shed some light on the TATA [indiscernible] that we have won recently -- and also what kind of order book that are going to get during this year, this financial year of INR 1900 crores.
Yes. So first of all, it's the U.S. China geopolitical tensions. I think that has been going on for a while, right? So I don't think this issue particularly has impacted our supply team or our semiconductor supplies. A lot of the high-end semi-conductor components anyway don't come from China or use of Chinese components is very low in our product. So this particular issue has not created any problems. In fact, our good diplomatic relations with the U.S. has only helps us in this regard. So this has not been a problem. That's first of all.
Second, relating to Tata Tele. So Tata Tele uses several technologies, several kinds of products in their network. They have been using WDM equipment. And very recently, they also bought our GPON equipment -- so it's like a combination of equipment that they have bought. Very recently, they have also bought switches and all those kind of things for building the network. So Tata Tele also customers which uses multiple products as a solution for building their network. So it's not one product, and they are also a pretty good run rate customer for us.
Okay and what kind of -- how much of the order book has been to execute in this financial year out of the INR 1900 crores?
Yes. As I mentioned, around 50% to 60% of that will be executed in this financial year.
Okay. And just 1 last question if I can squeeze in. So on the profitability side, you've explained that you're trying to strike a balance between growth and the margin. But do we have any internal targets? And what time are we expecting to become a cash flow positive on at least on the operating level, the cash for operating business. Do you have any internal targets further?
Yes, yes, yes. As I mentioned, we are driving for profitability for this financial year.
Okay. This financial year you're expecting to be cash flow positive on operating level, at least?
We are working towards that, yes. So I think -- thanks, everyone, and kind of hand over to Anand, our CEO, for any last closing comments.
Yes. So the closing comments, actually, I'm pretty excited to be here. We have a good healthy order book for this year and beyond. To execute and be -- and also excited about the significant wireless business. This actually puts us on a double map. I'm also very excited about the successful pilots of 200 sites for BSNL 4G, and we are planning pulling all stuffs to ensure that the supply for deployment happening right.
And as we look profitability, so we are going to invest to grow. At the same time, we want to very closely operate, manage our manufacturing operations to scale for business and also control , right? So I think we are going to be on a trajectory and I'm pretty excited to be part of the trades. Arnob?
Yes. So thanks, Anand, and thanks, everyone, for attending the call, and we look forward to interacting with you over the quarter and in the future as well. Thank you very much.
Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.