Saankhya Labs Pvt. Ltd. (TEJASNET) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the conference call hosted by Motilal Oswal with Tejas Networks Management to discuss the acquisition of Saankhya Labs. Please note, the duration of the call will be for 45 minutes only. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raj Bhanushali from Motilal Oswal Financial Services. Thank you, and over to you, sir.

Thank you, Steven. Good evening, everyone. On behalf of Motilal Oswal Financial Services, let me welcome you to the conference call to discuss acquisition of Saankhya Labs. We have with us senior management of Tejas Networks headed by Mr. Sanjay Nayak, CEO and MD; Mr. Arnob Roy, COO and Whole Time Director; Mr. Venkatesh Gadiyar, CFO, and Dr. Kumar Sivarajan, CTO. I will now hand over to -- the call to Mr. Sanjay Nayak to start. Thank you, and over to you, sir.

Thank you, and welcome, everybody, on this conference call. As you would have seen in our press release that we announced late last night and in terms of our intent to acquire Saankhya Labs Private Limited Bangalore. We had -- we have also placed the presentation that I'm going to be using today on our website, and I'm hoping you have had an opportunity to download that or have access to that because I will be going over through that presentation. So I'm on the presentation, as you can see the safe harbor statement, so I'll not read that. Going to the first slide of the presentation. So broadly, as you know, that last year, we basically had an opportunity where Tata Sons has made an investment in Tejas Networks. And subsequent to that, we have basically been thinking about how do we create a larger vision. So I just wanted to articulate the way we are thinking right now. So our strategy really is to create a global scale telecom product company from India. There are 4 parts of our strategy that I want to talk about today and then see where things fit in from the way we are going forward. The first and foremost being a deep tech product company, our first goal is to create world-class products for building end-to-end telecom networks. And as you know, we have been doing optical networks for quite a while. Then we also started to expand into wireless network. And now with the acquisition of Saankhya, you will see in a few minutes how we are continuing to expand that thing. And for doing that, we are going down 2 different parts. One is that organically, we will continue to hire and attract top-notch talent both for wireline and wireless. And we will continue to make a lot of investments in that area over the next 12 months. Second, we also believe that if there is a good opportunity to acquire companies, teams who can help us expand our product portfolio, technology assets as well as IPR and get access to new customers, we will also be looking at that. So these are the 2 ways we really are expanding -- our plan to expand teams so that we can have a larger portfolio of products. The second aspect of the strategy is that India is going to be going through a large CapEx cycle over the next 5 years, driven by 5G and broadband rollouts in many parts of the country, which are still not there. And our target is that we want to use India's large home markets to get to economies of scale. But for that, we hope that we can gain market share in both wireline as well as wireless category, especially with the new set of products and the upgrades that we are doing. And secondly, we also believe that the Indian market is going to provide us new opportunities because of the national mission to be Atmanirbhar in the telecom sector. So we do expect, again, government spending and government support for creating indigenous technologies to be stepped up as we go forward. So really, India as a home market to get to economies of scale is the second part of our strategy. The third is really to expand into international markets. We have now the brand set of the Tata Group and the deep customer relationships with different telco customers within the group companies. Our endeavor would be to see how best we can use the group synergies and really get to many customers heading in Tier 1 markets, which we do not have access to. That's an activity that we will continue to start working on and see results over the years to come. Second, in many emerging markets where we already have presence, where we have a good customer footprint, with a stronger portfolio of our products, a larger portfolio of products across new applications and more investment in sales, we again expect to increase market share especially in the new geopolitical situation where there is a demand from a lot of the customers to have -- buy more products from a company like ourselves who can be considered as a trusted source for global telecom products. And the fourth part of our strategy is really to build a global scale operations, by which I mean 2 different parts. One is from the manufacturing operations, leveraging India's PLI scheme. We are an applicant to the PLI scheme, and we will continue to make the investments and be able to take benefit from the incentives that are available and hopefully scale up that part of the business as well. And the second area is really that anything which is a noncustomer-facing role in terms of technical support, back-end support, either for presales or post sales, we do believe that if we're going to have a large-scale global operation and customer around the world, we can draw a lot of efficiencies by having a strong back end operation for all kind of things that do not require customer facing role. So these are really the 4 different elements of our strategy, which we'll be executing over the next few years to realize our vision that have I have articulated to you. Going to the next slide. This is the current Tejas product portfolio. This is more like a recap as to what do we have today and what are we going to get once we acquire Saankhya Labs. If you really see the picture on the -- to right-hand side are really the optical transport and the metro network that we've been historically building, and we have had a very good product portfolio there, getting very good success and continue to gain sales. On the left-hand side is the broadband access category. Earlier on, we used to have the GPON or the fiber-to-the-home products in addition to the Ethernet product like Ethernet switches then we added 4G technology, which we are now trialing in a very large network and things are moving in the right direction. And then, of course, in the same access area, 5G is happening around the world and starting to happen in India. There again, access technology like satellite communications and many others, which we are currently not focusing, but those are all opportunities, which can potentially be open once we start having a larger product portfolio. Going to the next slide. In terms of Saankhya Labs, I just wanted to give a brief about Saankhya Labs as a company. Saankhya is actually a Bangalore headquartered company founded in 2007. It is really a premier wireless communication as well as the semiconductor solutions company. They really have a skill set, which is spanning across both building system products, which are of the kind that we do and also building chips as we loosely call them on the semiconductor side. The company was founded by really industry veterans with more than 30 years of experience, both in India and internationally. Parag Naik, who is the CEO; Hemant Mallapur, who is the VP Engineering; and Vishwakumar Kayargadde, who is Chief Operating Officer. They have customers in U.S., Europe, Asia and of course, in India. They have, of course, about 73 international patents, 41 of which are approved, 32 are in the pending stages and across different technology domains that I talked about. They are also India's first tablet semiconductor chip company and they have actually built their own chip, which is going into what is called software-defined radios and they already have a lot of customers who have been using that in either satellite phones or downloads and many other -- in the specialized applications. They also have a lot of field deployments of the product. So as you can see from the history of the company, they have developed products over the period of time. They've been successfully deployed in customers in India and abroad, both in the areas of broadband, broadcast as well as satellite-IoT radios. In terms of the team strength, Saankhya has more than 250 engineers full-time and in addition, a lot more contract employees. More than 25% of their employees have advance degree masters or PhD. There are more than 1,000 man years of experience in -- precisely in wireless radio design, both from chips to systems which is really from the ground up to the highest level. And of course, on the radio frequency side from antennas to bits. So I think it's a very, very rich experience. And I would say that one of the most highly talented teams in this domain in the country. And they have end-to-end product development experience, which is very, very useful. More than 80% of the employees of the company are in R&D, and that gives you a sense of the strong technology flavor that they have. And of course, they have been recognized for all the good work they've been doing in various forums within the country and abroad. Just to give you a quick recap of the history, they started in 2007. They developed a couple of chipsets on their own then they had a partnership with ISRO for satellite communication for software-defined radios. And then, of course, over a period of time, they continue to evolve their chipsets. And of course, in 2017, they had a very landmark partnership with Sinclair Broadcasting Group. Sinclair Broadcasting Group for some of you who may not know and of course, the description of them is available in our press release, they're probably one of the largest broadcaster in the U.S., TV broadcaster in the U.S. and Saankhya has a very deep technology partnership, Sinclair of course, was also a large investor in Saankhya. And then they developed those chipsets around the broadcast radio applications. Then over the last 2 years, the company has actually focused a lot more on developing technology for 5G in terms of the Open RAN architecture, which is a new way where companies can become a part of the 5G ecosystem, and they have made a lot of progress. They have signed a joint development agreement, which is actually at a very advanced stage of development and products and so on with a very large ICT company in the country. And so the products are all getting there. And then, of course, on the satellite side, again, they've been making more progress and have tied up with a large U.S. satellite operations for satellite IoT and webcast solutions. So if you really see that both on the technology side as well as the business side, the company has been making a very good progress. I'm going to be -- going to the next slide, just to give you more -- a little bit more flavor of the solutions and the products that Saankhya brings to the table. If you look at the first one, if you see the 5G radio, I mean, in a 5G network, the stuff that goes on top of a tower is what we see as a radio and then the stuff that goes inside the ground station service called the base stations. So the pricy radio, there is a new architecture or open architecture, which is called Open RAN or virtualized RAN. And those are -- there are radios, which have to be designed using that technology. And this market is -- has opened up a whole new RAN as well as a virtual RAN movement. And there are not -- there are also going to be a lot of private 5G networks and for which this kind of technology will be required. I mean, this is a very large addressable market, more than $30 billion over the next 3, 4, 5 years. And of course, this is an area where Tejas was not doing a lot of work. but we will be augmenting our resources and actually become a strong player in this area. The second area where Saankhya has been doing extremely well is in the 5G broadcast area. And I already talked about the strategic partnerships they have with the Sinclair broadcasting Group. The reason why [Audio Gap] Taking off is because there's an exponential increase in video traffic on mobile phones. And if you think about it, there's a lot of unused TV spectrum. So for example, in the earlier days when Prasar Bharati or Doordarshan used to beam television signals from their tower, all that has now gone away because nobody really uses that spectrum. But that spectrum can be repurposed for 5G broadcast. That's a new technology area. There are a lot of new standards happening around the world. It's a niche space, with around $1 billion market TAM, and this will require next-generation direct to mobile broadcasting solutions, Canvas solution with respect to our kind of spectrum sharing and so on. So this is the second area where Saankhya has been quite strong in terms of their products and understanding of the market. The third area is satellite communications. If you really think about you would have been reading in the paper that there is a lot of low earth orbit or LEO or medium earth orbit or MEO satellite constellations which have been launched of late by a variety of companies in the Western world. Now if those satellites are going to be there up in the air, you would need stuff on the ground to take the signals whether -- and we can call them on a loose based satellite IoT or Internet of Things because there would be the devices, which will catch the signals from the satellite, broadcast it locally and actually create all kinds of solutions. So Saankhya again has been working and their chipsets have been designed in some of those. Their customers in this space have been people like ISRO, Bharat Electronics, Indian Railways and of course, another company called Ligado Networks, which is a U.S.-based satellite operation. So I'm just trying to give you a sense of the different products and technology areas in which Saankhya over the years has developed. And part of it is that a lot of these technologies that they have developed use their chips that they have internally designed many years back and they continue to upgrade. And on top of the chip, they now have all the software, embedded software, system software as well as all the hardware design capabilities in terms of building board and entire products like a radio that goes on top of a cellular tower. So I think over the years, as you can see, they have a very rich portfolio of products, a lot of IPR around all of these technologies, which as you see, are all next-generation technologies, things that are going to be required for many years in the world, especially as the technology is evolving. And I think the kind of expertise as well as the IPR and the product and the customer relationship Saankhya has, I believe that we at Tejas should be able to take advantage of that and create a much larger platform, which takes me to my next slide in terms of what are the synergies with Saankhya Labs with respect to Tejas. So starting off, as I mentioned, it expands our product portfolio in terms of wireless, satellite and broadcast applications. We had anyway, made us a pretty large investment and a very strong focus in terms of adding wireless portfolio, which we are -- have done on our own, and they are doing -- tries in very large operators, as you probably know about. And now with the Saankhya acquisition, we're going to accelerate that effort and add more pieces of technology, especially some of the niche areas, which I talked about, which can add in a reasonably decent sized market, addressable market to us in the areas of 5G radio access networks based on open run architecture, 5G cellular broadcast or satellite communication or software refineries, et cetera. The second benefit, which we derive working with Saankhya is going to be accelerating our wireless product development in general and 5G, in particular. They have a 250 people plus engineers, very world-class team, as I talked about earlier with a strong expertise in end-to-end design of radios, algorithm, software and of course, in our chipsets as well. The third thing is it really enhances our IPR portfolio. We have 73 international patents, 41 of which are approved, 32 are in the final stages of -- have been filed and are in the stages of approval. And in addition, there's a lot of design idea of what it takes to build complex hardware in a very unique algorithms, specialized algorithms, especially in terms of the complex technologies that are required for building satellites as well as broadcast and 5G products. And of course, radio frequency design expertise because that's another expertise which -- it is typically very complicated. And as you can see, very few countries in the world have expertise across all these domains. And then the last part is the semiconductors, the chip design expertise that they bring that they have the capability to do in-house chip design. The chip is physically manufactured in a fab, which is outside of India because India doesn't have fabs today. So that's why we call it a fabless chip. But in addition, there's a lot of skill set that goes into design the entire chip. And Saankhya has been able to do that successfully, very strong capabilities in digital signal processing chips, which are required in multiple industry domains, not just telecom, but others. And this specialized skill set is something again which we expect to utilize over the next set of our growth journey. So I think these are the 4 areas where we believe that Tejas and Saankhya can benefit together. As you can see, there is no overlap. There's only complementary customers, complementary technologies. All the engineers are based in Bangalore. We believe that the DNA of the company, the passion of the founders and the team to really create a company from India for the world is very strong. And all of those elements you believe will really help us become successful together in a much bigger way as we go forward. The next slide is a little bit about the deal structure. The details were, of course, available in the press release. But the way we are going about is going to be a combination of share purchase from existing investors in cash. And then eventual either merger, which will be through a stock swap or any other mechanism that regulatory would be possible. So we are going to be acquiring 54.4% shares from investors, existing investors and management team for INR 283.94 crores. Of course, this will be from our internal cash and we have adequate cash reserves in the company to be able to make this acquisition. And we expect that this primary -- this purchase of shares should get completed over the next 90 days, hopefully earlier. And after that, Saankhya Labs will become a majority-owned subsidiary of Tejas. It will be running as a separate company under the guidance of the Board of the company and the current management team and the employees will continue to run the company and of course, we'll be working together to maximize the synergies. And over the next period of time, over the next 120 days, we'll acquire or file for acquiring the 35.6% balance share through a merger scheme, which will be filed over the next 120 days. And clearly, in our business and industries, talent is key. It's really a people business, and we are very motivated that we work together with the management and key employees and both should have long-term incentives in Tejas' success and success together in the form of previous performance-linked incentives, including RSUs, et cetera. So this kind of gives me the overall deal structure in terms of how we're going to be proceeding with the transaction. Coming to my last slide, just which is more or less a summary slide of everything that I said, but I just wanted to kind of put it all in perspective. But clearly, Tejas has the vision to become a top global telecom product company over the next few years. We've been expanding our product portfolio, and our immediate focus is to really accelerate R&D investments to create a larger portfolio of products from wireline to wireless. And as I talked about in wireless from 4G to 5G to satellite communication to the broadcast value that we talked about because a larger product portfolio and a competitive product portfolio is absolutely essential if you want to be playing in the global market. We have to have products which are world-class. We have to have products that we compete with anybody and we will be making over the next 12 months, significant R&D investments organically as well as inorganic layer we just discussed, so that we can really achieve a very, very competitive portfolio of products. Once that is done, we believe that the acquisition of Saankhya will bring in domain expertise and IPR in wireless as well as semiconductor design, which is another area, especially if you see the current scenario in the world on chip design is a very important asset for us to possess. Saankhya will be complementary in terms of products, technologies and customer access. There's no overlap and everything from their side will be additive to us. And Tejas as a larger platform will derive synergies in R&D sales as well as in operations because building up capable customer operations, manufacturing operations, is something that is needed. And clearly, as even after this acquisition, we continue to have a very strong balance sheet, and we'll continue to invest and accelerate into our growth. So as I talked about in my first slide about the strategy, so the Saankhya acquisition is part of the first pillar of the strategy in terms of accelerating our R&D investments and product set so that we have a more competitive portfolio of products. On the other aspects of the strategy, we'll continue to make progress during the year. And of course, I'll be very happy to share those progress with all of you over a period of time. This is where I will pause and maybe we can open up for questions from here on.

[Operator Instructions] The first question is from the line of Tushar from Ratnabali Securities.

Congratulations on the acquisition and best wishes going forward. Sir, my first question is despite repeated guidance over the past 3 con calls, we are still awaiting a call whether synergies and future plans under the Tata umbrella will be discussed. So could you please elaborate on why it's being repeatedly delayed? And my second question is in a panel discussion at the ET Telecom 5G Congress your consortium partner, C-DOT channel, Mr. Upadhyay said that our POC is successfully completed, and there was simultaneous work on 5G. and I quote him as far as 5G NSA is concerned, we will launch in BSNL network by August '22. So could you kindly shed some light on the status of the tender and the above statements and the materiality for us.

So let me -- first of all, thank you for asking these questions. The first question about the synergies with the Tata umbrella. We already started to discuss, as I mentioned in this presentation also in terms of the overall strategy. And if you see the third leg of the strategy that I talked about, which is expanding into international markets will be, of course, will be under the Tata umbrella. The details of that in terms of exactly how we will do is something which we would like to talk about when we've actually achieved a few important deals. Even the second aspect of the maximizing the opportunity in India with respect to Atmanirbhar, we are actually working with the Tata Group company, for the large project that you talked about. In that sense, the synergies have already started to happen. So in that sense -- and even the last part, I would say, coming to building the global scale operations and the current situation with respect to supply chain constraints or whatever else, we are taking advantage of the connections that the group has. In that sense, I think the synergies have started to play out. The broader strategy is why I thought I wanted to highlight the first slide in terms of what's the big picture and how we are going to go about it. So that takes care of your question number one. The second thing is about the ET Telecom and I didn't attend that particular session. So I would not like to make any comment on what someone else said. However, what I can tell you is that we have been, of course, participating in the proof of concept. We are very proud and happy to say that things have been going on fine. As Indian company, as a technology company for India, I think it's a matter of great pride that in such a short period of time, we've been able to step up to the plate and actually build equipment, which is world-class and which is actually going to be successful in terms of the testing and the POC which are happening. What happens after that to 5G and when it gets upgraded in the non NSA mode, I would not really comment on someone else's, so that from -- as far as Tejas is concerned, we're committed to making the investment. We commit to making the indigenous 4G and 5G stack successful. Part of what we are doing today is part of the acquisitions, Saankhya will again further accelerate us in that direction. But as I can say that we are doing all the things we can to make sure that we address the market opportunity and create products that are absolutely world class.

The next question is from the line of NGN Puranik from Enam Securities.

Sanjay, congratulations on a very powerful acquisition you have done. I have a couple of questions. One is about they have a very strong portfolio of IPs, 70-plus IP. Can you give some idea if you explained quite a few of where the IP strength is coming. If you can explain in the context of what percentage of this is production IP, revenue IP and the defense IP. What's the way ahead because it looks like a very strong IP power. That's the one thing. Secondly is about how do you expand and deepen your own marketing effort to take these opportunity to the market.

Very good question, Puranik. I mean, as you rightly said, the IP portfolio is very powerful. And you articulated the 3 buckets of IP, where the value is. So the good news is that Saankhya started out as a chip company. So a lot of the implementation aspects, whether it is signal processing related stuff or algorithm stuff, which is very fundamental to a good implementation of a particular design or a unique implementation of a particular design. So I think the IPR, if I were to look at the breadth of technology areas that it is spread. We can think about it is both on the semiconductor side, algorithms implementation side, and of course, wireless in the radio side of things. So I think, and of course, a lot more stuff in -- especially in the open architecture space. even on the AI side of radios and RF and so on. So I think it's a spread across IP portfolio. Being a smallish company, there has been a very significant amount of diligence in the quality of IP that is there and the commercial usages of that IP. So a lot of the IP that they have created is embedded into their product, either chipset or the other systems that they have built. So that's the one thing. In terms of specifically bucketizing into those 3 buckets, which is defensive, which is offensive, which is revenue generating, I think in the products, it's already been used, the intent so far has not been to size the IPR as it is. The intent for the company so far was using the IPR as a background IPR, creating product, which could be with along with some other things, and then actually making a business or a revenue out of that product. So I would say that we do expect to continue to use all the stuff that they have done. And I also talked about in addition to the patents that they filed, there's a lot of deep expertise which exists in terms of digital signal processing, for example, which is a very, very critical element of technology or fundamental technology that goes into wireless systems or even some kind of optical system, optical communication systems. So having that technology available, the implementation techniques available both on the RF side, both on the chip side, both on the software side is a very powerful thing that we plan to use. So second question which you have, which is a very good question and part of I would say the reason why acquisition makes a lot of sense from Saankhya's perspective also is that you can create a lot of products and a lot of technologies, but it's very crucial and important to make sure that all of that is monetized in the form of products or solution that we can sell to the end customers, right? Part of, by the way, Tejas also becoming a part of that Tata hold that we had last year was exactly to solve the same problem. Decision...

I think Tejas will play a big role in an opportunity like this because they can convert a $1 million deal into $5 million, $10 million with your the powerful option...

Absolutely. That's a thought process, and this is what I articulated in my opening conversation that once we have the right kind of products I think we do have, within the group, a lot of capabilities to sell these products successfully to Tier 1 operators around the world to articulate the right kind of value, to be able to give end-to-end solutions, which is what I think the other part of the strategy with Tata being a part of the -- Tejas being a part of the Tata Group is going to come out. I would like to talk a lot more about this once we start executing on some of the successful projects, there's a lot of work in progress, but that would be the right time to say, but you're on the right side that we have to monetize all this and really scale it up at a global level.

And you will have a formal go-to-market approach with Tejas and Tata Group is going to partner with you in the initialization.

Absolutely, absolutely. And there are many, many different ways in which that partnership can come in terms of joint developments. It could come in terms of system integration solution. It could come in -- anybody could lead sales and anybody could follow it, but those are all things which are being worked on. And as I said, I would like to talk more about it once we've had...

And the deal sizes will change -- how significantly if you're building for a $1 billion opportunity, you can convert that into 5 million?

Puranik, I lost your last question.

I'm saying your average deal sizes will change with this opportunity.

I think in general, for any company like our size, I mean, the only way we can scale up significantly is average deal has to go higher. So we have a pyramid of deals where we get a lot of smaller deals, but very quickly, they need to graduate in another few hundred deals need to graduate into a few millions, few million needs to graduate who are tens of millions. And I'm hoping that starting next fiscal year and forward, we should start aspiring for $100 million deal as well. But that's the only way a company can grow, and I'm sure you guys have seen in the IT industry, how companies have scaled up. We do need to learn from them, and I'm sure that with the kind of guidance and the support we have at a broader group level, we should be able to get to those stages.

Their current revenues...

and profit, you have to be very, very strong, right?

And what is the current revenue and profit, theirs?

So they have been -- I mean, we disclosed that number in other filings. I think for the 9 months of this year, they did around INR 73 crores of revenues. On those, they are a profitable company at an EBITDA level. But this is on their own strength and whatever they've been doing. We believe that as we create a larger platform and we synergize with each other, clearly, we should be able to derive a lot of.

So they need a lot of sales and marketing effort, monetization effort from your side.

Absolutely, absolutely.

The next question is from the line of Pranav Kshatriya from Edelweiss.

I have 2 questions. My first question is -- can you elaborate how is the revenue shaping up for this company in the sense, how much of the revenue is actually coming from the telecom side of the business and how much is coming from the satellite and other products? And my second question is how -- because you said this will be a separate company and your subsidiary, how the organization structure changes? Do you have a joint go-to-market strategy as the marketing team of both the companies get merged or you have -- because there is a part of the business which is not relevant or not or a customer base, which is not interest by Tejas, you have this as a subsidiary level? Just trying to get a sense how dominant [indiscernible].

Yes. So I would -- let me go to your first question, Pranav. In terms of the revenue split, I think, really, if I look at broadly the 5G bucket, if I were to say, and the broadcast live satellite bucket would be around equal because both of them have been a very strong focus area for the company over the last 12 to 18 months. But again, I would say that the -- so right now, think of it this way that I believe, for the next 12 months or so, both Saankhya as well as the opportunity with Saankhya will be more in the investment mode to really create the right kind of products because they have a set of products, they have a set of customers. Clearly, I mean, I think with better marketing and sales muscle, we'll try to see what we can get more out of them. But my first cut would be that our focus really for the next 12 months is really to create a very, very competitive portfolio of products which we can sell to lots of customers around the world. So that's the first goal. S. Second thing which you asked about the organizational structure and joint JDM. Initially, I mean -- first of all, I mean, the deal has to get to the right level of stage in terms of -- it will take another 90 days for us to actually make the share acquisition and so on and so forth. But clearly, the way we would be looking at is synergies that I talked about, the 4 synergies. We will definitely start off with making sure that the R&D synergies come first because there's a lot of benefits we can derive together. Number two, we'll be looking at if we have a customer access in any geographies where some of the products that they have come up are relevant. It will, of course, make a lot of sense for our sales team to look at that. The other way around from the customers that they have in their very specialized set of customers, I think we will have to talk to them to see if there's an opportunity for Tejas kind of product. But that, I would say, at this stage, initially may not happen. And then as I said, as the integration happens more and as we get into a little bit more a few quarters down the road, I think we'll have a much better sense of how to scale up the sales of the products that they're doing as a common platform. But clearly, as you rightly pointed out, the -- once we synchronize the telecom products in terms of the cellular and those kind of products together, they can clearly start bringing synergies over the next 6 to 12 months and then we can start seeing how to pump up the sales. To be creating a strong sales channel, whether in India or outside of India, is a common asset that we have to build for all our products, whether it is the stuff that we've done or what Saankhya's going to bring or what we will do together going forward. And that is really where I wanted to split it between the India portion and the international portion. In India, I think we have a very good control on things. Of course, getting larger products require larger system integration kind of expertise, which again of course, we are working within the group. And internationally, clearly, our Tier 1 accounts will require a bigger balance sheet, bigger brand, which now we have access to. And as we go forward, we should be able to see the results of those things coming together.

Thank you, Sanjay for a detailed answer. I just have a small follow-up. Can you just tell me exactly, I mean, Saankhya 5G client, are they selling their products directly to the telecom service products or they actually go to more like a integrator or a product developer and then they reach to a telecom operator?

So I would say the broadcast product that they are developing or have developed jointly with Sinclair, they -- it's a new technology coming together, Saankhya itself is a customer. And there are many other broadcasters around the world who can potentially be customers for this joint product, which is developed because the benefit of that relationship is not only do you do technology, you also have domain experts and a potential customer -- captive customer that you can do. So I think that is part for the broadcast part of the business. As far as the cellular 5G or the overhand part of the business is concerned, clearly, I think it's -- first, we have to create the technology and then we will productize it. There could be multiple go-to-market strategy. And as I mentioned in the case of 5G, it could be a system integrator-led solution, which is a potential solution that will happen in the 5G rollout, especially for private networks or some others or it could be through the Tejas route, where we as OEM will also be potentially building a equipment, which we can directly add a sell to the customer or sell it via a system integrator to the customer. So I think the JDM for 5G, in my mind, overall, as an industry are still evolving. And our focus for us is to create the products, make sure that we are very competitive. Also look at anchor customers because there's no -- just no point creating products not having anchor customers. So that's the philosophy that we are following that whether it's for broadcast or cellular 5G or for even the 4G that Tejas is doing. Our first focus is to get a very large anchor customer, which if we can make successful, then the opportunities to scale up become quite possible.

The next question is from the line of Mukul Garg from Motilal Oswal.

Sanjay, just wanted to get a sense on the 5G side. You mentioned that the broadcast and 5G are equal in terms of revenues. Given that the O-RAN product is still under development, what all within 5G comes in their product portfolio?

So I think the revenues they also count is for joint development efforts that are being done along with partners. So part of -- if you really see the business model for them was also from a point of view of creating foreground technology on top of their background technology that they have and actually generating a revenue stream out of it because each start-up, of course, ends up creating their own business model that suits them and what works for them was to really make sure that a lot of new technology can be created. And as long as they have access to the technology, IPR of the technology stays with them, they have some sharing mechanism in terms of the risk reward with the customers. So I think the 5G thing that they have been getting revenues is significantly because of the joint development project that they're currently doing.

Right. And the joint development will be a part of the O-RAN product? Or is there something else, which ...

Yes, that is part of the O-RAN product, you're right.

Right. And just kind of thinking on this in terms of combination with your RAN aspiration, do you think once the product is developed, it can be a straight fit into your 4G RAN and for a migration to 5G? Or will there be a separate development process, which will take some time for that.

Clearly, I think one thing we have done very well in Tejas over the last 20-plus years, is really reusing IPR and reusing software and reusing -- for example, we have a common software code base. There's a lot of design we use across silicon IPs or parts or systems. And that is what has allowed us to do so much of technology development with a relatively lesser R&D resources compared to a global competitor. So exactly in that same philosophy, and we -- in fact, that is a part of the synergy that I talked about. We do have strong reasons to believe that there can be convergence in terms of hardware or new radios that we are developing whether for 4G or 5G or software, which, of course, our software is going to be an anchor for the 5G NSA as we call it. And of course, there's a O-RAN. So there's a lot of synergy that can come together is the right kind of architecture and right sort of technology inputs are taken and between Saankhya team and our wireless team, we do believe we have a lot of firepower to be able to come up with the right solution and architecture. We will definitely explore synergies and we have strong reasons to believe that there should be acceleration of all the programs by working together.

Sure. The second question is in terms of your plans for cash infusion in Saankhya. And if I go back and look at the committee from Saankhya from a few years ago, the aspiration was to raise about $75 million for expansion into sales and marketing and to build out the product portfolio. So will there be some incremental investment given that this is predominantly [indiscernible].

You're absolutely right. So I think on the good news side, after the prework that Saankhya did about 1.5 years, 2 back, I mean, they have a pretty steady revenue stream. And if we don't have a significantly increased aspirational investments in R&D, on an EBITDA basis, I mean, they are sustaining and they do fine on cash. But part of what we are acquiring them is not just to keep status quo. So the intent would be to see if there are opportunities which can be accelerated or opportunities, which we believe are worth betting on larger sums of money. We have the balance sheet and we have the ability to put those cash infusion. So I think those things will be something that we will definitely be able to do. The sales and marketing investment, as Pranav asked earlier, there's a clear opportunity to leverage each of the strength, which we will and try to see if we can find a larger sales platform where the product that they've actually created can be sold. So I would say, in summary, if you maintain status quo, the revenues and the EBITDA will hold, but clearly, if you want to accelerate a lot of the programs, we will not be shy of investing the right kind of cash and we have the balance sheet to be able to do that effectively. In fact, on a broader basis, I would say, for the next 12 months, and now that we're going to start the fiscal year for tomorrow, our focus would be really to focus on -- we have a good amount of business momentum, but more importantly, make sure that we create the right kind of products, really have a world-class portfolio that we can go after any customer and be able to say that this is something as good as anybody else, including the Indian Atmanirbhar story that I'm sure a lot of you guys are aware of that we want to have the best in class. So I think we are focusing on that. The rest of the stuff, already there's a lot of momentum, and we'll build more momentum using the second and third pillars of sales in India and sales internationally, working as a part of the larger group as the year progresses. I do believe that the investment that we're going to be making to do all the right things from a technology development, scaling of the company will start paying back once the sale thing will start firing and the revenue numbers start cranking up.

Sure. Just a quick clarification. If you can share the top line concentration and how much of revenue is coming from India right now?

For Saankhya?

For Saankhya.

I -- we have not gone into those specific details. Maybe as an unlisted company, I think they have not been attracting or we're not reporting those kind of things. So maybe I'm not able to find it out. Later on as a subsidiary reporting to the extent required, we will be sharing that information as well.

Members of the management, can we take one more question?

Yes, we can take one last question and then we'll wrap it up.

The next question is from the line of Sugandhi Sud from InCred Asset Management.

I'm just referring to the strategy slide that you began the presentation with in terms of the different sources of revenue that you're targeting? And is it a fair assumption that in terms of the timeline in realizing those revenues, what can be expected in the next 12 to 24 months is more in terms of being able to cross-sell your existing fiber products plus your 4G solutions in the domestic market and a 5G commercialization in the open and being a more far out opportunity. Also, since you said that most of your technology investments keep in mind that there should be anchor customers for those businesses and open RAN, while it has received a lot of accept -- there's a lot of interest from operators globally. Most of the commercial effort is concentrated in Japan and in limited -- at limited levels internationally. And India, 5G seems like still a little bit further away. So with respect to the 5G business, which is the one aspect of Saankhya, which I think correlates -- resonates the most with your existing customer base? Is it fair to assume that revenue synergies on those -- on that count are another 2 to 3 years, at least further away? Or do you have some kind of customer relationships that could bring that forward?

First of all, Sugandhi, your questions are very insightful, and I'm glad you asked those question. So coming back to -- you're absolutely right. If I were to look at the next 12 months, a significant majority of our revenues are going to come from the optical business, the 4G stuff that you are aware of, which by the way, again, we have to go through is on pace of closure, et cetera, et cetera. So that can be one area that will be there. Saankhya in their own revenue stream, which will continue, but the larger 5G revenues, whether for O-RAN or for the NSA option that we'll have, it's probably fair to assume that given the state of rollouts in India, which is going to be our initial home market and otherwise, it's possibly fair to assume that those revenues will come in the subsequent financial year and not in the next 12 months. So I think that's the right way to look at it. S. O in that sense, the revenue growth that we will see in the coming financial year, which is starting from tomorrow, I would be most on the -- based on the momentum that we have and the revenue momentum that Saankhya has. But as the year progresses, our endeavor would be to start kind of closing new deals or stuff that would be around the new technology that we are developing, which in turn will create the revenue momentum in the subsequent financial year. But that's the right way to look at it.

I now hand the conference over to the management for their closing comments. Over to you, sir.

Well, thank you again, everybody. I mean, first of all, I hope we were able to give you a better insight in terms of the motivation of the acquisition, these technology strengths that we get as a part of this acquisition and how all of this fits in as a part of our larger strategy Clearly, I mean, we are looking for exciting times ahead. And there's a lot of things that we would like to do, starting from the new year that starts. And we will continue to communicate with you. I think we'll have our Q4 earnings call sometime in April and we'll continue to make progress on all the initiatives that we've discussed as a part of our overall strategy, and we'll be happy to share with you. So thank you, and really a pleasure talking to all of you. Thank you again.

Thank you. Ladies and gentlemen, on behalf of Motilal Oswal, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.