Tejas Networks Limited (TEJASNET) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to the Tejas Networks Q1 FY '21 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Santosh Sinha from Axis Capital Limited. Thank you, and over to you, sir.

Thank you, Faisal. Good evening, everyone. On behalf of Axis Capital, I welcome all participants to the conference call. Today, we have with us Mr. Sanjay Nayak, CEO and Managing Director of Tejas; Mr. Arnab Roy, COO and Whole Time Director; Mr. Venkatesh Gadiyar, CFO of the company; and Dr. Kumar N. Sivarajan, CTO of the company. They will start with overview of the company, company's performance for Q1 FY '21 and then we can switch over to Q&A. Thank you, and over to you, sir.

Thank you, and welcome, everybody, to the Tejas Networks earnings call. First of all, I hope everybody is safe and doing well and healthy at home or wherever you're joining the call. And secondly, I also wanted to let you know that it's a very proud moment for us that this year, we have completed 20 year of our existence. So I wanted to take this opportunity to thank all the investors who have been a part of our journey. I hope you've had a chance to download the presentation that we have put up on our website for the Q1. I'm going to be using that as a queue during the conversation today. So let me start off with the first slide in terms of Q1 FY '21, the key updates. So in terms of financials, our net revenues, net of taxes and net of component sales were INR 77.4 crores, which was a year-over-year decrease of 50.6%. Although if you take the Q4 revenues, it was an increase of 47%. We had a loss of INR 9.8 crores. And the -- from our operating cash flow perspective, we had a INR 10 crore of cash flow positive for the quarter. As you know, we are a debt-free company, and our cash and cash equivalents are of -- are at INR 272 crores. During the quarter, we had a good order inflow of INR 188 crores. As a result of which, the orders in hand is now INR 593 crores, which is the best order book that we've had in the last 8 quarters. And approximately 35% of this INR 593 crores should be executable in the rest of this year. In terms of the revenue profile, international revenues contributed to 53% of total, although the total revenue base was smaller, but international was the larger portion of the revenue for the quarter. In terms of sales update, our Q1 revenues were impacted adversely because of lockdown restrictions on account of COVID-19. As you know, April and May, 2 months were almost a washout in Bangalore and probably in most other parts of India. So we had customers' orders, but we could not ship them because many orders are dependent on customer acceptance and the customers could not come to the factory for doing customer acceptance because of travel and other restrictions. And we, of course, had customs issues or logistics issues as well. So net-net, I think there was a shortfall in terms of the shipments that we could not make despite having the orders in hand. In terms of the profile of business, the India government business revenues were weak, year-on-year decline of 52% compared to Q1 of last year. BSNL and BharatNet, again there were no real revenues at all during the quarter because the projects are not yet running at full speed. In the Critical infrastructure segment, the revenues were low, but the new order inflow was very strong. And I will talk about that a little bit later as well. In terms of India Private, again, the revenues were 76% year-on-year decline. Again, the same challenges that the shipments were deferred due to lockdowns, both at our end, plus in many situations, our customers' godowns or wherever they take the inbound of the equipment, did not happen because they themselves were having challenges in rolling out a new network. So that again impacted some of the revenues for the orders that we were in hand. On the positive side, we are very happy that we have won home broadband on GPON with 2 Tier 1 operators in the country. This is a rate contract that we have signed, so we've been selected. We expect that starting from second half of the year, we should see revenues coming in from these 2 applications, which -- and this could be a multiyear kind of a situation for us. On the International, business side was strong. So even on an absolute basis, we had a 52% year-on-year increase. And another thing which was very interesting for us that from 3 different geographies, we had orders worth more than $1 million each, 2 of them are existing customers in Africa and Asia, and 1 was a new customer. In addition, we also had new International customer wins, Southeast Asia and 3 in Middle East and Africa. So if we see the run rate business, which is India Private plus International was 86% of total, and the tender-driven business was only about 14%. On overall basis, there's a lot happening post-COVID, both in terms of increased demand for bandwidth and, of course, the new geopolitical environment, which is emerging, both in India and internationally. So we believe that it is opening up a lot of opportunities for us, which I'll again talk about in the next few slides. Let me now hand over to Venkatesh, our CFO, who would walk us through the next 2 slides in terms of more financial details, after which, I will again take back the conversation.

Thank you, Sanjay. Good evening, everyone. So financial update. Net revenues for Q1 were INR 77.4 crores, saw a decline of about 50.6 percentage. However, sequentially up by 47 percentage. EBIT loss of INR 13.2 crores, year-on-year decline of 299.4 percentage. I would like to highlight one thing here that the cost of materials were reduced to 44 percentage of the revenues during the quarter compared to 58 percentage for Q1 of the last year. This improvement primarily came from international revenues. The lower revenues resulted in the PBT loss since primarily majority of the costs other than the material costs are linked to the manpower and are quasi fixed, and overall costs are under control. However, the operating expenses reduced by 19 percentage on a year-on-year basis. Our PBT -- we had a PBT loss of 9 -- PBT and PAT loss of INR 9.8 crores with a year-on-year reduction of 195.6 percentage and 266.8 percentage, respectively. The EPS was negative INR 1.06 per share. Key financial indicators. During the quarter, we had a positive cash flow from operations of INR 10 crores. The inventory decreased by INR 14 crores to INR 238 crores. Based on the orders in hand, we expect to consume a large part of the existing inventory over the next few quarters. Trade receivables reduced by INR 20 crores from INR 456 crores to INR 436 crores. We had collected -- in Q1, we had collected INR 103 crores from the customers. Some delays from the customers were there due to the COVID-19 issues. On the BSNL, BharatNet collections continued to get delayed. Excluding -- on the BharatNet outstanding, excluding the retention of about INR 70 crores, about INR 110 crores of amount, which is overdue, is expected to be collected in this financial year. The DSOs and inventory days have been increased due to the lower LTM revenues. However, from absolute numbers, they have been reduced from Q4 to Q1 level and expected to bring down the DSO and inventory during the -- in the financial -- coming quarters of the financial year. Despite payable reduced by INR 14 crores, our working capital has been reduced by INR 9 crores in Q1. By making use of the existing inventory and the expected collections, we will continue to improve our working capital during the financial year. Our cash position decreased by INR 8.5 crores in Q1, and we expect the cash position to improve on a quarterly basis during the rest of the financial year. We continue to be a debt-free company, and our cash end equivalents, including bank deposits and investments in liquid mutual funds amounting to INR 272 crores as of June 30. We managed our working capital well despite seeing certain payment delays from customers due to COVID-19 situation. While the uncertainty due to economic impact of COVID situations remain, financially, we are well positioned to invest and benefit from the opportunities in front of us. With this, I'll hand over to Sanjay once again.

Thank you, Venkatesh. I'm on the slide on the COVID-19 update on our business. So as Venkatesh said and I'm sure all of us understand that from a short-term point of view, there's definitely going to be impact, which is a little bit unpredictable because of the COVID situation and the economic impact we have. But from a business continuity point of view, I'm very happy to report that we were able to continually support all our customers worldwide, and we could maintain their network uptime of more than 99.999%. So I think this is something which our customer support team has been exceptional at. Secondly, that because of lockdowns and travel restrictions, as I mentioned earlier, we had an impact on operations, both from customers not being able to come to our factory for factory acceptance, outbound logistics challenges, some challenges or delays in the customs. And of course, the delays from a customer's perspective to say that, "Please do not ship us the material because our inbound and godowns are not open enough to take the thing." So I think all that impact happened in Q1. In terms of our employee productivity, I'm again very happy to report that very quickly, we were able to implement work from home from a large majority of employees, and they have been working very productively. And for those people who need to come to the office as well as the factories, we have done everything possible in terms of safety measures and social distancing and all the health and other best practices that we have learned. And so we have been able to manage our factory operations as much as we required as well as hardware and other labs being fully operational to support rest of the company. So in summary, we see that business continuity wise, we don't see any challenges and issues. Second thing I wanted to point out is that, among the few industries in the world, which because of the COVID, would see hopefully a positive impact, telecom is one of those. And clearly, telecom networks have been big proof to be mission-critical. Data traffic has seen a significant increase around the world with work from home, learn from home, video entertainment and everything else that we have [Technical Difficulty]

Ladies and gentlemen, the line for the management is disconnected. [Operator Instructions] Ladies and gentlemen, thank you for patiently waiting. The line for the management is now reconnected. Thank you, and over to you.

So this is Sanjay again. I'm sorry. Our line dropped. Probably one of the points I was trying to make is that telecom networks have proven to be mission-critical, sharp rise in data traffic and clearly, capacities are choking. And customers really want fiber-based broadband at home because when you have your kids doing online classes, you're doing Zoom calls or other video calls all day, the mobile broadband is not good enough. So that's the second thing we're seeing. And third is that the operators in India and other parts of the world have figured out home broadband connectivity is a much higher ARPU business than broadband connectivity where the margins are getting a little bit tight. And that's why people are very keen to upgrade the network capacities, both for home broadband as well as for metro networks. So what we're seeing really is increase in orders from our existing customers. So this is a trend which is becoming clear at least after the first quarter that from the existing customers, we're getting more orders, we're getting a higher share of their wallet, especially in the case of home broadband on xPON, which is GPON and GPON kind of technologies. And for metro optical, which is basically pulling together of all the higher bandwidth in metros and cities and so on. So this is one area where we are seeing a lot more business coming. Fiberization will continue as telcos invest in increasing their wireline broadband infrastructure and also augment the reach and capacity of their 4G and upcoming 5G network. So the part of the business that we cater to is something that there will be increased spending by the operators. On the other side, we are also seeing a trend that internationally -- because in India we know all the customers and they know us, but internationally, whichever customers we are already there, we are seeing a very strong business inflow. But new customer's acquisition is becoming a little bit delayed. Because of travel restrictions, we are not able to complete lab demos and field trials, especially for larger customers who would definitely insist on that process. Some of the customers also are preferring to maintain status quo from their suppliers. So during the COVID times, they don't necessarily want to introduce a new vendor. However, I must tell you that our sales teams and all of us at management have actually been able to reach out to almost all our customers, including the potential and new ones, via webinars, virtual meetings. We've really figured out a very good way to engage with our customers, and we have even now set up in remote lab demos and so on and so forth. So everything that we can do for winning new customers internationally is happening, but there is clearly a trend that the new customer orders may get delayed. Whereas existing customers, we can get more business. Coming to the next slide about the revenue segmentation. So if you see the chart on the left-hand side is the annualized version of how our revenue was in FY '20, where if you saw India Government was around 15%, India Private was 51%, and International between Direct and OEM, because OEM is now becoming very small, is around 33%. If I take the Q1 numbers, International is 52%, India Private is around 33%, Government is 14%. And within government, really, all of it is almost Critical infrastructure because BSNL/BBNL, as we said, really did not have any business during Q1, not that we lost anything except nothing really happened. So net-net is that our focus continues to be getting International and India Private to be a larger portion of revenues going forward. Of course, Q1 was a small quarter. But as the year progresses, we do expect that both these segments will continue to grow healthily. Coming to the next slide, in terms of the 2 segments, both India and International, I'll just draw down into both of them. So in India business, the government accounts, BSNL and BharatNet, if I were to take that as a bucket, government has clearly announced plans to increase BharatNet coverage from 125,000 villages to 250,000 villages by end of March and provide 500,000 broadband connection to villages. Government of India has also figured out that in the COVID times, the digital connectivity to villages was really a way for them to implement a lot more of the schemes that they have talked about of reaching to the poor and everything else. So this is something which is a high priority project. In terms of BSNL, the financial package has been approved by the government. And under that package, they have to roll out a new pan-India 4G network. This will again present us opportunities for tenders in upgrading their optical backbone, backhaul as well as the 4G radio network on the wireless side. We are closely watching how those tenders are progressing. And once those tenders come to a fruition stage, we'll have a better play on that. In terms of state-led BharatNet projects, the Telangana project, our System Integration partners had won it. We started to get the orders from them in this quarter -- in the last quarter, and some orders should come this quarter. Another state BharatNet project, which is at a tendering stage is Tamil Nadu. That is, again, where we will be bidding for the equipment portion, which is reasonably large in that tender as well. In terms of the Critical infrastructure, this is oil and gas, defense, smart cities, railways and all that. This is a segment which is doing extremely well for us. We received new orders for a large defense network from a System Integration partner. We also received orders for smart city and other smart campuses, again from SI partners. We are seeing -- we have bid already, and we are seeing new tenders in Railtel, Powergrid, Oil & Gas, Metro and all of this sector. In this segment, we already have a strong order backlog, which is orders in hand. And we also have a fairly good visibility of new orders, some of which will get executed in this financial year as well. So I would say, this part of the business, we see government continuing to spend and accelerating those projects. For example, video surveillance is one application. There are a lot of things happening, and we seem to have a good handle on that. And our philosophy there is, we will work with System Integration partners in most of the government business rather than doing things directly so that we just focus more on the products. In terms of Private accounts, as I mentioned, that increasing ARPU and pent-up demand for broadband services, both for home as well as small and medium enterprises, is motivating the operators to increase their CapEx in wireline broadband segment, which we expect during the financial year will be robust. Of course, in Q1, because of the logistics challenges, operators did not roll out many new networks, both in India or outside of India, which in turn resulted in them not lifting a lot of equipment. But as the year progresses and things start becoming normal or closer to normal, this trend should definitely accelerate. Again, as I mentioned, we're very happy that we've been selected by 2 Tier 1 operators in India for home broadband application on GPON, whenever they give a fiber broadband services. So we have signed great contracts with them, and we expect that we should see revenues on a run rate basis over the next few years as those home broadband and SME broadband rollouts happen. Network expansion in the near term will be at a slow pace. But as the year progresses and the restrictions get more easy in terms of control, et cetera, we should see that spending to happen. The third bullet I would like to highlight is that as a leading India-based equipment vendor, this whole new emerging geopolitical situation in terms of border, in terms of government focus on Aatmanirbhar Bharat, I think provides us with a favorable environment. We are probably the single company in the country, which has the largest India-made design and Made in India product portfolio. And we -- I'll talk a little bit about it later as well but overall, there seems to be a positive development for our business. How it pans out and how strong the government's intent and resolve is to implement these 2 initiatives is something which we'll all be closely watching. But at least at a macro level, it seems like a good situation to be in. On the International side, again, we are seeing a very interesting trend. That because of geopolitical issues and because of various sanctions and because of U.S. government making very strict orders in terms of chip supplies or even the fabs, which can produce chips from certain country, there is a significant amount of motivation for the customers to derisk their supply chain and diversify their supplier base from one country to others. And as a result of that, in whichever account we were there, we see that our wallet share in that account is increasing because customers are feeling that we have a fairly compelling value proposition in terms of competitive technology as well as competitive costs compared to what they were buying from others. And we see this as a very good trend emerging. Specific geography-wise, Africa and Middle East is doing very well for us. And the basic thing is that there's a lot more increased broadband penetration, web scale companies or the digital economies are building and wiring up Africa in a very big way, and that in turn is demanding more bandwidth from our customers. And we are seeing a lot of good traction for our DWDM, which is the high-capacity optical transmission product as well as the home broadband products, the GPON product that I talked about. And our converged access solution, because many places in Africa don't have fiber, so they're using a wireless access along with the GPON, wherever they have fiber. So we do see a good order visibility for the rest of the year from Africa. And I would also like to say that we won a multiyear, multimillion-dollar rate contract with 1 new customer in Middle East, which should give us good revenues over the next couple of years as well. In South and Southeast Asia, we again see a good order visibility from our existing customers, where we expect to get a larger wallet share. And we also got a new $1 million-plus customer order from 1 customer in South Asia. North America is not doing that well for us at this stage. The business in Q1 was slow, primarily because of the COVID-19 situation. And given where things are, we don't think too many things are going to happen in Q2 either. Mexico, where we have a lot of incumbency, we've completed successful trial for a new application, again, based on FTTS with a large customer, but we think the orders for that would really happen in the second half. U.S.A., we have now started to appoint a few channel partners to access these smaller customers because it's very difficult for us to go on our own and reach all the customers. So we have submitted a lot of bids to Tier 2 and Tier 3 operators. As I mentioned earlier, the delays in decision-making is happening because the lab demos and lab trials and field trials are not being completed. But to the extent that we can, we are pushing those things. But our belief is that in the first half of the year, the entire North American business for us, at least, being a new incumbent or new player into that market, is going to be slow. I'm now moving to the next slide. In terms of where are we winning, in terms of our product and competitiveness, so really, there are 4 segments that we seem to be doing quite well in India as well as internationally. Number one is home and office broadband. So the GPON technology that we have created, the one which we deployed for BharatNet is now also going to be deployed with large private operators in India as well as in many other parts of the world. And we believe that this is something which we are very competitive, and we are now getting to economies of scale to be able to really have the best-in-class technology as well as competitiveness in terms of price. The second area we are doing very well is the Critical infrastructure. We mentioned about this last year. What is happening in Critical infrastructure in all the utility sector, whether it's oil and gas or whether it's defense or it's many other segments of that business, they're really doing a network transformation, which means they had legacy networks which are modernizing. And there's a significant amount of telecom investment happening. For example, every time you have a new railway or a new oil and gas pipeline, they put video surveillance, lot more monitoring of telematics and so on and so forth. So that is another area where we are doing extremely well. And we have a fairly strong incumbency, and I think we seem to be getting more and more traction in that area. The metro capacity expansion that I talked about that once we have more data coming out-of-home broadband network and offices consuming a lot more data, the capacities in metros have to be increased. So this is again where our WDM and OTN products for the metro and core networks are doing quite well. And then the last bit is the 5G-ready mobile backhaul. So while in many geographies where we are operating, 5G really hasn't started to happen in any significant way. I'm talking of other than North America. So in Southeast Asia or Africa or India, we don't have 5G yet. So there's still an expansion of 4G happening. But in anticipation of 5G, the technology, which is being deployed is something again that we cater. So those are the 4 areas where we are winning. Coming to the next slide, which is product differentiation slide, I just wanted to kind of put this slide from a slightly different perspective. So if you see 3, 4, 5 years back, when we started talking to all of you as public market investors, we were primarily an optical transmission company, which was in the metros. And so we were really doing the middle segment, which is the optical transmission product. And we were doing some of the segments -- some of the products in the Metro core segment. Today, I'm very happy to say that with all the sustained R&D investments we have -- which have been made, we have been able to add 2 different segments to our business. On the left-hand side of the chart is the broadband access. So if you see, we added the GPON portfolio where BharatNet was the anchor customer. And subsequent to that, now we are into private telcos in India and then similarly, in many other operators around the world. So that was one part, which is on the GPON FTTX technology. Second thing which we did is we -- the same product that we are doing for optical transmission, we repurpose them as Ethernet switches for smart cities and defense applications. And that became really a very good product portfolio to add for Critical infrastructure because security considerations become important. So this is another area where we have been getting a lot of success. And then the third bucket, where we've not yet got much success, but we are looking at larger anchor deals to happen is on the wireless side. So we do have built a 4G wireless product. It can be upgraded to 5G. So this is a base station that we have built. And the good part is, all these 3 access technologies, the wireless, GPON and the Ethernet are all going into the same box that you see in the picture. So this is what we call as the ultra-converged broadband access, and this is something unique in the world that nobody really has. So this is the value we have been able to create on the broadband access side. On the right-hand side of the chart, extreme right-hand side, earlier we used to do up to 1 Terabits of switching capacities for Metro. We have upgraded that. And late last year, we launched a multi-Terabit, a 48-Terabit switch for the core, for which currently, we are having customer trials because this is a very large and very, very high capacity switch. We don't have much commercial success as of yet, but this is another area that we've added. So now you can see that between wireline, wireless, core and access, we really have a very, very strong portfolio of products. And this is something which has become a good differentiation for us in terms of increasing the addressable market as well as, for instance, when you talk of the Aatmanirbhar Bharat, which is the next slide where I am. So we really believe that the amount of technology we've created, the amount of products we have created, we are probably well ahead of anybody else in the country to really be able to stand up and say as to do we have all the products to build end-to-end network. So in the optical domain, we have products to build everything from the access of the network to the core of the network. Similarly, on the GPON side, not only do we have GPON, which is what we deployed in BharatNet. We also have something called next-generation PON, which is a 10-Gigabit version of that technology, which is just coming around in few parts of the world. And hopefully, we will be deploying that technology with a few operators in India as well as the market matures. So GPON is another area where we have now a full range of products, both on the head-end side, which is called OLT as well as the customer-prem devices, which are called ONTs. So we have created a cost-effective version of that as well. So there could be a possibility that some of Tejas products could go into people's homes in India as they get new broadband connectivity. On the wireless side, this is a new part of the business, which we have been investing over the last few years. And we believe that with a few anchor opportunities that could emerge in India as a part of Aatmanirbhar Bharat or trying to really do a lot more things internally, we could see a scenario for us where, for the radio access network, we could have our LTE-based products, which are, of course, 4G today and upgradable to 5G. So all the core technologies is there. And then we talked about the secured Ethernet switches and routers because security is very crucial and having a switch with just from Gigabits to Terabits for video surveillance, enterprise network, defense, and it's something that we have done very well. And from our point of view, the full ownership and control of all software, hardware, design, IPR as well as 100% local manufacturing enables us to meet all the Make-in-India requirements. So in summary, what we're trying to do is, we really want to become the product provider for the System Integrator who would be executing these large projects within the country. We believe that our core strength is building products, which we do. And the system integration, which is putting project management together and which has much larger cash flow and other implications, we would really be partnering with larger System Integrators, both in the private sector as well as PSUs, and we have successful relationships with pretty much all the leading SIs in the country. And with a track record of executing large projects, or whether it's BharatNet or defense or anything else, we believe that if these opportunities indeed materialize as the government's intent is, we should be able to see interesting business opportunities for us. I'm coming to the last slide. And after that, we will get into a Q&A session. So it really -- I want to see that where is our business at the end of Q1. So clearly, as a business for Q1, our revenues were impacted adversely. Because of COVID-19, we could not ship some of the orders despite having business and -- but that's the reality that we just had to face. International seems to be kicking up. It was 53% of total, and we won, in addition, new orders from customers in other geographies. Good order inflow, despite the fact that 2 months of the year -- 2 months of the quarter were quite lockdown and customers themselves were not in a position to release orders. I think we booked INR 188 crores of new orders in hand. And as a result, we basically have a good order book going forward. More importantly and equally importantly, I would say that the wins at Tier 1 operators in India for GPON products gives us a good runway for future revenues. COVID-19 clearly has lots of challenges in the short term and the economic uncertainty is clear. It's very hard to predict stuff that is going to happen on a quarterly basis because, for instance, Bangalore is in a little bit of a messy situation right now. But things could change, and it could be Mexico another day or Delhi another day and so on and so forth. So those things will continue in the near term, and we are definitely watching all those things and doing everything in our control to make sure things stay as normal as they can. But from a business perspective, data traffic is clearly going ahead. Business opportunities from an operator angle is clearly looking good for us because wireline broadband infrastructure is something which is going to be invested into. Our game plan is that really increase market share in existing customers because both in India as well as International and all the investments which we made in sales last year, where we have local presence in Africa, in Southeast Asia and Mexico and in U.S., to some extent, those investments are allowing us that at least wherever we have incumbency, we can potentially get more business. We did see some successes in Q1 on that account where we got larger orders from International. But -- and then the other aspect I also wanted to mention is that the whole geopolitical environment in terms of how customers are looking to derisk their supply chain, both in India and outside, it's something which is a favorable tailwind for us. The exact impact of that, we'll have to see how it emerges. We are clearly seeing more opportunities coming our way in terms of engagements, in terms of new applications, but those things need to get closed and transform into business. Aatmanirbhar Bharat and Make in India is clearly something which the government has now come very vocal. And we believe that among all the Indian companies who are into deep technology and products in telecom, with the range of portfolio of products, which has expanded significantly over the last 4 years, which I articulated earlier, we do have a fairly good opportunity. And our existing relationship with leading SIs in the country, the System Integrators, gives us that trust factor where people believe that working with us, even a complex project can be executed in time, in quality and with the competitive prices. And all this in a cash position is very crucial. Happy to report we have INR 272 crores of cash, 0 debt. And as -- despite some of the slippages in collection because of COVID, we believe that with the inventory utilization that we have in hand, the receivable situation that we see, as the year progresses, we should improve our cash flow and working capital. And hopefully, the bank balance in our account should improve every quarter from here on. So that's really where I would pause. And probably this is a good time for us to open up the floor for questions. And myself, Arnab, Gadiyar or Kumar, any of us will be happy to answer any questions that you may have.

[Operator Instructions] The first question is from the line of Mukul Garg from Haitong Securities.

This is Mukul. Sorry, I missed the initial few comments, but did you break out what was the business which you lost due to the lockdown in Q1? And also what portion of Q1 revenue was benefited from the carryover business from Q4? Because if I recall, you were supposed to execute almost INR 100 crore in Q4 on order book and that obviously got pushed out a bit. So how much of that was received and delivered in Q1?

So from our -- what we had originally, so there's 2 effects which came into picture. Slippage of Q4 business, which was supposed to happen in Q1 and new business of Q1, which was supposed to happen in Q1. The 2 combination together, we anticipated around INR 45 crores of revenues slipped out of Q1 as a combination of the 2. Some of the orders from Q4, by the way, did not get shipped out in Q1 either because some of the Critical infrastructure and all of those things, which are dependent on factory acceptance tests, et cetera, they could not happen in Q1 either. So around INR 45 crores is what was the order slippage because of those 2 things together from Q1 from what we had originally thought is going to happen and what actually happened.

So just referring on this, when you say that you had INR 100 crore order in Q4, how much of that was executed in Q4? How much of that was executed in Q1? I'm just trying to understand if there's a delay of 2 quarters? Can the delay be far longer?

So we have not exactly broken out that how much of Q4 orders got in here and not -- and how much of it's further slipped out to second quarter because it's more of a customer wise, customer situation. For example, I recount that there's a customer that wanted us to ship in March, which we won the business, international customer. But then his country is in a lockdown situation for most of the things. So he thought he's going to do it in this quarter and looks like now, they may be opening up and they will do that. Some customers in India in the Critical infrastructure sector, again, had a similar situation. Some of the private customers in India asked us to hold the orders, which they originally thought they wanted it early. So I think it's a little bit of a combination. My sense is, coming back to your answer that, I don't think it's a 2-quarter slip. That decongestion of the worst time because the lockdowns around the world, including India, in a full basis are almost over. So from hence forth, I think except for the last minute situation during the end of the quarter, we should start to see a normalization of at least the order that we planned is viewed in a particular quarter and actually happening unless there's significantly large part of the quarter that gets locked down either at our end or the customer's end. So I don't think there's a 2 quarter delay that decongestion will start happening from Q2.

Understood. And the second question was on the order book. Can you break out -- there was INR 188 crore increment this quarter. How much of that was on the Private side and how much is executable in FY '21? And the second part of that question is, you highlighted 3 international wins of $1 million each. This basically is like some INR 20 crores, INR 25 crores from 3 customers, which seems obviously on the back of the full number quite low. So just wanted to understand what prevents global customers from giving you, for example, a $20 million single order, given the CapEx spend, which has happened at Tier 1 operators. Is this your balance sheet? Or is there something else at play?

So 2 questions you had. The first question was that how much of the order book of -- that we have in hand is executable this year? So I'd mentioned that out of the INR 593 crores of order book that we have when we started the quarter, around 35% of that will be for this financial year, and the balance will be for next year and the year after. So that's point number one. Second point, your point was that, why did the international customers not give us even bigger orders than what we got? So I would also say that, except for the U.S. in the other -- where we really did not get much traction, U.S. and Mexico, both where we did not get much traction, but in other geographies, also the customers were under a lockdown for a large part of the quarter. So different geographies opened up in a very selective way. So for example, South Africa opened up for a short while. And we got some orders from there. We got orders from Malaysia. We got orders from Middle East. So I think the orders came and are continuing to come. Why we didn't get a $20 million order is really that the customers that we're working with. They may not be placing $20 million orders on anybody, not just on us. So I think as a part of the orders that they are placing, at least with the customers that we are with, we seem to be getting good orders. Some customers where we got selected last year, for example, there was a pan-African operator where we got selected last year, some of those orders, just because the orders actually come from OpCos, not from the main corporate, I think there are again delays because of we are a "new vendor " in that particular OpCo. And the new vendor in production, as I mentioned earlier, in any OpCo or in any country is taking a little bit more time than normal. So I would say that as the year progresses, we expect that the international orders will continue to, at least from the geographies that we are seeing good traction, should happen. U.S., Mexico, I think, will be a second half because first half, again, I believe that just -- there are too many restrictions and things that are not helping us right now.

Okay. And there was another question on the breakout of the incremental...

[Operator Instructions]

I understand. But this was an existing question, which I asked, that was my second question part. But can you give us the breakup of incremental from the Private sector orders won during Q1?

So I think in the Q1, around -- I'm just looking at the numbers here. So incremental Private sector order, if I were to look at our Q1 new booking, around 25% came from India Private, around 40% came from India Government, and the balance came from International.

[Operator Instructions] The next question is from the line of Rajendra Mishra from IDFC Mutual Fund.

So basically, this -- you have highlighted a couple of things. One is the home broadband you're speaking about. And you said that customers have -- OEMs have realized that -- the partners have realized that it is a good ARPU business. And you -- we have some technologies like GPON and all and which you have demonstrated in BharatNet and which is scalable or maybe gaining traction in private. So could you just build on that? I mean just explain a bit more how is ARPU better? And so what exactly are we looking there in terms of 6 months, 12 months, 18 months there?

So to answer the first question. If you see a typical mobile customer in India is about INR 120 to INR 150 or INR 200 of ARPU for an operator. Whereas a typical home broadband connection that anybody takes starts anywhere from INR 599 going to INR 999, INR 1,499 depends on which plan people take. So as a result, what's happening is that the -- and plus, people are willing to pay higher for higher-quality home broadband, which gives you, say, 100 Mbps connection with guaranteed speeds upside, downside and so on and so forth. So that's what was my first comment that our end customers are seeing a business -- good business case to rollout home broadband services because of the new way of doing things. So that's part one. Coming back to what is the opportunity size and how will it play out for us in the 6 months, 12 months and 18 months? I think the way to look at is the following way. In India, at the point in time, depending on whom you talk to, there could be anywhere between 2 million to 3 million home broadband, which have been powered on a high-capacity fiberoptic connection on GPON or stuff like that. Jio, for example, talked about 1 million home broadband subscribers on Jio Fiber, Bharti may have similar and if you add up all the other, let's talk about 3 million, 4 million, the addressable market, which people are targeting as in the next couple of years is anywhere between 50 million to 100 million homes. So I think there should be a significant jump in terms of the home broadband customers. This will be dependent on how fast people are able to roll things out. And as you know -- and which is why I mentioned earlier that any of the housing society that people live or neighborhoods people live, there are restrictions for people to come in and wire up new connections and stuff like that. So they could be operationally and logistically a slow rollout in the near term, which should pick up as the restrictions and all that reduce. So I would say, if you would take a 3-year window, we are talking of, let's say, roll it up to 4 million or 5 million home broadband subscribers in the country, are reaching up to, say, 100 million home broadband subscribers over a 3-year period and that is what would be the opportunity size. Clearly, there are 3 kinds of players in that market. One is Nokia, which is a global leader in Fiber-to-the-Home GPON equipment. So they are incumbent in some of the larger operators in the country. Now we have also got an opportunity to play into that. And there are our Chinese vendors also who have a competitive portfolio, but some of that market share dynamics may possibly change going forward. So that's the way to think of the size of the opportunity and how it will pan out.

So just correlated to that, so 4 million, 5 million, if it goes to 50 million to 100 million, let's say, in 3 years or 4 years, what will be the opportunity size for us, very rough cut?

So it could be -- so for 100 million -- to wire up 100 million subscribers, let's say, you would probably need close to about $2 billion worth of active electronics to be bought, if you were to put the numbers or get -- anywhere between $1.5 billion to $2 billion depending on how you look at it. That much amount of equipment will be needed to wire up all the 100 million subscribers in the country.

Okay. Second question is a little -- just a technical thing, which I need to understand. So 5G, we all have been talking a lot for quite some time now. Maybe it's coming in 6 months, 12 months, I don't know. But now we are clearly seeing the world getting polarized into 2 buckets because of geopolitical issues. So just help me understand if the 5G technology in one, which is China-driven world, is it a different standard and U.S. will be a different standard? And whether we are flexible to supply to both and whether once the world polarizes, are we -- do we have -- will be -- it will be an opportunity for us or it will be -- so how it will impact us in terms of -- are -- so is that standard still evolving and whether will be aligned to both, aligned to one? How is that going to impact the dynamics of this industry that we are operating in?

I think this is an excellent question. So let me tell you how will 5G impact us and what happens in the new geopolitical situation. So first and foremost, there is only one 5G standard in the world, which is uniform for everybody else. It is set up by an independent standards body. And by the way, I mean, India also, you would have read in the papers in the last few weeks that India had contributed to one such very important 5G standard, and I'm very happy to say that Kumar Sivarajan, who was the Chairman of the Standards Body of India, during whose tenure, a lot of this work was done and submitted and some of our team members were participating to that global standard. So coming back to the 5G standard is common, number one. So there are 3 elements of a 5G that we need to think of. One is the transmission. So 5G still does not obviate the need for a very high capacity optical transmission. So the technologies that will go into servicing a 5G infrastructure are what we are already doing. So if you look at the product chart that I had talked about, the -- some variant of GPON technology, some variant of packet transport technology and some variant of OTN technology, these are all technologies that we are already shipping products, will be used for backhauling all the 5G infrastructure. So essentially, 5G will have densification of network, which means if you have 100 base stations today to cover a certain locality, you need probably 1,000 base stations in the same locality of 5G to cover everything. And every of those 1,000 base stations will need some kind of a device to bring the traffic back. And that -- those are the devices that we do in terms of stuff that goes on optical fiber. So that's one part that we are positively able to service that aspect of the backhaul or crosshaul, as is called for the 5G market. So that's point one. The second aspect of 5G is the radio part, which is the wireless, as loosely we call it, base stations. So as I mentioned earlier that we have invested over the last 5, 6 years in building our own 4G base station, which with software and certain kind of feature-set upgradability, can be made 5G compliant. And 5G is nothing, but what is called loosely a Release 14 or Release 15 of the 3GPP standard, which is the standards body. So the base station that we have can be upgraded to 5G. It's a 4G base station today, it can be upgraded to 5G. So that is another play which we can potentially have. In 5G, for wireless, there are 2 different segments of the market. One segment is called the Fixed Wireless Application, or FWA. So our current product is already compliant to the FWA market segment. And then the second aspect of 5G, of course, is mobile -- enhanced mobile broadband, which, of course, we are upgrading, and we can upgrade with software features to address that. So we will be able to address all the optical, the backhaul part of 5G today with the products. And with the wireless products that we have, with upgradation, the same can be upgraded to 5G. So I think any which way, the geopolitical situation happens in the world, the transmission part or the backhaul part just insulated, and the wireless part is an opportunity which may open up depending on how serious the government of India is, for example, building their own equipment and how well Indian ecosystem can potentially step up and build all the stuff.

[Operator Instructions] The next question is from the line of Kunal Patel from Equilligence Capital Advisors.

Hope everyone is safe there. Sir, first question is regarding Aatmanirbhar Bharat again. So we have been talking about it for a few years now. And nothing has moved in the direction we wanted to. So did we have any representation from our side to the government since the announcement? Or has our Indian customers showing any intent to get higher wallet share to local share? Would be great if you can throw some color on that.

So good question. So there are 2 parts. One is that have we represented, of course, I think we are a part of all these standards, all the voice of industry in terms of whether it's Export Promotion Council, TEPCs. I used to be the Chairman of TEPC, Kumar was the Chairman of Standards Body. I'm currently also the Chairman of FICCI's R&D Council. So I think that we have a lot of inputs that we have given to the government. Government has done 2 things. In fact, the most recent one was last week -- actually last weekend or last 2, 3 days back, where they have come out with a new guideline where any equipment from certain countries with whom India shares border cannot be bid in any government tender, whether central government, state government or even municipality or any government money. So what that basically means is that -- and this has been done by altering what is called the GFR guidelines or the procurement guidelines of Government of India. So that is one thing which concretely the government has released as late as late last week. How is that going to play out? We still have to see. But that would basically means that the government procurement would potentially be favoring domestic products and domestic companies. So that's point one. The second point which you mentioned is that, have private operators in India started to look at more Indian equipment? The answer is, yes. But that comes more from a point of view of diversifying their supply chain risk because currently, because of the trade war between 2 countries, there's a lot of uncertainty, whether a particular equipment supplier would even be able to continue to manufacture their equipment as chips from U.S. or chips from U.S. machines are not made available to them. So just from a pure supply chain diversity, we are seeing more engagement with many of our private customers in terms of areas where we have strength and they have requirements. How will this exactly pan out? As you rightly said, in the past, also, there was a conversation about Aatmanirbhar Bharat and preference to Make in India. So will this happen this time? We'll have to actually wait and watch.

Okay. Fair enough. Sir, second question is regarding, again, both the telecom operators have started -- are in critics mode again. Bharti has already selected Ericsson as their partner. Correct me if I'm wrong, but a bigger chunk of Jio business has also gone to our U.S. competitors. So where are we lacking in our competitor intensity? Also if you can just throw some color on Indian Private business where the growth will come from, say, over next 18 to 24 months?

So the good news is as a "start-up company," which is always growing, which is what we are, we can confidently say today that our GPON products are as good as anybody's in the world. We can compete against the best-in-class, and we've started again with a very humble beginning for supplying for BharatNet, which we successfully rolled out. But the same technology over the last 24 months, we have matured and made it state-of-the-art in fact, as I said, not only GPON, it's now supporting next-generation PON, which is not even being rolled out in India or even in the U.S. in any significant way. So technology-wise, I think we are almost up there. And in fact, with the economies of scale that we got out of BharatNet thing, even cost-wise, we are very competitive. So we do have reasons to believe that as more operators in India and around the world start rolling out GPON network in large quantities, we should hopefully get a decent shot at that business. The first step of that is, of course, being selected and being integrated in their systems and so on. And after that, it would basically depend on our performance, in terms of quality, in terms of all the other things which make a vendor win. So I don't see that there's nothing that we are lacking at this stage. It's just that we now have the product, which is as good as anybody else's. And we are as competitive as anybody else because none of the operators in India or tenders will allow you to win if you're not already that.

[Operator Instructions] The next question is from the line of Vikrant Kashyap from Kedia Securities.

Sanjay, I have a couple of questions. First, I need a breakup of receivables. And are we still facing challenges in recovering money from our customers? I'm not talking about BSNL/BBNL because you have mentioned in earlier comments. But due to COVID situation, are we still facing to receive money from our other private players in India or international clients?

So first question, Venkatesh will give the breakup of the receivables, I don't have in front of me in terms of India and international. But barring BSNL as a one-off customer in India where we've had challenges, and again, I want to just reiterate that our money from BSNL is for the BharatNet project, which is different than the CapEx of BSNL. And we also can confidently say that if we have not received money, nobody else has received money for that project. And as BSNL gets their sovereign guarantee backed up by the Government of India, which they announced a few weeks back, we hope, as Venkatesh said earlier, that we should collect that money. So BSNL is a challenge area for us, has been with correct bits and pieces, but we expect that now the big chunk should happen once they get the sovereign guarantee. As far as the other customers are concerned, either in India Private, we don't have any challenges with any other customer. We don't have exposure to any operator whose balance sheets are stressed. So in that sense, we are insulated from that. Our smaller operators in India, we have very strong mechanisms of payment, either in the form of advance, LCs or whatever else. The government, other customers, we are now working largely with System Integrators with whom we have fixed payment terms. So we are, again, insulated from the vagaries of government guys not paying them for projects. As far as international is concerned, most of the customers we are receiving payments on time. A few customers, we are seeing delays. We are not seeing big delays, but for example, some of the things which were supposed to, say, come by end of June, may come in, say, middle of July or end of July or maybe spread out by a few weeks here and there. So we do see a few slippages and partly because of the customer own challenges in terms of their banking systems or things not working in full thing. So I would say, a little bit of delay we have seen in certain customer payments internationally. But materially, if you see even the receivables that we got and that to without anything significant coming from BSNL, we collected a decent amount. If I look at our Q2 receivables, and that's why we were very confident when we said that by end of quarter 2, we should see higher amount of cash in the bank, so receivables will come down. And of course, the working capital correspondingly will also come down. So I would say, except some amount of delay of a few weeks here and there, we haven't seen any material delays from our customers anywhere. And definitely no delinquencies. So we've not seen a single customer who said, "I can't pay or I'm stressed," because all customers of ours are almost actually in an investment mode for a part of the business that we address, which is providing higher capacity broadband services to their customers.

Okay. I will take the breakup of outstanding order receivables. But my second question is on our order book. So how much of this order book will be executable in FY '21 current year?

Yes. So I think, as I said earlier, around 35% of our order book would be executed for FY '21. So that's around INR 210-odd crores we should execute from here till the end of the year from the order book that we have in hand. That's based on our current estimates. Some of these are things which, of course, depend on the customers' requirements. So it could be a little bit more or a little bit less, but around INR 210 crores is what we think we'll execute out of the order book for this year, in addition to what we've already done, by the way.

And Sanjay, can you give us the breakup of receivables?

[Operator Instructions]

I had asked the question earlier. I am just waiting for the number.

Yes, I'll answer to that question. I'm Venkatesh here. In terms of the receivable breakup, about 25 percentage of the receivables are outstanding are from International, and rest of them are India.

So sir, 75% was largely into India Private and if you can better give a breakup?

If you take out maybe BSNL, BSNL approximately about 40 percentage of our receivable, then rest of them are other Critical infrastructure and -- plus India Private.

And that is some of the receivables are not due in the sense that they are current -- they will be paid up after a 1-year guarantee period. So we've got 90%, for example done. And the last 10% retention money will come 1 year after that. So it may not be due. So I would say, the major overdue payment in India is really BSNL. And International is, as I said, 25% of the total.

Ladies and gentlemen, due to time constraint, we'll take the next question as a last question from the line of Sangameshwar Iyer from Consilium Investments.

Sanjay ji, just wanted to understand given that the demand scenario across all geographies for us looks pretty robust, what would lead to the order ticket sizes moving towards beyond the $10 million mark? Do we have to hunt for new customers in the international market or even in the domestic market separately to get to that kind of a run rate? I'm talking about India Private and International here. And we -- given the kind of demand scenario that we are looking, when do you expect the quarterly run rate on a revenue execution basis to go back to that INR 150 crore to INR 200 crore run rate per quarter? Do you see that coming in, in next couple of quarters? Could you give us some quantitative idea to understand the execution part of the demand scenario and how it gets reflected in numbers?

Okay. So let me answer your first question first. So what does it take for us to get $10 million kind of run rate orders from multiple customers, both in India and internationally? So I think we have probably done everything that we could in India because in India, we don't have -- because of the incumbency relationships, et cetera, et cetera. So I think as we are winning newer applications in our existing customer, we should -- once the order flow starts to happen, which I said could take another quarter or so, we should start to see a good run rate of orders getting established in India, not just because of the GPON application win that I talked about. In addition, actually to all the major Indian customers in the private sector, there are multiple other engagements and wins that we are lined up for. So I think in India Private, hopefully, sooner than later, we should get into a situation where we should establish a robust run rate number with each of our large Indian Private customers. So that part, I think, in terms of application win, provenness of our capabilities, competitiveness, I think those were good achievements that we made in Q1. The results of those achievements will probably get shifted by a quarter, and we should start to see in the second half of the year. Coming back to the same scenario internationally, we will see this year that at least a few -- so first of all, let me talk of the negative part first. Winning new customers of large size internationally this year is going to be very challenging because travel restrictions are there, customers are not introducing too many new vendors, et cetera, et cetera, so to the place -- for places where we already are there, so for example, in Africa, in Southeast Asia, and in certain customers in North America, including Mexico, we should see a larger ticket size orders starting to flow in. We already had some in Q1. Some have already happened in Q2 as we have started the quarter, and it's really now starting to become a good run rate, I would say, as we go along. However, I must again caution saying that we do have a little bit of a start-stop because sometimes things start to look good and then the customer gets into a bit of a pause mode because of the local situation. So barring those near-term things will we have, if I were to integrate the whole year's situation for larger orders from existing customers internationally, at least we will see a few geographies where we have good incumbency show better numbers this year. How much better? I think we would like to wait. Coming back to your second question of when will we get to INR 150 crores, INR 200 crores kind of a run rate by quarter? Hopefully, sooner than later. I would not give a specific guidance because, again, a lot of things are not necessarily in our control and as much as we want to. The only caution which we are applying now is rather than building inventory for very large revenues, we're taking a very conservative approach to say that let's not block our money in inventory. So whatever inventory we already have, which is quite substantial, we want to decongest that. And as we see more clarity on orders and as we see more things happening the way we expect, we would essentially ramp up the task. By the way, as an industry, the component lead times have increased. So there are delays in terms of securing certain long lead components, those kind of things we are doing. But again, coming back to your answer, it's a little bit difficult to say how soon we'll get there, but hopefully, sooner than later.

But just as a follow-up on the same question. So when we say that on the international customer spend, do they have the potential to give out orders on an average ticket size of $10 million plus? Or are these customers typically have an order to get size of a few million dollars only?

So I would, I would -- yes, okay, that's a good question. So I would say, the customers where we are actively engaged, we are talking of customers who are single-digit million dollars, for us at least. I'm not talking of what they totally spend. For us, we are talking of anywhere between a low single digit to maybe a high single digit kind of orders. So that's kind of the range at best we will get with international customers that we currently have engagements with in this financial year. It could change in future because as we move from a smaller part of the network to larger part of the network. It could change next year. But I would say, this year, internationally from the customer that we have, we think we will still be in a single million digit scenario as of now. I mean, of course, we are continuing to see the situation. But that's a way to think of. We're still not in a situation internationally where we get yet $10 million, $25 million order from a single customer. That stage, we have not yet reached internationally.

And sir, I just missed, have you given the outlook of each segment in terms of what kind of a significant growth that you're looking at for the year?

No, no, we have not. So what I did in my commentary earlier, which is in line with what we had said in April Board Meeting that we will not really -- given all the uncertainties, we'll not give a guidance per se right now in terms of thing. But the way subjectively, I had talked about it earlier, but just to quickly resummarize, we would see increase in terms of growth on India government just because we already won orders, and there's a lot of stuff which has happened, which didn't happen last year. So that should happen. India Private could be flat to growth depending on when things happen. And International, we expect to see growth compared to last year. How much growth is, of course, a function of how things pan out. But that's the broad way I would say where we see things today.

Okay. So India government, when you say BSNL and Critical put together? Or it's -- are we going to...

As a total bucket, as a total bucket. So Critical is already doing quite well in terms of orders in hand, orders won and the whole thing. BSNL/BBNL is really a function of when they do. We're not counting much revenues from them, except for the state BharatNet, which we already won. But barring those, we don't count much from them this year. But the Critical infrastructure alone can give us significant growth on an annualized basis because we've already won those orders.

And given that International was pretty strong last year, as an offsetting factor for your BSNL loss, should one -- what kind of growth are we talking here? Is it like a double-digit growth here? Or is it like given that the scenario has become more favorable from all the stuff?

Yes, I would say, definitely, double digit is a very long range. So we should definitely be able to do double-digit growth. Which spectrum of the double digit? I would again, qualify that it's a bit early to say, except that the signs seem to be positive. If I were to kind of step back and say that a lot of things have aligned for us, so we seem to have a very good product portfolio. The whole geopolitical situation looks good internationally as well as in India. We seem to be getting into the bigger scheme of things. In a segment where people are going to invest both in India and outside, which is home broadband, metro broadband, et cetera. So a lot of the stars are kind of getting nicely aligned for us. But exactly how they will play out, how soon they will play out is something which we are just being a little bit cautious because it's not very good to predict in an environment that we all live today where there's uncertainty all around. But given where we are, what we could do, we are doing, and I'm very confident that at least the efforts are being put by the company to do everything that we can in our control to really increase our application wins, which we are doing. But the actual revenue results of that, we'll have to see how the year progresses.

Great. Good to hear that we have the confidence of double-digit growth, at least in the 2 leading segments that we have, both in India Private and International despite all these situations that we have globally.

Yes.

Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments.

Thank you, everybody. First of all, very good questions. So I hope even the people who did not get a chance to answer -- ask the questions, we were able to address, we tried to be a little bit broader on those. And as I said in my comments a few minutes back, we are doing everything that we can to really make sure that we are well set up to take advantage of the opportunities as and when they are opening up with the new customer wins, with a very strong cash position, which at least we are very confident of, will continue to improve. We seem to have set things up well. Exactly how that will play out, how soon that will play out, we will basically be closely watching and we'll continue to communicate with all of you as we make more and more progress. So thank you again for all your support. And again, as I said, this is the 20th anniversary of the company. We hope that this could be a year where we could actually put all the things together and actually demonstrate good success. Thank you.

Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.