Tejas Networks Limited (TEJASNET) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm Bharati, moderator for the conference call. Welcome to the Q4 FY '21 Earnings Call of Tejas Networks. We have with us today, Mr. Santosh Sinha from Axis Capital Limited. [Operator Instructions] Please note, this conference is recorded. I would now like to hand over the floor to Mr. Santosh Sinha. Thank you, and over to you, sir.

Thank you, Bharati. Good evening, everyone. On behalf of Axis Capital, I welcome all the participants to the conference call. Today, we have with us Mr. Sanjay Nayak, CEO and Managing Director of the company; Mr. Arnob Roy, COO and Whole-time Director of the company; Mr. Venkatesh Gadiyar, CFO; and Dr. Kumar N. Sivarajan, CTO of the company. We will start with the overview of the company's performance for Q4 FY '21 and then we then switch over to Q&A. Thank you, and over to you, sir.

Thank you, Santosh. Good evening, everybody. This is Sanjay Nayak, along with my colleagues here in Bangalore. First of all, I hope everybody is safe, and we know that things around have again deteriorated a little bit, but I'm hoping that everybody is doing fine. So we had uploaded the presentation on the website and also made all the press release, et cetera. So I'm going to be using the presentation that we had put up on the website. So on Slide #1, which is the Q4 key updates. So on the financial side, our net revenues for the quarter was INR 201.6 crores. And for the whole year, it was INR 514.8 crores which, on a whole year basis, meant a year-on-year growth of 35.6%. On Q4, profit before tax was INR 18.5 crores. And for the whole year, our PBT was INR 22.5 crores. And of course, last year was a loss, but this year, we turned the corner around and delivered profitability. In terms of operating cash flow for Q4 was INR 47 crores. And cash and cash equivalents increased by INR 29 crores to INR 364 crores. So every quarter, we've been able to improve on our cash position. On the bookings side, which is orders that we received during the year, we saw a year-on-year growth of 54%. And at the end of the year, our order book, which is purchased orders in our hand, is INR 679 crores. In terms of the key update on the sales side of the 3 segments, on the India government side, as you would have been tracking, there's a lot of policy decisions which are for promoting Atmanirbhar in terms of domestic telecom equipment, and that is providing us strong tailwinds, whether it be in the form of Make in India policy, the new security guidelines which restricts import of telecom equipment from certain countries after June 15 or the PLI policy for telecom equipment, which we will be eligible for as well. So overall, I think those things have been a positive factor for our business. On the India Private side, as we have been giving the updates in every quarter, we've been continuing to get a lot of business momentum around the wins of new applications primarily related to home broadband connection, which is fiber-to-the-home, as well as for the backbone capacity expansion using the DWDM technology that we have, with the larger operators have to expand capacity once more data flows into the network. On the international side, for the last year or 2, we've been saying that we've been focusing to grow our international business. We are happy to inform that during FY '21, our international revenues grew 62% year-on-year and was 40% of total revenues compared to 33% of total revenues in FY '20. And in terms of booking, we had 103% year-on-year growth on international booking, and we saw very healthy order inflows especially from Africa and Southeast Asia. And in terms of new customer wins, which are of material kind, we had 5 new customer wins in Q4. If you recall in the last quarter, we had also talked about a global impact that is happening on the semiconductor industry because of demand-supply gap and capacity challenges, so we do continue to see a global shortage of semiconductor component, which is continuing. And actually, from the last quarter to now, the lead times for certain components have gone beyond 50 weeks and continues to be a challenge, so we will need to carefully manage our inventory and make sure that we place component orders in advance to secure our supplies. Since we have got a heads up in January itself, we have been taking corrective actions and trying to manage the situation that is at hand. And this is a global situation, which I'm sure every industry player will be going through. So that's on the key financial update side. I would now hand it over to Venkatesh to walk us through the next few financial slides, after which I'll come back again and give a little bit more color on the sales and the complexity of the business.

Yes. Thank you, Sanjay. Good evening, everyone. On the financial update, I would read the Q4 FY '21, if I believe, most of the people are not in front of the system. So the net revenues for the quarter Q4 was INR 201.6 crores, and for the entire financial year was INR 514.8 crores. EBIT was INR 15.5 crores. And for the year, INR 1.4 crores. And the PBT for the quarter was INR 18.5 crores. And for the full year, INR 22.5 crores. PAT was -- for the quarter, Q4, PAT was INR 33.6 crores, and for the full year was INR 37.5 crores. EPS for the quarter was INR 3.61, and for the full year, INR 4.05 and the Q4 '20 was an exception and the year-on-year growth, whatever we have mentioned, last quarter was -- last quarter in the FY '20 was abnormally low with a lower revenue base, hence, the respective number on a year-on-year has to be looked into very carefully. Next slide, the key financial indicators. We have -- in Q4, we have generated the cash flow of INR 47 crores compared to INR 55 crores in Q3. Net worth has improved from INR 1,094 crores to INR 1,134 crores. Inventory has decreased by INR 15 crores to INR 214 crores. We have been able to decrease the inventory level since from the beginning of the year on a quarterly basis. However, while we target to continue to deplete our inventory going forward, but however, we may have to stack up the -- manage the long lead time on certain components as Sanjay was mentioning in earlier call. On the trade receivable, we had improved on the collections on every quarter. The trade receivables on absolute numbers have been reduced from INR 456 crores from the beginning of the financial year to INR 414 crores now. And on the BSNL front, I just want to give you the update. While the collections from the BSNL projects were continuing to come, but it was in a slow pace. But however, for the entire year, we have collected about INR 62 crores in the last financial year. And after that, since from 1st of April until now, we have collected about INR 12 crores to INR 13 crores. With that collection up to date, the overall BSNL outstanding is about INR 122 crores. But if I take out the retention money out of that, around INR 70 crores, total old overdue receivable from BSNL was about INR 52 crores. With that, approximately, we would have collected 85 percentage on the project value. Then on the net working capital, on absolute terms on a year-on-year basis, we have reduced around INR 90 crores, which moved up from INR 540 crores to INR 450 crores with a combination of a reduction in the existing inventory, and we have improved on the collections on every quarter, that's how we could lower the working capital. And of course, with the combination of all these things, inventory reduction and the collection of the trade receivables, which had seen the improvement in the working capital, that has resulted in the cash and equivalents has moved up to INR 364 crores. That means we have added around INR 84 crores in the last 1 financial year, and we have added INR 29 crores of cash in the Q4. Net-net, particularly this year, with a net revenue of INR 515 crores. And with the costs are under -- with the cost under control, we have turned breakeven at EBIT level, and we become profitable at the PBT and PAT level. With this, Sanjay, you can take on.

Thank you, Venkatesh. Let me get back into the next slide, which is on the breakup of our revenues by segments. So this is a chart which we share in terms of how the business has been broken up by 3 major segments, which is India Government, India Private and International. So if you look at the chart on the right-hand side, India Private moved up from INR 195 crores last year to INR 224 crores this year. International moved up from INR 126 crores last year to INR 205 crores this year. And of course, the government moved from INR 58 crores to INR 86 crores this year. And within the government segment, the critical infrastructure portion is the larger majority. If you see from an overall angle, International, as I said, has been growing both in terms of the revenue cycle as well as on the booking that we talked earlier. And that is something which has been quite heartening for us. In terms of the run rate business, which is the combination of International plus India Private, it contributed 83% of our total. And on a year-on-year basis, it showed 33.6% growth. One other thing I would like to mention that between Q3 and Q4, we actually had 2 consecutive quarters where incoming order flows or new order flows was more than INR 200 crores each, which is a good sign because our business seems to be picking up steam as well. And of course, as you saw in Q4, we also did revenues of more than INR 200 crores. Coming to the next slide, which is the sales update. I will give a little bit more deeper color on all the 4 segments, which is India and the 3 major international segments, in terms of what happened last year and what is the outlook that we see in the current financial year. So India business last year grew 22% year-on-year. And as I mentioned earlier, we see positive tailwinds from all the various government policies. Some of them, the PLI policy, for example, will come into force this year. We are still awaiting the final guidelines. And if the guidelines do turn out in the way we are expecting them to be, this should be a good way for us to take advantage of that policy and get additional margins into the system for us. The other thing which is important is that the need for trusted telecom equipment. So there's been a significant regulation where all private, public or ISPs or any kind of a telecom operator can only buy equipment which is classified as a trusted source. And this would be effect on 15th of June. What this means is that unlike many countries who have blacklisted telecom equipment from certain countries, India has taken an approach that they're going to whitelist specific equipment from specific countries. And hence, it is actually a more stringent measure that the government of India has taken. And what that means is there is a need for a lot of operators to diversify their supply chain and that is something that can benefit us as well. India Private, as I mentioned, the broadband and FTTH demand is a key growth driver. So we've been selected by 2 major Tier 1 operators for that application. In the FY '21, the results that we announced, we haven't seen much revenues contributing from these segments from these operators. But -- because it does take a lot of time for our equipment to get installed, commissioned, tested in their management and other systems, so we do expect that a little bit of growth from that segment should come in the current financial year going forward. For WDM and OTN, which is the capacity expansion for metros and other applications, again, we have been selected by 2 telcos again, where we will now become a part of their backbone expansion projects. And this, again, we have not seen much revenues in the last year. But going forward, in the current financial year, we should start seeing ramp-up on these 2 applications as well. So I feel that India Private this year should see a healthy growth going forward based on the application that we've already won. India Government, the critical infrastructure segment has now almost become like a run rate business because it's across many, many utilities, many of the smart cities, many safe cities, which have video surveillance projects and stuff and defense and other kind of projects. So I think that segment continues to do well. We have a good backlog from that segment, a lot of tenders which we have bid, which should get into execution mode this year. And on top of that, of course, there are the phase -- next phase of BharatNet projects which haven't really got off to the ground. If you would have recalled, the Prime Minister mentioned that in phase -- next phase of BharatNet in the next 1,000 days, they were going to connect 650,000 villages from the current 200,000. So that project has still not started taking off. And as in when it starts happening, we should get some business out of it. And similarly, BSNL is planning to build a 4G network, so there'll be a wireless element to it, which is the 4G base stations. And of course, there will be optical backhaul, and those are all segments which we are closely watching and seeing how that goes. So overall, I would say India Government business, the funnel looks good. However, the conversion of that depends on when government spends, how much they spend, et cetera, et cetera. So we will kind of keep a moderate view on that. In terms of the regions, let me start off with the star performer for us last year, which was Africa, Middle East region, and Europe, I just added because we just started to look at Europe later last year. So Africa business, on a revenue basis, grew 68% year-on-year. Of course, on the booking was much faster. The good part of Africa, why we did so well, if you recall, for the last 3, 4 years, we've been investing in Africa. We've got local sales team in Johannesburg, Nigeria, Kenya, North Africa, Dubai and many other places. So during the pandemic year, since we had customer incumbency, we had a lot of local teams, we were actually able to get a significant business uptick from our customers, and we continue to see the momentum in this year as well, and we are quite confident that the business will continue to grow quite well. In terms of the CIS and Europe countries, we started looking at it late last year, as I mentioned. We've got a couple of small wins, which are more important from the point of view of our products getting acceptance in those markets. They have not meant much material impact on the revenues. But we do see that with some new sales investment that we made last year, we should start expecting some traction in this financial year. So this is a large addressable market of $3 billion, so the market size is not our problem. Our challenge is really that now that we have incumbency and good success, how do we continue to grow. So I would be quite confident of quite a robust growth in this segment of our business next year. Coming to the next one, the Americas. Americas clearly underperformed for us. In fact, it was not at all close to our expectation as well. And the real reason was that, at least in a good part of North America, the customers really did not want to change their vendor decisions. Whatever they were buying, they just continue to buy. All the labs and trials and testing was almost closed for a good part of the year and hence, we really could not make much success. As we said earlier, that in U.S. and Canada, we are targeting the Tier 2 and Tier 3 operators and rural Internet service providers. And that is a segment which has -- which is going to be growing quite a lot for the next few years. I'm sure some of you read American President's big $100 billion announcement for rural broadband and other connectivity from federal funds. So I think there's going to be a new CapEx cycle around fiber-to-the-home connections for the next 3, 4, 5 years. We are not yet there but -- in terms of business success but with all the efforts that we've been putting last year and now, we hope that we should start seeing success in the near term. Mexico, of course, was, again, very badly hit because of COVID situation, and the customers really had a lot of challenges. We did win some good customers, some of which we announced, and we expect a quite robust growth this year as well. So this is again a very large market, and it's really -- Mexico, we are almost having again a good, strong local team and U.S. also, we rebuilt our team last year, and I hope that both these reasons will give us good success in the next financial year. Coming to Southeast Asia. Asia business grew quite fast, 366%, because the base was not that big. But -- and we won a very large multimillion-dollar project of -- in Southeast Asia, which was both wireline and wireless products. So this was one of our first large-scale deployment of wireless products, which is the LTE base station. And of course, we are also increasing sales investment in the region. We are hiring some more local people because travel and all that will be difficult. And with more of those investments, again, this is around a $2 billion market, so we expect that Southeast Asia will continue to also grow, now of course, not at the pace that we grew this year, but will again show robust growth. Net-net, if I look at all the 4 regions, we see positive signs. We've been getting good success. And one other thing which I just wanted to mention that out of INR 679 million crores of order book that we have when we start the year, around 50% of that will be for revenue in the current financial year, so that's around INR 350 crores of business, which basically, we just have to execute as soon as we possibly can. So that's the quick summary on the sales side. The next slide is about the applications where we are winning. This is actually the same slide that we had used in Q3, so I'm not going to go much into it. But just to summarize, places where we are competitive and we are as good as anybody in the world is home and office broadband, which is fiber-to-the-home connections. Of course, when we go to U.S. market or Europe market, they do have some very specific requirements, which are of those markets for these applications for which a certain amount of R&D enhancements and upgrade needs to be done, which we are aware of and are in the process of doing. But the base product is the same and that should be good. The technologies which we use is fiber-to-the-home, GPON, XGS-PON, which is the next-generation PON. And of course, for the wireless side, the LTE product, which we can also use for other applications, for example, in India as well. Coming to the next one is the -- and which we address from the 1400 family. Then the next thing is how do you -- when you have a lot of data traffic flowing into the network from homes or mobile broadband, et cetera, or maybe 5G as we go forward, there is a need for all operators to strengthen their backbone capacity. They're always running out of 40% to 50% growth in broadband traffic and data traffic on the network, so they have to enhance those capacities. So there -- that's where the DWDM technology comes into picture, 100 gig, 200 gig, 400 gig, 600 gig. 600 gig is pretty much state-of-the-art, and we have really, really competitive products. This has been extremely successful in Africa. For example, one of our largest customers there is building web-scale networks for the likes of Google, Facebooks, Microsoft, who are pumping a huge amount of bandwidth and setting up large data centers across the entire African continent. So that's one example where we are doing. And of course, network modernization of critical infrastructure. So all of these utility companies are modernizing their networks, safe cities, smart cities, in oil and gas, railways, electricity companies. So that's another area where we do quite well and there's a whole bunch of technologies. So net-net, what I'm saying is our focus in R&D continues, even if you saw last year, we continue to invest in R&D. We kept our overall cost under control, but we did not shy away for making sure that we -- that our R&D investment don't suffer because that is the only way our products stay ahead of the game, and we've been making very good progress on that side as well. I'm now coming to the last slide, and then we will open it up for question and answers. So if I were to kind of see when we started around the same time actually almost to the same day, last year, there was a lot of uncertainty around the business environment at a macro level. And we had come off a very dismal Q4, and that's why when Venkatesh said earlier that when you're doing a Q4 of FY '20 to Q4 of this year, I mean, the percentage growth shouldn't really be looked in absolute terms because the base was very low. But there were 3 or 4 challenges which we had in front of us. Can we return to growth, number one. Can we actually hit profitability from where we were, number two. Number three, did we have enough cash to ride through the tough times because it was very uncertain last year. And number four, we had a lot of inventory, a lot of receivables, all kind of things were not looking good. So I'm very happy to say that on all the 4 fronts, we have made significant progress. In fact, what has been heartening is that we made progress every single quarter. So now 4 quarters in a row, we had growth in every single parameter that I outlined. So if you see from an overall year perspective, the revenues were growing very well at 36%, bookings at 54%. We returned to profitability with PAT of INR 38 crores. So overall, I think the health of the business in that sense is back. The business momentum is very strong, which is evident from the fact that our order book is continuing to increase and has gone to INR 679 crores, which is the highest that we've had. Our focus on international, especially in a tough year where travel was almost nonexistent, but because of the local sales team investments, the incumbencies we had in the region that we were doing well, we were able to amplify that and we could deliver very strong international growth, both in revenues and bookings. In India, which is our home market, I think, finally, with big wins in terms of new applications around home broadband, which is going to be a very profitable and a very fast-growing segment of the telecommunication business in India, even for all the Tier 1 telcos because they make 6x ARPU from a home broadband connection than they make from a mobile broadband connection. So there is a need for everybody to really expand when people are working from home all the streaming videos, et cetera, et cetera. So that means that you have to have more fiber-to-the-home, you have to have more capacity in the metro networks and the city network. And both of those applications where we have now been selected by the 2 major telcos, we feel very confident that while we may not have got much revenues in the last financial year, we expect that the business momentum from last year will carry this year and it should turn into good revenues for us. And of course, with all the geopolitical situation happening in the country, Government of India has recognized and acknowledged that telecommunication is an absolute critical infrastructure which has to be secured, which has to be trusted. And there is a need for India to have its own global Tier 1 telecom equipment company, and that's where the Atmanirbhar spirit comes in. I think with the breadth of our product portfolio, with the capabilities that we have shown over the last 20 years, the resilience we have shown across tough times, we think we have a good shot at taking advantage of all of those policies and scaling to the next level. And last, but definitely the most important thing as well from a business-growth angle, our balance sheet is strong. We improved our cash by around INR 80 crores, have increased that to INR 364 crores. We have no debt on our books. So we feel confident and comfortable that when we have to make long investments call, whether it's for R&D, whether it's for sales, we have the capability, and we will be able to take things at the time and continue to grow. So that's really where I would pause. And -- but of course, the last point also, which I want to reiterate again, that while all of this seems nice, I think the global semiconductor industry shortage is an issue that every company in the world is tackling and grappling with, and we are trying our best. We had taken early calls in December. In fact, when we understood about this thing in January and we spoke to some of the largest customers in India, they were surprised saying, "Hey, why are you guys only coming and telling us this stuff? Nobody else has told." But after a few months, they actually acknowledged that we did have early warning indicators and as much corrective action we could take then, we are taking. And we are, of course, in touch with our suppliers. And because we are in India, we get a reasonably preferred treatment from some of them to be able to make sure that we are able to continue to look at this. But this, again, I would say, would be a situation that we have to continually watch, and which we, as a management team, are tracking very closely. So that's really where I would pause. And I would now open up the floor for questions. Thank you.

[Operator Instructions] First question comes from Mukul Garg from Motilal Oswal.

Sanjay, good to see you guys return to INR 200 crore-plus revenue number. I think that's quite a commendable performance. Just a couple of questions on the International business. The -- you mentioned the International business bookings are up 100% plus on a Y-o-Y basis. What number should we look at this as your overall booking? Or like what was it last year? And is there a difference in the duration of this versus the India order book?

So -- okay. So thanks, Mukul. So in terms of the International order book will get executed quite quickly. So out of the INR 679 crores of order book, around 20% of the order book is for International and 80% is for India. And out of the 20% of International, I mean almost all of it, 90%, 95% will get executed in the current financial year itself because these are all live orders from run rate customers. India order book, I would say around 40% of that would get executed, so that's 80% of the total. So you can take around 32% of the India -- of the total order book is India and around 18% of the total order book, which is contributing to around 50%, will be executed this year. Coming back to what kind of expectation that we have from International. Clearly, International will continue to grow because we have a lot of good momentum in terms of customers that we've been engaged with in different deals and different stages. Clearly, I mean, if I were to see the growth for next year, there is a fairly good chance that International will grow faster than India again next year. And this year, for example, we came from a 70% India and 30% International to around a 60% India and 40% International. My sense is that we will probably -- International could be a larger proportion of total next year as well. Of course, I mean, if there are -- if the India starts flying and the customers start demanding a lot more equipment, it could change. But I would say that International should be more than 40% of total next year as well.

Sure. And the second question was on the expected credit loss, which you guys have been reporting in receivable. You have written off almost INR 35 crore in last 2 years, almost 4% of your revenues between FY '20, '21. How should we see this going forward? And where is this coming from, given that you have not taken any impairment in BSNL receivables?

So maybe Venkatesh can walk you through that. But the way we do our accounting policy is that if there's any receivable beyond a grace period of payment, we take it as a ECL. And when the payment actually comes, we do reverse it. So I think our expectation -- so a lot of the ECL would have come from BSNL delayed payments. So when we are able to get the payments from BSNL, the ECL starts reversing is my understanding. Is that correct, Gadiyar?

Yes. Yes, Sanjay.

Okay. Thanks.

Larger part of the ECL has come from the BSNL team.

Okay. So this is again predominant -- dominated by BSNL?

Yes.

Yes.

Yes. In fact, net of BSNL, the DSOs receivables on an absolute basis, everything basis has dramatically come down this year.

Understood. If I may just ask one last question. On the composition of inventory, is there any change in inventory in Q4 versus Q3 given the revenue growth in Q4 coupled with the shortage in semiconductor? I'm just trying to understand whether you're carrying more semi component inventory on your books or is this similar in the nature?

No. I think it is -- we are starting to stock up on components, as Venkatesh mentioned, because what happens is, if we leave the component buying to our EMS companies, they will place only when they get everything else finished. But right now, the question is for securing the inventory for the next 6 months, 9 months, 12 months, right? So we did take calls on component -- securing component inventory. So there will be some component inventory increase for sure, between Q3 to Q4. But the way it will happen is we will consign it or sell it to the -- our EMS company as and when he needs it for the other purposes. And related to that also is that, which I think Venkatesh may not have pointed out, but we also have a little bit more higher levels of inventory in Q4 than it would have otherwise been because our objective is first to secure the components rather than worrying about reducing inventory by much more larger things. So I would say this thing we will continue to track. So inventory will continue to get used. It -- actually, today having the inventory is an asset. There are many customers around the world. If I can say I'll ship you material tomorrow, they may cancel the order from their existing suppliers and give the order to us. So in that sense, this is how we are managing the inventory at this stage.

Next question comes from Sanket Bihani from Kedia Securities. There seems to be -- there is no response. Can I move ahead with the next question?

Yes, please.

Yes. Next question comes from Shantanu Mantri from MKVentures.

First, a very big congrats on an exceptional performance. I'm sure this has surprised everyone, including us. Sir, I just want to quickly get a sense of broad numbers. So if I'm seeing your quarter 4 revenue split, so International has been -- it's almost doubled compared to last quarter, it's around INR 82 crores. And then India Private is around INR 66 crores and from India Government, around INR 44 crores. So I just wanted a broad sense that you've been talking how the international prospects look next year, and you've been talking about growth for most regions. And there might be an addition from Canada and CIS, Europe that might add in. So can we -- is it safe to assume that this INR 82 crore run rate of quarter 4, this now becomes a base for our international operations?

So first of all, thank you for your kind words. Specifically, yes, I think your split of revenues ballpark is correct in terms of what we did in Q4. So I would say, first of all, historically, Q4 is always the largest quarter. So if you see between our -- every last 3, 4 financial years, except for last year, of course, which Q4 had actually tanked, I would say that -- I mean since you do not give a forecast or at least in terms of the numbers, I can say that the International momentum is quite good. As I mentioned, as an answer to the question to Mukul, that it's 20% of our current order book is international and almost all of that order book will be executed in the next couple of quarters, I think we will see that the traction that we are achieving in International is something that we would like to sustain. Whether we're able to sustain or not is, of course, a function of how the business pans out. India Private, again, I would say, is something that is building up. Some of the -- as I mentioned in my commentary that Q4, by the way, historically in India was always very big. So I would not read that just because we had a INR 200-plus crores Q4, I mean that's the baseline and everything goes up from here. It's just that there's a seasonality in our revenues. So I would say, India Private, we see very good traction because of the application that we have won. And once our customers start deploying our products, which just took a little bit more time, especially because of the COVID situation, their labs were closed, their teams were not working at full capacity, et cetera, we feel that that's a traction that can continue. India government, we, as I mentioned in my commentary, is always the -- is the most hard to predict. So the only thing we can predict is the order that we have in hand, which we have won, which is -- they've got to be executed. The new tenders, new supplies, I mean, some baseline amount, of course, keeps happening without any issue, especially in the critical infra. But the India Government part is really out of our control. If the government decides, for example, this year that they're going to spend more money on COVID-related stuff or whatever else they want to do, the telecom projects suffer, it also will impact our business. But we have a decent amount of backlog from the India Government segment to feel that at least it can -- it will not be great, but at least it can be modest growth from where we are. But clearly, International would continue to grow the fastest, followed by India Private and followed by India Government, which, at this stage, is mostly because we don't know how the government spending will be in the coming financial year.

Sure, sure. Sir, one last question. What really excites us is that India Private, what numbers you are doing, you are saying that in FY '21, this was primarily nothing major came from the home broadband, the FTTX, right? That the 2 -- where we are selected from the 2 telecom players, so that in itself is a huge opportunity where we're leading that more than INR 10,000 crore, INR 15,000 crore opportunity in the coming years. So that has yet to play out. So I remember talking to you in December last year and you said in a couple of months, more clarity will come. So just want a broad view that when does this opportunity starts playing out, what can we expect in FY '22 in terms of how you are talking to them? And how soon are they looking to start executing it on the ground? And same with the metro expansion, the DWDM OTN. So for both of these 2 lines, because the opportunity is huge, so I just wanted your thoughts on this.

Yes. No, that's a good point. So where we are exactly is that, as I said, in this quarter, the current quarter that we are in, we believe that they are at the tail end of the testing and integration because since this -- our equipment gets into a customer-facing situation, they have to integrate in their building, management, operations, all kind of systems, right? And that has taken more time for both of them because one of them at the OSS is run by a competitor company who is not most motivated to integrate our stuff quickly. But almost all that is over. So I would say this quarter would be the quarter when all of those systems will be put in place. So next quarter onwards, we should start seeing order inflows for these 2 applications. And then -- and so that is one part. The second part is their own ability to roll out because not just for us, even for themselves, if you look at their numbers, both the operators that we are all talking about, the number of home broadband connections that they would like to give versus the number of home broadband connections they've actually been able to give is very significantly low. So if they're not able to solve the last-mile problem as fast as they would like to, clearly, the rollout would get spaced out. Not that it is not going to happen, it will just get spaced out. So the space of roll -- the pace of rollout is something that they control. What we control was, to some extent, is how quickly we can get integrated in their system so that we become a part of their ordering flow. And then it becomes a pure market share for us that if there are 2 suppliers or 3 suppliers, how much market share do they distribute between their current incumbent and us. So I think that, I would say, Q2 onwards will start playing out because Q1 looks like will be the tail end of all of this integration, et cetera.

So we can expect, say, from second half of this financial year?

That's a fair point that Q1 will be all this. Q2, the order comes. Second half is when the action starts happening, yes.

[Operator Instructions] The next question comes from Ashwini Agarwal from Ashmore Investment Management India.

Congratulations, very exciting and positive numbers and great commentary. Couple of questions. So as your International increases, I mean, Europe, let's say it goes from 40% to 50%, and as your private sector kicks in later this year, wouldn't it be rational for us to expect the seasonality to go down significantly? I mean historically, your fourth quarter has been a significant portion of the annual revenues. But let's say, 1.5 years out, shouldn't your 4 quarters start to look reasonably similar or more even? Would that be a fair expectation?

No, no, absolutely, you're right. In fact, that is a very fair expectation. And our endeavor is even starting from FY '22, because of the healthy backlog that we have and the need for a lot more run rate customers to execute, we hope -- if you see between Q4 last year to Q1 of last year, we have something like close to 3x difference. We did around INR 78 crores in Q1 and INR 200 crores in Q4. So I -- you're absolutely right, that seasonality definitely will start shrinking because Q4 is a very Indian phenomenon because the government guys and even the Indian guys, a lot of stuff happens in Q4. So we hope that starting from the current financial year, the seasonality will start reducing. And as our customer base broadens, especially outside of India as well, we should see a lesser seasonality coming in. But I would still say our business is small. We are vulnerable to big ups and downs from a few customers. So we still have a little bit of way to go to be fully, what should I say, insensitive to this stuff. But currently, the directional-wise, I'm pretty sure that seasonality will start coming down.

Okay. Sir, second question is that you spoke about the chip shortage, but my colleagues tell me that TSMC has been talking about a significant expansion of CapEx and at least on the automobile side, TSMC has promised that auto side of the semi shortage will start to ease say, July, August. And does that have any impact on your semi supply? Or is that a completely different value chain? And what are your equipment suppliers saying? And the connected question is, I mean how much have you been able to secure the next 12 months revenue? I mean is there a potential where you might lose revenues because of shortages of components?

So let me answer the second one first. Definitely, there's a potential that a shortage of components may cause some revenue blip for us. The reason being that the things are changing by the day in the sense that every -- some days we get a new surprise that, oh, by the way, this chip supplier has also increased from -- 4, 16 weeks to 26 weeks and so on and so forth. So -- and then coming back to the first part, by the way, the common point is TSMC. Actually, TSMC does auto chips, TSMC does communication chips, TSMC does all kind of chips, right? TSMC has limited capacity. So the -- I'm sure you guys have followed the semicon industry, but the combination of shifting of the geometry from older technology to a newer technology, the China guys basically stepped up a lot of chips, at least in our industry, Huawei and ZTE since they were -- U.S. had put all kind of sanctions, they basically overdrew the chips. So as a result, the communication industry has a significant shortage. There are a couple of suppliers which are key to everybody. And they are not seeing any improvement in terms of the decongestion in July, August time period for sure. So I think the communication industry sector, as a sector, is having an overall challenge. For example, home broadband connection. It's an allocation going on. Whoever is going to be able to secure those ONT devices will give services because in 3 months', 6 months' time, there will be no ONTs left in the market or chips left to make the ONTs if you haven't secured it already. So I think communication industry has more challenges. Auto might get decongested in July, August. From everything we are hearing from our suppliers, it could go on for another 12 months. And then as much as we are doing right now, just to give a sense, and Mukul had asked this question earlier, we are securing chip supplies. Some of it comes in our inventory. Some of it goes in the form of advanced purchase orders that we place with our suppliers. We are, by the way, placing orders for next 9, 12 months today. So -- because if we don't do that, there is no chance. The only positive side for us in this thing is that because all the suppliers, the global suppliers, they understand that a lot of their chips have gone to China and a lot of what the Chinese companies have may not be able to come into many markets, it may not come to India, it may not go to U.S. So it is in their interest to develop suppliers like us from India and support them in a different way than they would do to their other suppliers so that at least they are creating OEMs, which are going to be global for a few years. Otherwise, yes, they sold a lot of chips in 1 year, but then what happened next year? So those are all those things which are interplaying. But I must tell you that, that's something which we definitely are ceased with as a problem. And we, as a management team, are doing everything that we can to secure as much as we can as far as we can for the year.

Connected question is that is there a price implication or margin implication arising from the shortage?

Absolutely, absolutely. In fact -- so there are 2 things which are interplaying for us. If you see our Q4 numbers, our gross margins went up, and that was very simple because our International percentage went up, right? I mean if you see from a Q4 angle. But -- so our comfort comes that if our International business keeps growing, we have more margin cushion. But on the other side, one of the ways to secure some of these components is by paying expedite fees. And at least a few suppliers, I wouldn't name them, unfortunately, have started demanding, "Okay. If you want this, there's x percentage expedite fees." So now how much of that expedite fees can be passed to our customers, how much we have to absorb? I would say, I mean, currently because the customers haven't started feeling the full brunt yet, they are reluctant to pass on any of the increases to us. But what we have done is stop giving them any discounts which we normally give year-on-year. But my guess is another 3 or 4 months from now, when the supplies even dry up further, they may have no choice but to -- we may have no choice but to pass some of the pain to them as well. But that's something we have to see as we go along. But definitely, there is a potential for some margin pressure because if you have to secure, you may have to pay expedite, you may have to rush equipment, you may have to pay more freight. I mean all of those things are going to be definitely in play in the 12 months. I mean if you listen to the commentary of any communication chip supplier or equipment company, they're all going through the same situation like us.

Next question comes from Chetan Gupta from Samena Capital.

Sanjay, just near-term impact from COVID wave 2 on exports and domestic, you didn't touch on that. It's the only kind of near-term red flag we didn't speak about. So maybe it will be helpful to kind of update us.

No, good question. I mean this situation is evolving every day. We are only a couple of us in the Board meeting in the office today because Bangalore has -- and actually, I need to leave at 8:00 because there's a curfew at 9:00 onward. So I think, so far, because we have taken all the inventory actions for Q1 much earlier and orders are already in hand, I would say, at least for Q1, we seem to be good unless there's a complete lockdown. But whatever has happened in India's telecom as an industry has been left out as a critical infrastructure. And we did manage during the first couple of quarters of last year's lockdown. So I would say that barring any very tactical kind of a delay, if we integrate it over the quarter and if you spread out our revenues during the quarter, I feel that at least for Q1, which is where we have a lot of visibility, we should be okay. But yes, the situation is something that we are carefully watching because it doesn't take much time to get into a little bit of a mess. But luckily for us, we seem to be okay for the near term in terms of the COVID impact. But I mean our guess is as good as anybody else's in terms of what's going to happen a month from now or whatever.

Next question comes from Tejas Sheth from Nippon India.

Great set of numbers. I just have 1 -- 2 questions, both on the international front. We have added 20 new clients in financial year '21. If you can give some color of is there any of this client which can lead to a good scalability in next 2, 3 years. Maybe 23 -- $20 million, $30 million kind of annual run rate they can do with us maybe 3 years down the line, any of those clients, if you can throw some color.

Yes. I think there are a couple of those which can do that. In fact, the good news is, for example, in Q4, one of the clients that we signed up, a new client, we just got the initial PO from them, a very small one. But if that works out, that partnership alone can be quite a large partnership, maybe at least in the second half of this year and going forward for multiple years. So I think there are definitely customer contracts on the international side which are not just tactical one-off kind of things. We think that a lot of these things will be hopefully continual increases in there. Not everybody is big, for sure. But for example, in -- similarly, even in the Americas, in the Mexico part of America, actually, we won a Tier 1 operator there, which again is a run rate customer, will continue to do well. Asia, same situation. So I think there's definitely, among the international customers we have won, there are a few which have large potential over multiple years. And we just have to make sure that we continue to service them well. And by the way, one of our African customers last year did phenomenally well. I mean this is an existing customer for a few years. But they absolutely did fantastic for us, and we have been growing with them. Even this year, their forecast and funnel looks very exciting. So I think even the Southeast-Asian customer that we got a repeat order for wireless, again, has been an existing customer. So the story for us, International, wherever we had incumbency and a track record, we did well. Wherever we had to break in and create our brand, we struggled. So I think hopefully -- but we can't struggle forever. So hopefully, we start showing better results from all the different geographies.

What would be the cumulative spend of these 20 customers in the product which we can service them on?

Good question. I don't have the data in front of me, but in -- but most of our industry, it's a few customers drive a lot of revenue. I mean that's just the nature of the beast. And what we do is we keep growing a lot more customers at the base, some of them start with $100,000 to few-hundred-thousand dollars in the first year, become $0.5 million to a few million dollars next year, become $5 million to $10 million next third year, become $10-plus million. We had customers who are $10-plus million, we had customer over $5 million, $10 million. We had, of course, customer a few hundred thousand. So I think the pyramid is continuing to build up for us. I think one of the earlier calls, we have described this, and we are making progress on that. As I said, we had 2 customers who had, I guess, $10 million each last year.

Okay. Okay. On the America part of the International piece, you've done -- now obviously the lockdown is continuing at the global level itself. Do this year also looks like not taking into the American market? Or you see something coming up there?

We are always optimistic. But I think it will be a slow start, clearly, because of everything that you just said. But I hope that as the later part of the year progresses, we should be able to build up the momentum in Americas. It definitely will -- may not be to the size of Africa, which has already reached a very large number. It will take some time to get to that place because we have been investing in Africa and Asia for a while, so America will take some time. But at least I would like to believe that this is the year when America can start delivering decent numbers as well. So -- but of course, we'll have to see how the year progresses.

Okay. Just last on this Make in India push by the government, even the private telcos in India are enticed to source internally. Are there norms set for them as well by the government? Or it's something which is very open-ended?

So okay. So first, a very good question because directly, they are not mandated to buy under the preference to Make in India scheme. Like every government department, center, state, municipal, whatever, they have to buy under the PMA (sic) [ PMI ], the Preference to Make in India scheme, right? So private is not under that scheme. Having said that, private is under another law, which is again motivating them to look at alternating their supply chain, which is that from June 15 onward, and you would have been reading about a trusted source, they can only buy equipment from trusted sources, which basically means equipment from a certain country will not be allowed to be bought by them beyond June 15. So many of them who have a large exposure to equipment vendors from such countries are saying, "Hey, if there's an Indian company, why shouldn't I look at them? Because it gives me a long-term credibility and long-term assurance of supplies." So I think we are seeing that benefit come to us in addition to, of course, products being competitive by themselves, which I think should start showing up in a positive way. But that's more like the indirect effect, if I were to put it. But they are definitely looking to see, hey, why not from Indian sources, right?

Okay. And Bharti tied up with Dixon for one of the telecom equipment on the PLI scheme and that kind of assured them the business from Bharti. Does it make sense for us to tie up with any of the large 2 telcos or the equipment which we can cater to them for just local deployment?

See, the way it happens is if you -- from what I understand, I mean I've been reading that news item as well. So whatever I understand is that, that is for very low-end equipment, which is more like your dongles or CPs or things which are in very high volumes and very low design content. And they are most manufacturing-oriented. So for those things, it makes sense for contract -- so by the way, Dixon being a contract manufacturer, makes sense for them to manufacture for OEM because it's just a pure manufacturing thing. A lot of intellectual property, a lot of software content, a lot of design content, it is a slightly different value proposition because the volumes are not very high. It's a high value but low volume, whereas contract manufacturing tie-ups makes sense and it's high volume and low cost. So I would say we are working closely with all the operators. Of course, there are conversations around that. You guys are going to get PLI benefit, how can we benefit from it? So those conversations continue because, you see, ourselves outsource our manufacturing to contract manufacturers like Dixon, for example. I don't know if we adding a layer in between may make sense there. But that's something we'll continue to evaluate. I don't see anything on the table as yet. Maybe we have time for one last question because if we don't leave now, then we will be under curfew.

Thank you, sir. That would be the last question for the day.

That was the last question. Okay. Great.

Yes. So now I hand over the floor to Mr. Sanjay Nayak for closing comments.

Thank you. I guess we already had very good questions which covered almost all the topics that I would have wanted to beyond what I said in the presentation. Again, I would like to say that it's been a good year for the company. We, as a management team, have been very focused. We're basically doing what we said we were going to be doing, which is focus on International, focus on the run rate, continue to invest in R&D, focus on collections, cash flow. So I think all of those things have panned out well. We hope that with all our efforts, we'll continue to keep the momentum for next financial year and look forward to showing good results in future as well. And as I think you all know that Q4 is always the biggest quarter for the year. So Q1, there is a seasonality as we talked, so we'll have to deal with it as it goes. But we are making all the best efforts to look at the challenges and find a good way to build the business. So again, feel that thanks to all the team of the company and everybody else, we've been able to turn the company around and get it back on the right path. Thank you.

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using [ Dulsabat ] conference call service. You may disconnect your lines now. Thank you, and have a pleasant day.