Tejas Networks Limited (TEJASNET) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Tejas Networks conference call on strategic investments by Tata Sons hosted by Motilal Oswal Financial Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mukul Garg of Motilal Oswal Financial Services. Thank you, and over to you, sir.

Thank you, Karuna. Hi, everyone. Thanks, and welcome to the call with Tejas Networks senior management today. Today, we have with us Mr. Sanjay Nayak, CEO, Tejas Network; and Mr. Venkatesh Gadiyar, CFO of Tejas Network. I will now hand over the call to Sanjay for his initial comments, and then probably we can open up the call for Q&A. Sanjay, over to you.

Thank you, Mukul. Good afternoon, everybody. It's again good to talk to you. We have uploaded a few slides of our investor update on our website, which I hope you had a chance to look at. I would be initially covering those slides, and then, of course, we'll be taking questions and answers, as Mukul had mentioned earlier. So starting off safe harbor statement. I hope you had a chance to look at that, and there are some additional disclaimers in terms of the information that you should be looking at and be aware of in terms of the proposed transactions. Now I'm on to the main slide of the presentation, that [indiscernible] Tejas' vision and our journey so far. So if you know, we created Tejas -- we started Tejas about 21 years back to create a top-tier global telecom and networking company from India. So if I were to break our journey, there are different phases. So Tejas 1.0 was really about starting off with a very highly talented team with the envision dream. And we are all first-generation entrepreneurs backed by world-class venture capital and private equity investors. We focus on R&D to create globally competitive and award-winning optical important products. And in addition, in the company, we built end-to-end product life cycle processes spanning technology, sales, customer support and manufacturing operations. And I must say that we achieved significant customer success where our products are deployed in several countries around the world. Then we have Tejas 2.0, which is the next phase of our journey, which is -- which started off where we built up a successful platform for world-class telecom products. And this Tejas 2.0 journey really started off when we, as the first deep tech product company, got publicly listed in India in 2017. We, of course, increased our presence in the Indian market, both in the government as well as the target telcos. We expanded our international sales, and we have customers in more than 75 countries. We expanded our product portfolio beyond optical transmission and added broadband access and cyber as well as wireless on LTE technology, which is the technology for 4G and 5G. We've got a very rich portfolio of intellectual property, which consists of 349 patents, more than 300 silicon ITs and millions of lines of field-proven software. We have a strong customer endorsement in the form of run rate and repeat business, which I've been talking about in our earnings call as well. And we have clearly established a successful track record of cutting-edge high-quality products that will compete with the best in the world. So as you saw, we have -- all of this is working well, and we have seen it reflected in our financial performance over the last few quarters. We have seen consistent growth in terms of all the metrics that we can think of. Having reached so far, we've been looking at that, do we have a much bigger opportunity, do we have a much bigger global play. And that's what I call Tejas 3.0, which is a new milestone and a new business for us. What this really reflects is that globally, there's a new CapEx cycle driven by growth of data consumption, rollout of 5G networks and fiber-based broadband networks, especially in the post-COVID world. With a very large addressable market opportunity globally, and as you know, telecom equipment business is a $150 billion industry annually, the geopolitical developments around the world have created a need for structured telecom products in many countries. And of course, in India, we have a very large home market with favorable government policies for Atmanirbhar Bharat in telecom. On the technology front, again, a lot of disruptions were happening. At a broad level, the softerization of telecom networks, emergence of open architecture and new technology trends starting with 5G. And we have an opportunity to leverage the world-class technology talent in India having the capability to build cutting-edge products. And in fact, the majority part, majority of world telecom products have a lot of R&D people in India. We have also evolved into a very unique business model where we can use the India-based R&D cost advantage and the asset-light manufacturing model to actually generate significantly good financial performance. But with all this opportunity being available, what does it take to really accelerate our vision and reach our true potential? So when we looked at that, there are a few things which came out. Number one, the global branding and relationships. That is something which is an essential feature that is required and it's not just [indiscernible] but for India as a country because we're not known in the world as a destination or resource for high-tech products, we are known for high-tech services. The second thing, since we compete with companies in the world who are much larger than us, we need a lot more balance sheet strength. That is what gives the confidence to global Tier 1 telco customers for large contracts. Secondly, we also have to look at balance sheet strength to be able to make adequate R&D investments both through organic as well as inorganic routes. And being in the electronics and hardware business, we have to have global economies of scale in terms of hardware manufacturing. When we looked at all of this, we looked at the opportunity and we looked at what it would take for us to accelerate our vision. It was very clear to us that there is a need for a strategic partnership, which will allow us to convert this large opportunity into actual market share. Having done that, we are very happy to announce, which we did last week, our strategic investment from Tata Sons. And I wanted to clarify this is through Panatone investments, which is a wholly-owned subsidiary of Tata Sons and not in the operating company, to acquire majority stake in Tejas through the following routes. A lot of this information has been shared already in our press release and in the various filings. But just to summarize, the investment consists of a few portions. Number one is a preferential allotment of INR 500 crores, which is regarding to INR 1.94 crores of equity shares at a price of INR 258. Second, preferential allotment of INR 950 crores, totaling to INR 3.68 crore warrant, which we call CDA warrants, and each which warrant could be converted into 1 equity share at an exercise price of INR 258 per share. And these warrants will be exercisable in 1 or more tranches during the period commencing from the date of allotment until expiry of 11 months from the date of allotment. The third one is Series B warrants, which is up INR 400 crores, comprising of -- coming up to 1.55 crores warrants. And again, the same way that each warrant will be, in fact, to subscribe to 1 equity share with an excise price of INR 258 per share. And these Series B warrants will be exercisable from a period from a date of allotment until expiry of 12 months from the date of allotment to 18 months. So between 12 to 18 months, we want to be converted. The next one was acquisition of up to 13 lakh equity shares from Tejas management at a per share price of not exceeding INR 258 and this would have amounted to INR 34 crores, that this will be in the form of a secondary investment and not a primary investment in the company. And last Friday, [indiscernible] was purchased out of the 13 lakhs. And because of all of this, there was an open offer to acquire up to 26% stake at again INR 258 per share in accordance with the SEBI regulation. So this was the summary of the terms of investment, which is investment in the primary today and then preferential warrants Series A and Series B. And the use of proceeds, again, investing organically as well as inorganically to expand product portfolio and R&D.; second, an investment in sales, marketing and additional people; third, in enhancing manufacturing and operation capabilities, including working capital expansion as we need and other than corporate purposes. So this is how all the proceeds that we're raising would be utilized for the company. In terms of what are the strategic benefits of our deals with the charters. Number one, as I said, if you correlate this with the handicap that we face or the things that we needed to accelerate our journey in terms of being -- realizing our full potential, those transaction will become part of India's leading business groups with a very strong brand. We get an opportunity to leverage synergies with Tata group companies with access to wider global relationships. And many of the group companies are in businesses that we have overlapped it. Third, capital infusion to provide balance sheet strength to invest for growth and expand our product portfolio, both organically and inorganically. The next one is the opportunity to scale up our ambitions for Atmanirbhar Bharat in telecoms. And overall, it gives us an opportunity to have a force multiplier effect to significantly accelerate our journey to becoming a top-tier, trusted, full-stack global telecom OEM and really convert a large TAM into actual market share in the years to come. So in summary, as you can see, we've had a fantastic journey so far. Being the product company from India, we have done a lot of good work to create a very, very robust platform, and this partnership allows us to really take the benefits of that platform and scale it up to global levels. At this point in time, I would pause and I would really open up the floor for questions from all of you. Thank you.

[Operator Instructions] The first question is from the line of Ritesh Poladia from Girik Capital.

Congratulations to the entire team for the [indiscernible]. Sir, my question is Tejas so far was limited to a certain value chain in the entire telecom infra. After this deal, does our standing change or will evolve to be beyond what you are doing in the telecom infra? The second one, so far, our manufacturing presence also was limited. There was more of outsourcing and final assembling and quality control was [indiscernible ]. So how does this also change post the deal? And immediate BSNL 4G, [ MPLS ], sir, if you can give us some updates. How does that also change the with the Tata [indiscernible]? That's it.

Okay. Thank you. So let me answer one by one. So #1, we would be expanding our product portfolio. So if you see when I described the Tejas 1.0, 2.0 and 3.0, in Tejas 1.0, we just had optical transmission products. So we added access products. Now our ambition is that both wireline and wireless products both for 4G and 5G is something that we would be expanding into. So really, one change which will be there is a larger set of product portfolio and trying to become almost a full line end-to-end product provider in the telecom value chain. So that's one part. Coming back to the second question that you had that are we going to go and do something different in terms of our supply chain models where we had a very asset-light manufacturing model. I think the asset-light manufacturing model will continue. We would like to continue to outsource our manufacturing primarily to EMS companies, which is what we are supposed to do very well, and we will continue to focus on product creation, sales, marketing and all the other operations in that we've been doing. So I do not see that we're getting into EMS manufacturing kind of things going forward. Third question you asked is about 4G tender and [indiscernible]. We have -- both of them, we have the PLI scheme under the government of India and are eligible for the scheme. So we would, of course, continue to look at that or the benefit part of it, and that would not change. [indiscernible] we can potentially have an opportunity to increase or take more benefits of the PLI scheme because we'll have more number of products to sell to more countries around the world. And second thing is about the BSNL 4G center. As I mentioned in the earnings call of Q1, we have [indiscernible] participating in the process. The proof of concept trials have already started, and we are engaging with BSNL as for the process.

Your partner is TCS, right, in the BSNL 4G?

Yes, we are partnering with TCS every front end. And also ITI has technology from TCS which -- where we, again, [indiscernible] partnering with TCS, we have a role to play So none of that [indiscernible] as a part of this.

The next question is from the line of [ Samir Raj ] from [ Nippon EMC ].

Congratulations on the deal. So I'm just very curious, I mean, apart from Tata, [indiscernible] any partnership and [indiscernible]. And do you see any similarities with the telecom at Tata? Do you think [indiscernible]. That's question number one. Secondly, will there be any possible management changes where Tata will be nominating directors or including the senior members in the management? And third, regarding warrant. So are these warrants [indiscernible]? And are there any targets to be achieved for [indiscernible]?

So your first question was that -- how did this deal happen or did we consider other people. So actually, in a sense, we've, of course, been working with Tata group companies over many years, with Tata Communications and Tata Teleservices being our customers. Of late, as the person in the earlier question has asked, we were working with Tata Consultancy Services on the 4G tender and BSNL. So there was an engagement going on between -- which is the business engagement in the normal course of business. What we also realized that there was a lot of potential for us to do a lot more together. And that is how this thing converts, and it resulted into the transaction that we talked about. Coming back to the second question that you had , what synergies the Tata group companies, I already mentioned that we have been supplying equipment for more than 15 years to Tata Communications and Tata Business Services, and the 4G tender with TCS is something which is currently ongoing. And then the last part is our warrant optionally convertibles. Yes, the warrants are optionally convertible but 25% of the value of the warrant tax for the regulation would be given at the time of the warrant issuance. The purpose of warrants, by the way, just to clarify, was that as we talked about in terms of -- we have now a larger ambition, larger growth potential and a larger opportunity that we are going after. That would require us to have access to a -- more amount of capital as and when we need it. So the whole purpose of keeping it in the form of warrants is that as and when we see any opportunity, for example, for inorganic growth opportunity or making significant investment in any particular area of business, we should be able to draw down on that warrant and the intent of the group is to really support the company in really scaling up much more faster than we have done in the past. So that's how the warrants would be really looked at.

And will there be any changes in management?

The last question was for senior management, absolutely. As was stated in the press release, the Tata group has all the confidence in the senior management and the entire team, including myself, Arnob, Kumar, Venkatesh and entire the rest of the team will be continuing. We are actually quite excited about this whole thing because many of you who have been invested in the company for so many years, also realized, as we've been communicating to all of you, that there's a lot of potential, there's a lot of TAM, addressable market, in the world. But realistically, we are not able to go after and really achieve that market for all the reasons that I mentioned in my presentation. It's very [ exciting brand ] and a platform like the Tata group actually gives us a significantly better opportunity to convert that TAM into real market share. And hence, the management team is very excited. And we are all looking forward to a phase III of our journey, as I call Tejas 3.0, and really achieve something that we really cut out when we started this company to begin with.

The next question is from the line of [indiscernible] From Enam Securities.

Sanjay, congratulations to you for a brilliant transaction you have done. You can't get a better partner in India for Tejas than Tata. A fantastic [indiscernible] it is. I've a couple of questions. One is about the -- you are expanding your portfolio, so the portfolio that includes wireline and wireless products. And as it is, you have a huge design and R&D capability. So with this, how -- what kind of stable market expansion you have with the might of Tata and their market access, global network, everything available to you and your deep design focus? So would you like to be? [ And what are your player ] going forward? Or any other ideas which will take you to the next level of scale?

Certainly thanks, [ Ranik ], and I appreciate your sentiment. As you rightly said, the value of the strategic partnership, as I described in my presentation earlier, is really across 2 or 3 different dimensions. Number one dimension is that can we use the network and the relationships and the brand that exists with the Tata group to sell a lot more of the product that we've already created. So that's really one level of synergy that we're looking at. And I think especially some of you have been tracking our international journey, we finally turned the corner last quarter when we had a majority of our revenues in the international form, right, which is 2% for international in Q1. So I think that journey can be accelerated where we are handicapped because of lack of relationships and so on and so forth. So that's number one. The sales side, I think, more relationships, more brand recognition. Plus many of the Tier 1 customers around the world, they do look at companies with a strong balance sheet, something who will be around for the next 10 years, 20 years, 50 years, right? And I think that question hopefully will be settled once and for all that we will be around for a long period of time. So that's point number one. The second thing which you mentioned is that expansion in terms of the product portfolio gives us an opportunity to actually -- once you win the customer, once you are in a country, can you get a larger wallet share of that customer's telecom sense? And that is something which you also figure out, that if you have any way of being able to sell product 1 and product 2, why not also have a higher range of products to sell so that we can get a larger wallet share? And there, again, I believe the relationship, and especially as we grow in terms of accelerating our own organic development, and we'll also be openly looking at inorganic options to look at if you can fill up a gap in our product portfolio in any particular technology area, either from a time-to-market advantage or from any other angle that we see fit. So that will, again, allow us to do that. The balance sheet size that we have now really enables us to make things happen. So on an overall basis, the broad thing that we mentioned is the way we are going to go. The specific plans, et cetera, et cetera, and the concrete strategy, we'll, of course, be rolling it out over the next few months, and we'll be happily sharing with all the investors [indiscernible].

So the expansion would be in terms of -- would you be expanding your R&D capacity because that's the core of your business? So is that the approach to -- going forward? Or rates start to product lines and maybe the manufacturing on the [ OBM lines ]?

No, no, no. So we do not believe that, as I mentioned earlier, that the plan is really to expand more on the R&D and the more on the product side, which is both organically and inorganically to expand our product portfolio and R&D capacity, as you said. Second is into manpower, which is sales, marketing and people. And third is manufacturing and operational capabilities. We do believe that we will continue to use the EMS model where -- which is the asset-light model where [indiscernible] design and everything will be done, but the low level assembly would be better than -- and is being better than by our EMS partners. So I don't think we would be getting into that aspect of the business. All global countries around the world, like us, have actually, over the years, moved into the model that we started off to begin with.

It may [indiscernible]. So your addressable market [indiscernible] how big it would be?

I would not put a number right now. And clearly, I think it's -- so the good news for us is that the addressable market in telecom equipment is very large. As I mentioned in my presentation, it's around $150 billion. So luckily for us...

[indiscernible] addressable market. But I have seen [indiscernible]. They're testing the whole world in my market. [indiscernible] market requires all the firepower. Today, you have the firepower. [indiscernible] in that context.

Yes, your point is absolutely well articulated that the target market or the -- is very large. But what was accessible to us because of our size, because of our product portfolio, because of our international reach, et cetera, et cetera, was limited. And clearly, this number will increase. How much it has increased, we are not specifically [indiscernible]. And as we go forward and as our plans come out more clear, we will be able to articulate how that is outstanding.

Congrats. Sanjay, you have done a brilliant job in midst of all the crisis in the last 2 years from almost [ INR 100 crores ] of bankruptcy, you have taken the company back again. Fantastic. All the best to you.

Thank you and appreciate the [indiscernible] our shareholders.

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

Sanjay, I think my question is more similar to [indiscernible]. And while we understand that it is, I think, a little bit too early to formulate some thoughts on how you are going to track going forward. But if you can just share a few thoughts on -- you mentioned a couple of areas where you are going to invest, whether it is sales and marketing, product expansion, whether it is about inorganic opportunity or -- so if you can just kind of share some thoughts on initially how do you see which one should come before and which one you can kind of push back a little bit in terms of priority right now. And also whether you look at India as a bigger market or you still have international markets as a main hope for you given that you now have a much longer holding power, and India sales is growing quite fast. So if you can just share some thoughts on how we should look at the business from 6 months to 1 year perspective in terms of direction.

Mukul, the way it's going to pan out is that there will be multiple things we'll be working out in parallel. Number one is that, as I mentioned earlier, the existing products that we already have, can we sell a lot more of those, both in India and outside of India? So I think there will be one series of activities or planning that will go around that line of thinking. The second thing in parallel which will happen because there was a time to market that we need to catch up on certain technologies or areas. We'll also be looking at to say that we have to bolster our R&D and capacity, both organically and inorganically, to complete that. So I would say both of them would be happening in parallel. Having said that, any of the strategy will take a little bit of time to implement. First of all, the transaction has to close. That'll take some time. So I don't expect any significant difference in any trajectory in the next few quarters. But clearly, once we get all the strategy in place, once we get the details of the issue in place, we will come back and share with you in terms of materially when we can start seeing the difference. But definitely, in the next few quarters, I will just take time to just put the right strategy in place.

The next question is from the line of Ashwini Agarwal from Ashmore Investment Management.

Sanjay, congratulations. This is a wonderful transaction. And I'm really, really enthused that you will finally be able to realize the full potential of the effort that you guys have put in over the last several years. Two questions. One is, obviously, this gives you the capital and this gives you the Tata brand name, which is recognized globally and therefore, access to a lot of customers, a lot of conversations, which may not have been accessible to you in the past. But in the short term, when you speak about inorganic opportunities, and you work with TCS and you worked with other group companies of Tata's, including Tata Teleservices, are there any bits and pieces within the Tata telecommunication R&D or product design or manufacture that you can kind of bring into Tejas? Is that one of the objectives, to consolidate all of Tata's communication, R&D type of activity within Tejas?

So at this stage, it's a bit early to give any specific details on that because we have not gotten into any discussion in terms of the telecom technology assets, if I were to simplify in a way which are existing within other Tata group companies. Clearly, from what we gather, from the investment and that's where, again, when I mentioned earlier and it's very important that the investment is from Tata Sons. So we clearly will have an opportunity to evaluate all the technology capabilities and other products, for example, which are available in other group companies, and the objective would be, of course, to synergize and leverage them. Specifically, what they are and how well we will be able to utilize is something that will take a little bit of time for us to determine. But clearly, the intent is to see if we can take advantage of those opportunities and create a healthier telecom equipment business, which is what we will be driving.

And would that also mean that you might have joint go-to-market proposals along with TCS, where TCS has a services engagement, but you could sort of work with them to provide some hardware solutions were required? Or is that also something that will evolve over a period of time?

Yes. I mean, as you rightly said, whether it's TCS or Tata Communications or Tata Teleservices, all of these companies have a presence in the telecom vertical, as you all know. And as someone asked the question earlier, in the BSNL engagement, we are working with TCS for the 4G projects. So clearly, I think the intent is to look at synergies, intent is to find out ways that we can benefit in a bigger way and create a win-win situation. But clearly, I mean, being separate companies, I'm assuming things will happen at a normal arm's length distance. And I clearly see that those things which will come out clearer as we learn more about the different capabilities of the group and engage in more detailed discussion which will, of course, happen only after the transaction is consummated.

And the other question that I had was, and this relates to a question I had asked you at the time when you presented your June quarter earnings, does this potentially change your approach to Tier 1 telcos in U.S. and Europe?

Definitely. Why just U.S. and Europe? I would say worldwide. In fact, part of the reason where the strategic investment makes a lot of sense is that we always believe we have very good products because think about it this way. If we -- unless we didn't have good products, even the Tier 1 telcos in India would not even buy $1 worth or INR 1 worth of product from us, if you are not as good as they get, right, in that sense. So clearly, the products were there, but we did not have access to the Tier 1s around the world because many of the Tier 1s, a, as I said, lack of brand was always a handicap; b, they would look at a larger balance sheet to say that if I'm going to give you a very large contract, do you even have the financial capacity to be able to successfully execute it and service it over the next 5, 10 years because that's what the Tier 1s look at. So I think all of those areas where we did not have adequate resources or the connections or the relationship, we hope this transaction will enable us. And yes, we will look at Tier 1s globally. In fact, this is exactly what I mentioned in my presentation as well, is that those are all things which we were earlier ignoring or not ignoring, but we are not really thinking that they were addressable to us. But now we believe that the possibility or opportunity to address them significantly increase once this transaction gets over.

And one blue sky question, right? Now sitting where you are today now with access to the best -- one of the best brand names out of India and the balance sheet, and you had the technology capability anyway, do you think that if you were to look 5 years out, and let's look at $150 billion or the $10 billion that was your addressable space, as you've always pointed out earlier, I mean, do you think that 5 years out, we can aspire to be a revenue -- with a revenue line of, say, $1 billion plus 5 years out?

Clearly, we have an opportunity to be a much larger company than what we are today. What exactly is that number, only time will tell. Do we believe it is -- if a large growth is achievable? Absolutely. Do we believe we have the products that -- and can build more products to achieve a very large scale? Absolutely. Does this partnership give us a far better opportunity than we ever had before? Absolutely. So I would say the opportunity clearly exists. How soon it can happen or how much time it will take will clearly depend on how well we execute. And I think we have done a lot less with lot less resources. So with more resources, more relationships, we do believe and we have the confidence that we should be able to accelerate our growth, which is what I mentioned. And exactly where it will be, I'm sure time will tell. But we clearly are convinced that the opportunity which we can address and we can achieve is significantly larger than what we've been able to do in the past. So what that number is, unfortunately, I don't have any clear answer to give you. But definitely, directionally, we are -- that's the direction we want be head into.

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

And congratulations on the fantastic deal. I have 2 questions. First one is basically post this investment, the company will get inclusion of about INR 1,800 crores of cash and the company already holds about INR 300 crores of cash, plus there will be some free cash generated from operations over the next 2, 3 years. So assuming that we have access to a pool of, say, INR 2,000 crores to INR 2,500 crores of cash, what will be your priorities over the next couple of years in terms of investment into R&D, inorganic? And what else would -- basically, how will this large cash pool be utilized? If you can throw some perspective on that. And my second question is in terms of the inorganic acquisitions or opportunities that we will explore, what would be our priorities on that? Will it be to acquire some new product lines, new -- or get access customers through some international acquisitions? So some thoughts on that.

Sunny, as you rightly said, we had INR 300 crores, INR 400 crores of cash. We are also generating cash as we've been doing over the past several quarters and the INR 1,800 crores of cash definitely gives us a very strong balance sheet. And that was exactly the intent because what we have really done structurally with this transaction is really increase our ambition. We really want to say that there is a capability, there's a potential. There's an opportunity, as I mentioned, and it is something that we need to think differently. So the purpose of strengthening the balance sheet was to be able to go after ideas or go after things that we would have not gone if you would have stayed with the balance sheet size or the -- without the strategic investment that we have. We would have definitely continued to grow and grow well as we were doing in the past many quarters. But we believe that this opportunity that we have got gives us a chance to accelerate all of that. So in terms of specifics of exactly where we would prioritize this capital, would it be acquiring more products, more customers, I think those are all areas that we are carefully evaluating. And as I said, as soon as we get our arms around the transaction and in the next short period of time, hopefully not too distant future, we will come out with a more specific plan and of course, share with you. But at this stage, I would say that the purpose was we have the balance sheet, have the connections, have the capital available, so that whatever plan that we come up with, and which I'm sure will be a combination of some the things that you already mentioned, will allow us to really make good use of the resources that we have and really use it to accelerate growth. And as the earlier question Ashwini was asking, to really a much larger aspiration, take larger debt and really invest for the longer term. And those are all things which you only start thinking when you have a stronger balance sheet, when you have stronger backing, and you will be handicapped into thinking that way given our the limited resources that one would have otherwise. So that's the way I would look at it. So definitely, kind of the areas that you mentioned are all those things that we're carefully looking at. But we would come back with the specific plan once we have done the work at our end on a more concrete basis.

Sure. And one more related question to this. So basically, in terms of the overall, you mentioned that there's $150 billion of telecom products market, which is accessible. Out of which, I understand, the current portfolio can service about $10 billion between India and global. And assuming wireless products, what does that -- or if you can highlight that 3 or 4 segments of segmenting this $150 billion opportunity and what would be our focus or top priorities in that.

So just to clarify since you mentioned. The $150 billion is the total value of telecom equipment that the world buys every year, right? So when we use to craft our addressable market share, it was a combination of 2 things. It was a combination of the product portfolio, intersecting with the markets in which we are operating. It's a combination of product market fit, as we were to call it, because we may have a product portfolio, but in some very large country, which, for example, is in our neighborhood, we are not targeting for selling. That market was not really available to us, for example, right? So in that sense, $150 billion is just a factual number, which is basically the total amount of telecom equipment that the world buy. The $10 billion number was a combination of the product market fit, which means current products in the current market that they're selling. So what is going to happen, as I mentioned earlier in the call, we will be expanding our market that we go after. In those markets, we are not going after certain kind of customers, including Tier 1 customers, because of the reason that I highlighted earlier. So essentially, for the same product, we'll have a larger actual addressable market like the one [indiscernible] mentioned earlier on. Secondly, by expanding the product portfolio itself, so for example, we were doing optical primarily before, now we have gotten into wireless. We'll be accelerating our investments into the wireless as well. So the product -- the set itself will evolve. So how big that number goes to, and it's a big number to begin with, I think the bigger challenge is our execution capabilities to really accelerate both the larger sales of our existing products and of course, the induction of new products in our portfolio so that we can get a larger wallet share from the customers that we already have access to. But clearly, I would say, directionally, we'll be heading to a much larger addressable market or real addressable market. It's not going to happen overnight. It will take some amount of time for us to get our act together. And that's what we would really set out in our strategy in terms of what we plan to achieve or what period of time. But the real thought process here was that we need to think long term. We need to think of building a very, very sound enterprise which will stand the test of time and really realize the full potential. And that's why sometimes having all the resources lined up before you really want to take off is an essential thing, and that's really what we have tried to do with this partnership.

Congratulations once again. And look forward to hearing a more elaborate strategy for the next couple of years soon.

The next question is from the line of [ Rupesh ] from [ Intel ].

So Sanjay, can you hear me? Sorry?

Yes, we can hear you, [ Rupesh ].

Yes. Okay. Congratulations on a fantastic deal. I really have two more questions. The first one is what is your market share now with India Private? And this new deal, so what is your aspirational market share, let's say, 3, 4 years from now or 5 years from now? And then the broader context and this is like Huawei exiting this market, right? So can you comment on that?

So specifically, by the way, we have not been sharing market share data because for the Indian market, the market share data is very [ serviceable ]. There's no global credible research fund from [indiscernible]. But subjectively speaking, what we have been able to demonstrate over the past few quarters and with the new wins that we announced in Q4, Q1 and before that, we clearly are heading in increasing our market share in India in the categories that we've been completing, which is optical transmission, FTTX, which is GPON infra technologies. And now we are entering on the wireless side as well with some of the engagements that we have with a few customers [indiscernible]. And as you rightly said, some of the vendors would be having a reduced market share because of various governmental regulations, et cetera. And we do have an opportunity to increase our market share independent of them and because of them, if you were to look at it [indiscernible] point of view.

So directionally...

Yes.

Sorry, directionally, can you say at least 3 to 4x in the next 5 years? Because [ the RFP ], Huawei was, I think, 15 as per [ the RFP ]. And you were like 15%. Yes.

It's hard to exactly pinpoint where we will be 3 to 4 years. But directionally, if we execute well, if we do what we are supposed to do in terms of our strategy, I'm clear that we should be able to improve the market share in India. And India is a large market. It will be a very large market going forward with all the FTTX rollouts. We are still at a nascent stage of that business. 4G expansions are still happening, like one of the large government operator has still not built its 4G network. 5G is going to happen starting from next year for the next 1 year. So we are really at the beginning of a long CapEx cycle in India based on fiber broadband, 4G, 5G expansion and so on. And we clearly believe that if we have the right product, if you can be complete -- competitive, which we have demonstrated amply in the past, we clearly have a shot at being a large player in this -- our home market.

Okay. Okay. The second question is, at the strategy level, do you think you will still remain a product company or you will go into system integration kind of work also?

No, we are very clear. I think we want to be a product company. We -- as someone asked earlier, that we would not be getting into the EMS business, which is a separate skill set. It's a very asset-heavy infrastructure that [indiscernible]. We're not going to go down that...

I am not asking about manufacturing. Sorry, I am not asking about manufacturing. Yes, sorry.

Yes, I understand what you're asking. So we will not be going in that direction. And similarly, system integration is a completely different skill set as well. It requires putting together some pieces from us, some pieces from many other companies. And that's, again, another area where we believe that in the near term or in the medium term, we definitely don't think we'll be expanding. But again, our core strengths are building the best-in-class products. We'll be expanding our product portfolio. We'll be expanding our geographical reach with those products. And that's the way we see things going. Of course, when we come out with a more linear strategy, we'll talk about it, if there's any other area we look at. [ But if I must say ], this is what it looks like.

Okay. And then another question is, now you're looking at Tier 1 participants, you have 1 in telco [indiscernible], the Verizons of the world and then [indiscernible] in Europe. So can you talk about, let's say, top 3, 4 areas where you had constraints [indiscernible] because of our size before? And now you're saying that 3, 4 areas now, you have a better chance at tracking theses players in terms of, I don't know, financially and technology-wise or other things. So what were the problems you are facing now which you think like you can address?

See, basically, the way it works is a Tier 1 telco win is not a single dimensional decision. It's not just about technology, just about balance sheet, just about support, just about 1 dimension. It's a combination of a variety of things. What I highlighted in my presentation earlier is that the fact that you would sell to the absolute top Tier 1s in India who want the latest technology, the most high-quality product and competitive prices so that we can win there, we can increase market share, clearly gave us confidence that we have all the elements to succeed even globally. What was missing was really the access to the Tier 1s in terms of relationships. What we're also missing is the fact that any new geography or new market that you go to, they may have some specific things which are related to that particular telco and our ability to make such investment in advance of the sales. It could mean they're looking at the balance sheet of the company to see whether you have the capacity to issue large contracts and can they trust you with those things. So it was a combination of all of those things, which were kind of -- and I must also say that it's not that we've not won international Tier 1s. We have won international Tier 1s in specific geographies where we focus on. We were winning them at a certain pace. We are winning our market share at a certain pace. And we were continuing to expand as was evident in our quarterly results over the last few quarters. What this will allow us to do is potentially accelerate our journey in that direction. So that's the way to think of in terms of what's going to happen differently.

Okay. Okay. And then last question to ask on technology side is, we have been more or less a follower in technology. An example that comes to my mind is in 800 gigahertz, giga premium product, for example, our product will be ready only in 2023. But if you look at [indiscernible] now, they are already deploying 800 in the [ long side ]. So do you now think that your technology road map will be accelerated and then we will move from technology follower to a technology leader strategically over the next 5 to 7 years?

So first of all, I would like to correct it a little bit. We are not a technology follower. And maybe one particular example that you take is more of a components play. For a 600-gig or 800-gig component, we can just buy off the shelf from certain suppliers, whereas certain of our competitors may have chosen to build those components in-house. And it's not exactly clear in the longer term which of that two is a better strategy. There are many areas of technology, which I do not want to get into the details on the specific call because the purpose of this call is different, where we are actually the best in class in the world, and I have no qualms in saying that. So I don't think it would be accurate to say that we have been a follower of technology, and this will allow us to become a leader. Maybe the thing which we are trying to do is, given our balance sheet size, given our capacity of R&D available, we have to pick and choose the areas in which we wanted to focus and where we saw the maximum chance of success given our customer base. So I talked about the product market fit earlier on. So really, our limitations on technology or what one would call as the leading edge of technology, was not limited by our ability to actually create those technology products. I mean, we're all familiar that if someone in the world can build a product, we can build it from India. It was really our ability to say that even if I build this product with my customer -- with a customer, buy this it from me or will they use my size or will they use my balance sheet strength to still select someone else? So our limitation on certain aspects of technology were from that side. As we make our strategy, I don't think we might overnight suddenly change that. Okay, now that we have more balance sheet strength, let's go and start investing much more ahead of technology curve like anybody else in the world does. It will still be a judicious call in terms of product market fit because even the market opening of different clients in international Tier 1s is not an overnight activity. It will take time. And we just want to make sure that we don't invest ahead of the curve. We don't fall behind the curve. And if you can do a good job of product market fit that will allow us to use the resources that we have available in a much more judicious way. But I must also tell you, even though we can say that we have $300 million, $400 million of capital available, but if you compare that with some of our competitors, they still have maybe 10x as much capital available. So the discipline of technology investment, the discipline of market investment, the discipline of cash flow, which we have all gotten as a basic DNA of the company, I think will continue. Except that with the larger set of resources available, hopefully, we will be able to do a much bigger job and basically do more with more rather than doing -- trying to do more with less in the past.

Okay. Okay. Got it. Okay. And then one [indiscernible] data question. At product mix levels and new products, let's say, few years from now, I guess from now, how much would be optical, how much would be wireless, how much will be wireline? Some 1/3, 1/3 or optical will still dominate?

I think it's a bit early to answer that question because we still haven't detailed out our medium-term and long-term road map in terms of product strategy and technology. So I think it's a bit difficult to give a precise answer to that. But what I did mention earlier is that we would be graduating from a wireline-only company to a more full stack supplier. Full stack doesn't mean every piece of technology that goes into the telecom value chain. We will still have to think of areas where we can be successful, areas where we can have a competitive sense. So I would say it would be a difficult question to answer at this earlier stage, as to exactly what our product mix will be 2 to 3 years, except that, we will have a richer portfolio of products than we have today, and we'll be addressing a larger market given where we are today.

[Operator Instructions] The next question is from the line of Arun Prasath from Spark Capital.

Actually my question was already answered.

The next question is from the line of [ Sankash Gupta ] from the [indiscernible] Investments.

Congrats, Sanjay, for this value-creative deal. Most of my questions have answered. I have just 1 remaining. Sir, do we have any product overlap with any of the Tata group companies ecosystem as of now? And the second is that this Tata group companies ecosystem, do we see the possibility into medium to long term of getting into any new sectors apart from telecom?

So -- yes, the answer to both the question, as of now, based on our limited understanding of what exists in the other Tata group companies, we don't think we have any overlap, if at all. There could be complementary things, but we don't know that because we have not yet done the full exercise. The second question is -- and part of what I answered as a part of one of the questions earlier is that over the next few months, once the transaction over, we will actually do a detailed exercise to see what other things are available in the ecosystem and is there a way to leverage it in a win-win way. So we will be exploring that. The second thing is that in the medium to long term, we get into new sectors, no. I think we are very clear on what our core strengths are and which is what has been articulated, and we're going to repeat that. So I think we'll stay focused on what we do well, except that with the platform available, the opportunity available will be bigger and the opportunity to accelerate our journey will be faster. But I don't think it will be prudent for us to do things which we are not good at, at this stage.

The next question is from the line of Tejas Sheth from Nippon India.

Congratulations on the deal. I have 2, 3 questions. One, is there any business of Tata group where we had some, let's say, market share and this deal can help us to gain larger market share of their telecom supply?

Tejas, I mean, we do business with a couple of the service provider companies in the Tata group. And the fact that they have selected us on merit on competitiveness in the past and we have had long-standing relationships is a good sign. Clearly, if there are synergies and if there's no market share that we can get from them because of better value proposition to them, I'm sure we will definitely explore those opportunities. Given that each company operates on an arm's-length basis, I'm sure those guiding principles will be followed. But clearly, being a part of the group, we will aspire to increase our market presence where possible in the group companies.

Okay. And does this deal widen the horizon of our PLI participation?

In a way -- the way -- I don't know the answer is because we have applied for PLI based on our products and our -- so the way the PLI scheme works is you get a certain percentage of the incremental sales that you had in '19, '20 as a base year, which was actually quite a low base year for us, right? So if you are able to become part of this deal over the years, over the next 5 years, there is a possibility that we should be able to accelerate our revenue growth. And that, in turn, we could potentially accelerate the amount of benefits that we can get out of the PLI scheme. But again, the PLI scheme is applied for. There's still approvals to come from the government. And once the scheme starts getting rolled out, we would start seeing the benefits of the sales.

Okay. Okay. And on the talent hiring and even the chip sourcing, again, does this whole deal making us a bigger company move us in a very comfort zone towards chip sourcing?

So you have 2 questions. Let's talk about the talent question first, and let's talk of the chip question next. So on a talent question, the view that we all in the management team have is the fact that any bright engineer, a very talented talent in the country or around the world, who would have heard about the data and, trust me, there's been lots of people who have reached out to us and complimented us for the opportunity that this deal presents to us. So we would really be hoping and looking forward to the best and the brightest talent available in wireline, wireless, packet switching, routing, network management. They would be excited to work in Tejas because of the opportunity that we can potentially create for everybody, right? So I do see a lot of excitement in the job market where people feel that we could be a good company to be a part of. That, of course, we will have to continue to see how it actually pans out. The second question that you talked about was the chip supply situation. Our chip supply situation is a tricky situation for everybody in the world, no matter who you are. Clearly, I think with the backing of the Tata group and potentially the relationships they may have with some of the larger chip suppliers because they do have different touch points and different business engagement points with them. We will have to explore if any of those relationships can actually come into benefiting. But independent of that, as I had mentioned in our Q1 earnings call, as a team, we have been taking a lot of proactive actions to make sure that the business upswing that we are seeing in our business is potentially serviceable by securing the components at the right time. But that is a [indiscernible] situation that we continue to monitor.

Okay. So just last question. Would the name of the company be changed to any of the -- to represent the Tata brand?

Good question. We will share that with you once we have met internally and figured out the merits of our name change together with Tata. Clearly, Tejas has its own brand name. Tata's, of course, the brand, I don't even need to comment on that. So I think the objective would be to really look at the best -- whatever is the best for the business of the company, we would be taking that option. But that is something after that transaction is consummated, we will take a very, very detailed view. And I think we have very well respected people in Board, and all that will help us with those decisions.

The next question is from the line of Bharat Sheth from Quest Investment.

Congratulations, Sanjay, on a excellent deal. Sanjay, why the way in telecom market is moving more on the trend-based networking than the whole hardware base? So how much of our portfolio is consist which we can be complying to this end so more opportunity may emerge and some of the portfolio may go because they're not reusable? If you can give some color on that.

So if I were to paraphrase your question, it is about that in the -- the new standard in the telecom are evolving, they are disaggregating the hardware and software differently. And in that direction, how do we play in? So actually, if you look at one of the bullets which I mentioned in my opportunity slide as Tejas 3.0 was exactly this, that there is a technology disruption happening in the world, which is what we call the softerization of networks where the things that they're segregated, new open architectures come in there, things can happen. And if you really see different kinds of businesses, new entrants into existing businesses, the best opportunity happens when there's a technology disruption point. And we actually see that as an opportunity. Lot of our architecture of the product and the way the company was built in, in fact, in the earlier of many, many calls, we keep talking about software-defined hardware architecture that the company actually has adopted over the years. So that has been our DNA, that programmability or being able to take advantage of such disruption is going to be good for the company. So I think we are well prepared for that. We have a very strong technology team who keeps looking ahead of how the world and the networks are evolving, and we definitely try to head in that direction. So I think we are well prepared and it's a evolving and continuing exercise. And I think technology disruptions are things that we look forward to because it gives us new opportunities.

And that will be a more, better margin business as well as, I mean, vis-a-vis existing business?

That's again difficult to say because better margins is a function of competitive landscape and how things evolve. So it's a bit premature to head in that direction. But definitely, as a company, we acknowledge it, we understand it, and we are preparing a -- prepared well for addressing those opportunities.

And do we think that any of the product may become obsolete? Do you think that...

No, no, no. I don't think so. Every product, every technology continues to evolve. And one of the reasons for us to continue to invest in R&D, even when our revenues were down, we never blink, we always invested in R&D, was to ensure that we never get obsolete, and we never become irrelevant. We never have a situation where we did not make the right investment, and the competition took over. On the contrary, we keep doing what we're doing with the resources that we had. We focus harder and make sure that at least whatever we are doing, we do the best job. So I don't think, I mean, we have any obsolescence in our product. In fact, to the contrary, we always believe that more technology disruptions are better for nimble companies like us compared to larger companies who may have -- who ship the moment takes more time. So that's the way I would put it. [indiscernible] just given the time, we have already pushed at the time, so maybe we can take 1 last question and then wrap up.

We take the last question from the line of Chetan Gupta from Samena Capital.

Sanjay, I think what nobody asked was how were some of your other clients reacted. I think that's important, right, because you service a lot of people. Are other clients a bit nervous? Are they seeing this in the same light that you are? I think it would be helpful to answer that.

Good question, Chetan. Again, early days. It's just been 2 working days since [indiscernible] this deal. But we have been in touch with some of our larger clients. So far, I can say, at least the ones in India that matter to us, I can say that there has been very positive response. In fact, I must tell you that these are big clients in India, always had a lot of pride in Tejas. They have supported us across the board. And with this transaction, they feel very excited that we have the backing and the balance sheet to really become a much larger company that all of us, especially from India, would feel proud of. So I would say the initial reaction has been very positive, not just on clients, I would also say, from government officials, pretty much everybody in the ecosystem, from our component suppliers to our employees, to a lot of people, in general. And I would say, in the [ academia ], it is something that everybody feels is the right direction to head into. We are excited. A lot of people, a lot of stakeholders seem to be excited, from customers to suppliers, so I think it's a good start. In anything like this, it's execution that matters. And we are really looking forward to taking this opportunity and making the best of it. And over the next few months or whatever time that we've come back with our most specific strategy, I would like to share and share the [indiscernible].

Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to the management for their closing comments. Over to you, sir.

Thank you. I already submit my closing comments. And all I can say that when we were looking at this deal, we looked at all stakeholders. And in our wisdom, we believe that this was a good move, this was something which allows us to accelerate the acceleration and the vision that we've set out. And we are very excited with this partnership. And we hope that we will continue to share our road map and the milestones and the progress in the coming days. And we do believe that we can create a lot of value for all stakeholders. So thank you, and look forward to your continued support, like you've been giving us in the past and future as well. Thank you.

Thank you very much, sir. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.