Tejas Networks Limited (TEJASNET) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '24 Tejas Networks Limited Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashvik Jain from ICICI Securities. Thank you, and over to you, sir.

Thank you, Sagar. Good evening, everyone. Thank you for joining on Tejas Network Limited Q4 FY '24 Results Conference Call. We have Tejas Network management on call, represented by Mr. Anand Athreya, CEO and Managing Director; Mr. Arnob Roy, Chief Operating Officer and Whole-time Director; Mr. Sumit Dhingra, Chief Financial Officer; and Dr. Kumar N. Sivarajan, Chief Technological Officer. I would like to invite Mr. Anand sir to initiate with opening remarks, post which we will have earning presentation and Q&A session. Over to you, sir.

Thanks, Ashvik. Welcome to Q4 FY '24 Tejas Earnings Call. Good evening. My name is Anand Athreya. I'm the CEO and MD of Tejas Networks, and I have Arnob Roy, who's the Founder and COO; Dr. Kumar Sivarajan, who's the Founder and CTO; and Sumit Dhingra, who's our CFO. I'm happy to inform that Tejas had the best ever quarter and the best ever year in its history and a profitable one, too. Over the last year, Tejas has been insanely focused and we've been executing ruthlessly on major projects such as BSNL 4G RAN and many other projects. What we have witnessed in this recent quarter is growth in all segments. And we have also secured the supply chain. So I'm very pleased -- having completed 1 year at Tejas, I'm very pleased with the progress that we have made. And I'll hand over to Arnob Roy to go to other details. Thank you.

Thanks, Anand. I'll take you through our earnings presentation that we have uploaded, which has 2 sections. One is the results of Q4 and giving some color and details to it as well as a refresh of our products and technologies and the outlook for the future. So the first update is about Q4. As Anand mentioned, we ended the year on a very strong note with a strong revenue growth. We scaled our business with the profitability and ended the year with a strong order book for execution in FY '25 and beyond. So for the quarter, we had a net revenue of INR 1,327 crores, which is significant jump year-over-year and a profit after tax of INR 147 crores. For the year, we ended with INR 2,471 crores, again a strong growth from the previous year and a PAT of INR 63 crores. We also ended the year in the order book of more than INR 8,200 crores. To add some more color to the quarter. We had made a lot of progress in all fronts for both wireless and wireline business. For wireless, our -- we shipped a lot of equipment for the 4G/5G RAN in the BSNL network, which is cumulatively more than 10,000 sites have been shipped and the installations are progressing quite well. Apart from this, we've also engaged with several other customers for our RAN products. And as of now, we have multiple ongoing proof of concept, POC, like with potential customers in the private and utility verticals. So we've started making business development progress beyond the immediate BSNL opportunity. We made good progress on our wireline business as well. I think one of the highlights was completing the supplies of the large volume of IP/MPLS routers for BSNL's network, which is 4G -- the backhaul network for 4G/5G wireless networks and this is one of the largest deployments of indigenous IP/MPLS routers in India. There are close to 15,000 routers deployed in BSNL networks and we have completed supply, and the installation, commissioning and deployment is going on as we speak. We also had some several strategic wins for our WDM and our switching and routing products in the critical infrastructure sector. We entered into a strategic partnership with Telecom Egypt of our FTTH, the GPON equipment. It includes, apart from local manufacturing and supply, sharing the experience of BharatNet and NKN network projects in India and also contributing to the training and manpower development initiatives. They also cater to many countries with whom they have free trade agreements and there could be a potential gateway for supplies to many countries in Africa and Middle East. Some of the other highlights are the approval of our PLI application and the grant of INR 32 crores for the past year of FY '22, '23 and also, Saankhya Labs, our subsidiaries, also got approved under the semiconductor DLI scheme, and received the incentives as well. During Q4, Tejas and subsidiaries were granted 22 patents and the total patent count -- approved patent count of 335. A few corporate updates. We received the Voice and Data Excellence award in the Make in India category for our Carrier Router portfolio, which are basically IP/MPLS products that we shipped to BSNL for the smart network. We are also starting to get recognized globally as key vendors for our products and for our wireless products. Gartner, the very respectable industry analyst, they recognized us as a representative vendor in their Open RAN/vRAN market report. And Omdia, which is a leading analyst in the wireline space, they also recognized us in their FTTX report as an established PON and GPON vendor in the Rest of Asia and Oceania markets. Apart from that, our merger process with Saankhya is progressing well and the resolution was approved by the equity shareholders and unsecured creditors of the company. And after the voting that was conducted as per NCLT directions -- directive. And we expect the next few steps to get completed over the next couple of quarters for formal closure of the merger. So I was myself one of the -- I was reappointed as the Executive Director and COO. Mr. Bhave, who has been Director for many years, is retired as a Non-Executive Independent Director on the completion of his tenure. And Mr. Lakshminarayanan also resigned as a Non-Executive Non-Independent Director to spend time for his professional commitments. So color on our -- on the revenue profile for FY '24. We see on the right-hand side, you can see the Indian government was 36% of the overall business, Indian government was -- sorry, India private was 54%. India government was 36% and International was 10% of our revenues, and this is an area where we're focusing a lot in terms of growth for our International business. And I'd like to definitely remind you that our -- the shipments that are happening for BSNL 4G has been categorized as International private -- as India Private because our India customer is TCS which is a private entity. And just to reiterate, we had a strong closing backlog of INR 8,200 crores, of which substantial part was India at INR 7,900 crores and the International was INR 262 crores. I'll now hand you over to our CFO, Sumit, to share some details about the financials.

Good evening, everyone. From a financials perspective, we had a revenue of INR 1,327 crores for the quarter, which was a growth of 343% over the previous quarter same -- previous year same quarter. EBITDA of INR 248 crores and PAT of INR 147 crores. This implied an EPS of INR 8.6. From a full year perspective, consolidated revenue was INR 2,471 crores and EBITDA of INR 83 crores and PAT of INR 63 crores with an EPS of INR 3.71. So from both on a quarter-on-quarter perspective and on a year-on-year perspective, we had a strong growth this quarter. Some of the other key financial indicators, if you look at net worth of about INR 3,150 crores, inventory of INR 3,700 crores, decrease compared to the previous quarter, which was around INR 2,680 crores. Predominantly because we are -- as mentioned in the previous call as well, we are securing long lead items for expedited delivery of some of the projects, including the BSNL 4G projects. And as we go along as the project continues to get executed, the inventory will totally absorb. Our trade receivables stand at around INR 1,458 crores at the end of the year. This is partly also linked to the revenues that we've done during the quarter, had collections over INR 650 crores this quarter. Working capital increased to about -- increased by INR 1,519 crores, again, driven mainly by inventory and receivables. Our cash position at the end of the year was INR 641 crores and working capital borrowings of INR 1,744 crores, which is essentially all for working capital.

Thanks, Sumit. So a recap of what happened in FY '24. FY '24 has been a milestone year for us. We had a significant growth in revenue and return to profitability, starting with Q4. We had growth in all product segments led by wireless and all the different product segments in wireline as well. We had a successful entry into 2 new large product technology segments with high growth, the 4G/5G RAN and the Service Provider Switching/Routing market. And we entered this market with large projects in hand which we are executing. We are executing the largest ever networks built in India with indigenous technology and 4G/5G RAN, routers as well as satellite transponders which we talked about last quarter for the retail projects that's getting executed by [indiscernible]. We demonstrated our ability to scale manufacturing by executing shipments in a record time. We finished the March spend of 15,000 routers in [ the early 2 ] months. And we made significant investments for enabling future growth. We grew our headcount by 42%, mainly in R&D, manufacturing, sales and so forth. We expanded our facilities for supporting our growth in R&D and manufacturing operations. And we also made major CapEx investments in R&D and manufacturing, and we have been talking about this over the last couple of quarters as well. So I'll quickly switch on to a little bit of a refresh of our business. As you know, we make end-to-end products for building telecom network. And with -- we have entire range of products, starting with -- on the left-hand side, wireless and wireline access in the wireless 4G/5G radio and wireline access with the GPON equipment and also Internet and IP/MPLS customer premise equipment for enterprise -- standard enterprise services. We also have the metro aggregation products within the middle of the slide -- the middle section of the slide with multiple technologies, [indiscernible] network. And then we have the metro core and long haul products using DWDM and OTN technologies and all of these managed by a single network management solutions. So this kind of gives us a unique advantage of being able to build complete end-to-end networks for any customer. So that's where we are today as our products. And the key applications that we serve are the 4 key applications, one is the mobile brand, the 4G/5G mobile brand network and the backhaul network, that's the big project that we are doing for BSNL right now. We do our equipment business for doing wholesale and enterprise business services, a big section of our business is home and business broadband as they developed where we are deployed in ISPs -- several ISPs globally and also network for critical infrastructure where the utilities, the power, rail, oil and gas, where our equipment is used to fill their critical networks for the captive networks, for the data applications and also for the wholesale network branded business. So our products are targeted towards a high-growth market segments in wireless and wireline and on the left-hand side, you see the addressable markets for the RAN and core, which is growing significantly, large market, growing significantly over the next 5 years. And also on the right hand side, we've got a wireline market, these are our addressable markets, which has even stronger growth. And all the -- and in all the segments that we are in are seeing strong growth, both in India as well as global markets. So looking forward to the future, beyond the overall market growth, we are looking at several high-scale opportunities both in India as well internationally. In India, we have -- this is, we have several large projects which are one part of it is, of course, the BSNL 4G/5G continued investment. There are going to be more investments in 4G satellites and network for the pan India 5G networks and for the backhaul expansion. For the private telcos, we see -- anticipate a lot more CapEx spending happening for the 4G/5G network and also for -- and similarly for the backhaul network for the mobile application. We all have -- know about the BharatNet Phase-III project, the initial specification and tender documents have come out and it's in the process of getting finalized. And just the CapEx that you see, which is asked for is more than $500 million, that's an initial estimate and that is going to be more than that. And the other part is the broadband rollout in India continue in full steam and the plans of all the private operators, higher fees. We have more than $600 million of investments are planned over the next few quarters. So these are summary of all the significant projects and the opportunities that we see, which are addressed by the product portfolio that we have. Similarly, globally, there are huge investments going out in broadband equipment where more than $100 billion are getting spent in the U.S. and Europe and the lead projects and the other in Europe, which is actually bridging the digital divide in the different countries by expanding their rural broadband network and a huge investment is going over there, which are addressable by our product. There is a large replacement market of [indiscernible] in the EU and the U.S., and more than $5 billion have been assigned for that market. For the -- in some of the emerging economies in Africa and Asia, we see a lot of investments which are planned for expanding 4G/5G network, which are basically, there is a deployment initially starting right now I'm speaking at this time and we see that as an opportunity to grow in this market. And a lot of investments are actually planned for utility modernization, actual budget to is high, but this is more than an $8 billion of addressable market for helping transition utility network from the traditional SONET/SDH equipment to IP-based networks, and that's one of the technologies that we are very strong in. So that's it. In summary, I gave you a picture of FY '24 and our outlook for the next few years and our continued investments. I'll stop over here, and we'll open up the floor to Q&A.

[Operator Instructions] The first question is from the line of Sohan Joshi from ASC Consultants.

Am I audible?

Yes, sir.

Congratulation for these numbers. So this backlog order of INR 8,200 crores doesn't cover the 5G order side, right? It's just for the 4G coverage of 1 lakh sites, right?

That's correct. It just covers our existing backlog using 4G and other wireline -- the order book that we have, it doesn't cover 5G coverage.

Okay. But my second question is this system on chip IP design regarding the semiconductor developed by Saankhya, I presume it will be captively consumed for -- first by a 5G wireless equipment and then we will market it for the outside market, right?

So the current SOCs are actually getting used one of their chips for the satellite transponder products, which has been designed using the semiconductor, but newer chips that we are designing, I mean -- we will evolve our products subsequently when the chip products are ready. But our current 5G products are not held up by that because our current generation products are getting designed and will get launched this year. And when their semiconductor gets ready, at the time we will look at optimizing the equipment at this point of time.

The next question is from the line of Santosh Sinha from Emkay Global.

My question is regarding the BSNL project. So what exactly is the time line for this project? Is the whole of any portion will be executed in FY '25 alone or will it [indiscernible] over FY '26 as well? Is the resource related to similar, sir, because we were reading...

Mr. Sinha, your line is breaking up. Can you please see your cellphone reception?

Yes. So my question is regarding this BSNL project. So we were reading about some news articles that there has been concern regarding delays in the project and BSNL is also looking for help from the vendors as such. So do you want to comment on that? And last question is what kind of margins do we expect in the long run?

Okay. So you've asked 3 questions, Santosh. The first thing is BSNL supplies. Yes, I think, we expect to finish our supplies in this financial year in FY '25 itself, right? And I think again, most part of the network will also get deployed and commissioned during that time. So that's the answer to the first question. Second question was about news reports that have come up. And just to reiterate what has -- that is what really meant, which will be subsequent clarification that came. See, the RAN equipment is actually getting deployed all across the country right now in different zones right, north and then west and other zones also started right now. But what has happened is the core has been deployed in few of the zones, not in all of them, so wherever our RAN is getting deployed and installed, at that time, whenever the filler core is not there, the equipment is getting integrated to the existing core. So when the core -- when the filler core gets deployed in those circles, in those zones, they will patented to the filler core as well. So this is just a temporary situation where the RAN is deployed and in that zone, the core is not available, so it is getting integrated with the existing core in the network. So that is all that the report has meant, okay. Your third question was about margins. Yes, so yes, as you've seen, our margins have actually grown over the last quarter. And going forward, it will be -- we don't comment on how the margins are going to look like. But I would probably as soon as our wireless and wireline equipment, I mean we've been saying that our long-term goal is that as you see our historical margin that we had in the company and in over time, we will be [indiscernible] those kind of numbers in terms of margins and financial [indiscernible].

Just 2 more questions. After that, I will fall in the queue. One is regarding international, so what kind of headway we are seeing on the international front because ultimately, for FY '26, we will have to grow on the international side. So what kind of -- are we seeing any new interactions or interests from the client? And second is regarding BharatNet. So what is the update there? And where can you see actually the revenue coming from BharatNet?

Not sure we could follow your questions because the line was not too good. I think your question was, if I understand, was international business. I mean what kind of opportunities we see and how do we see in BharatNet. If you recall the last slide that I presented on the immediate and upcoming opportunities in the international market, yes, I mean, we are increasing our focus on investments in the international markets and all the -- we've kind of given you a big picture of the opportunities that we're looking at, both in the U.S. and Europe as well as the kind of opportunities in utilities as well as emerging markets. And there are several projects and the opportunities we are currently engaged in, in these markets without giving a lot of details, but that's going to be a focus area for us. That's going to be where our investments are also going to happen in the next few quarters, that's internationally. As far as BharatNet is concerned, as you know, the project has already announced, lot of the technical documents and tender documents are out. But right now, the questions and clarifications are going on, which was with a tender. And we expect that sometime during the year, the tender will be bid and completed and so on. And a lot of the active equipment over there is for IP/MPLS router, the type that we have and that we have shipped to BSNL and also for the aggregation equipment or GPON equipment, ONT. So we are well covered in terms of products for the opportunities in BharatNet -- in the upcoming BharatNet tender. I hope I've answered your question.

The next question is from the line of Deep Mehta from Bank of India Mutual Fund.

Congratulations for very robust set of execution, which you've done for this quarter. I just have one question. This quarter we have seen significant stretching of our working capital cycle. How should we look at this number as we ramp up our orders? And what can be the steady-state working capital cycle if you comment on it?

Yes, I'll let Sumit take this question.

Yes. So as we've commented earlier, the working capital currently needs to be looked at in context of the BSNL 4G project. We are in the midst of executing this large project, which is INR 7,700 crores worth of value over the next 2 quarters, a lot of working capital buildup is in context of or in preparation for execution of that project. As we go along over the next couple of quarters, you will see eventually the working capital tapering down as the execution progresses.

The next question is from the line of Ashish from JM Mutual Funds.

Sir, in terms of our RAN, if you could highlight the competitive scenario in the Indian market, we understand there are international players also serving similar radios. Is there a cost advantage for private telcos? So basically, are our products cost competitive? And if you could also highlight whether there is a difference in technology stack for 4G and 5G RAN between us and those guys?

Yes. See, we have bid and won in this highly -- in this large BSNL network. And BSNL has ensured that they get the most competitive prices, which are available in the market. So you can be rest assured that the products that we have designed and that we're selling are extremely competitive as far as the global -- how we can grow. So that's one part from a cost competitiveness. The other part is that our technological differentiator. Yes, any product that we make are always made with several technological differentiators and I'll let Kumar to give you [indiscernible].

One of the important differentiators we have is that we integrate optical transport into the wireless, which no one else is doing in the industry and that's the key differentiator. We also have the ability to integrate other forms of optical access into the same part, what we call universal conversion process. So that's -- this integration actually helps bring down the total cost of ownership of the wireless operators by doing multiple technology integration into our RAN equipment. So we save a lot of money in building the -- buying and building the backhaul equipment. And as well as it gives them the platform for launching other services apart from either the mobile services, which has been met with all the home and enterprise broadband opportunities in and around the area where they are installed. So this is one of the key differentiators and customer really appreciates it and is leveraging technological advantage as well.

Yes. This is helpful. Secondly, on the private telcos. What -- so apart from BSNL obviously as far as the private telcos are concerned, is there an opportunity for us. Obviously, you have mentioned on the slide that more than $3 billion of CapEx will be rolled out. In terms of opportunity size and are we in discussion with some of the bigger private telcos as far as these radios are concerned?

So as I mentioned in the earlier slide that we are actually engaged in few opportunities from the telcos and -- in the critical infrastructure system. And as we speak, we are to gain them. We are into multiple POCs, where our radios are actually deployed and are undergoing trials. So yes, even beyond this, I mean, there are multiple opportunities and we have started engaging with other customers. And they are all in India, and we hope to actually line up some opportunities internationally as well.

Okay, fair enough. And lastly, do we have sufficient manufacturing capacity on our side? And to that extent, would you say that the borrowings would not increase from current levels or would stay at current levels.

So, No. No. of course. the manufacturing capacity has been build up, that's where the investments have been happening over the last few quarters. And now we have our -- we have established a scale where we can execute a project of this size within the timelines that are expected and we are very aggressive, right? So we have to invest in that type of manufacturing capacity. So that is there. And I think your question was about the working capital going forward. See lot of the working capital, so one part is the investment in manufacturing from selling it up, but a lot of the working capital is in procurement of components with going to the manufacturing line. And that is a temporary phenomenon for executing these large products where we have to build the inventory. They're getting converted into the finished product, and they will get shipped out and that's where -- and we are getting our collections in as well and that's where the working capital cycle will go through and go down over time.

The next question is from the line of [ Pavneesh ] from [indiscernible]. Please go ahead.

Sir, I just wanted to make a request that if they could release our results a bit early because today, the conference call was scheduled at 7:00 and results were declared at 7:10, so didn't get much time to analyze the presentation and ask the question. Otherwise, my questions have mostly been covered by other analysts. Just this request.

Sure. Yes, this was the first for us. But yes, definitely, we'll do that next time.

The next question is from the line of Pratap Maliwal from Mount Intra Finance. Please go ahead.

Congrats on a great set of numbers. So just wanted to confirm that I was seeing in the presentation, that we cumulatively shipped equipment for about 10,000 plus sites on the wireless business. So just to confirm the overall order was for about 100,000 sites. So we'll be executing the remaining 90,000 in the next 3 or 4 quarters going ahead. Is that correct?

That's correct.

Okay. And just one more thing. We've had an improvement in profitability as well this quarter. So last quarter, we have seen that the low-margin part of the network equipment were deployed and that had consequently affected our profitability a little bit. So has that actually been compensated for this quarter? And going ahead, can we expect this improvement to sustain now that the low-margin parts are out?

So yes, your observation is right. I mean, we mentioned that last quarter, and that's correct. I think this quarter we ship the components of products, which is not a higher margin, and that's what is showing in our overall margin kind of a thing. So going forward, I think the blended margin -- as I said we don't comment on future margin kind of thing, but you can see the trend out there. And as we said, our margin is a blend of wireless and wireline products. So yes, the trajectory is there and will depend on the combination of products that we sell.

Okay. So we do expect to hopefully maintain the improvement going forward as well?

We don't give guidance on that.

The next question is from the line of [ Hiren Kumar Thakorlal Desai ], who's an individual investor.

I have just one question. Do we have an estimate of what PLI incentive we may receive for FY '25?

PLI estimates for the year are dependent on the revenues that we do for the year. For FY '25, since we don't give any guidance on the revenue, it will be difficult to give you that estimate.

Okay. Can you provide some percentage of revenue as an incentive that is there. I mean, what is the percentage number?

Policy states that the PLI would be between 5% to 6% of the manufacturing revenue, which is incremental revenue over the base year. So for every year, whatever is the manufacturing revenue less fee revenue for the base year. On that number, you'll get, let's say, a 6% kind of PLI.

The next question is from the line of Prathamesh Dhiwar from Tiger Assets.

Firstly, sir, congrats for your great set of numbers. So just I was having this one question. How are we looking at our strategic partnerships with Valiant Communication? Are we looking at any acquisition, which will help us doing any backward integration like...

Dhiwar, Valiant technologies, we have a very strong partnership going over for many years. They are our key partners for our equity markets. Their teleprotection and technology gets integrated with our transmission products to provide a very optimized solution to our utility and critical infrastructure customers. So that partner is a little bit of a terminal set of products between both companies, but we have worked very well together to address this market. And this is going to continue, right? We are looking at opportunities together in markets, not only in India but globally, but that's how it's looks like.

The next question is from the line of Gurvinder Juneja from Fortuna Investment Advisors. Please go ahead.

My first question is about getting some clarity on this proof of concept you're doing on the utility side. What does that mean? Is that including any work with Valiant? And second question is I probably misunderstood or didn't understand the split of revenue you gave between India government and India private, what gets classified as India government revenue and what gets classified as India private, I just wanted some clarification. I missed that, please.

Yes. So for some of the POCs that we are doing is on our wireless equipment, 4G, 5G RAN equipment, and this is not including Valiant. This is purely applications with wireless. Your second -- so these are multiple networks where they are getting tried out as we speak for potential deployment. The second question is about India government and all. As you see, as you know, we split our revenue in terms of 3 sectors. One is the Indian government, which is mainly the public sector companies, the operators, [indiscernible], BSNL and so on. And then the Indian private which are the telcos, the private telcos and ISPs in India is India private. And the third part is the international customers. So the clarification we gave was, in India private, in the last 2 quarters, our shipment to BSNL 4G is categorized as India private because they are actually our immediate customer is TCS and not BSNL. And we look at our immediate customers who we are shipping to kind of classify which is the business segment. So we want to make sure that we understand that the India private numbers that we are showing -- reporting that includes the BSNL 4G, 5G segments.

Our next question is from the line of Harshit from Wallfort PMS. Please go ahead.

Just wanted to get a sense on the kind of order book buildup that we can have going forward. Could you give some sense on that?

We don't give guidance on future business. You have the order book and I kind of painted color of the opportunities in front of us, both in India as well as internationally. So I think that's the best that we can do, right? Talk about our products, talk about our current order book and talk about the markets for these products and the immediate large opportunities that we see in front of us. I think that's the best we can do.

So globally, sir, the kind of business that we do globally, how many competitors would be there, comparable competitors if you can just put that kind of a number?

If you look at in India, the same -- all the global vendors and our global competitors are actually doing business in India, right? I mean all the names that you know of. So internationally also -- so we compete against them in India and it is the same set of vendors that we compete against in the rest of the world. So there's no difference. I think it's the same competitive environment that you see in India, that we see internationally.

And sir, would you like to share how many tenders have we filled in or how many, what is the win ratio or something like that? Is that possible?

Yes. I think those are far more leadership of our business. It unfortunately we cannot share, but I think bidding happens, keeps happening all the time and we're doing some bidding stuff kind of thing. But those are numbers that we really don't share in terms of how many bids and win ratios and all this kind of thing, I mean, that's really confidential information within the company.

Next follow-up question is from the line of Hiren Kumar Thakorlal Desai, who's an individual investor. Please go ahead.

Yes, one more question was just regarding the inventory part of it or you may just say the entire inventory cycle. The fact that we are dealing with TCS in a way. Do we have a sort of a better estimate or better certainty in terms of how long that cycle will be having? I mean what is the inventory turnover that we need to maintain, especially for BSNL business?

Okay. See, as I mentioned, this project is INR 7,700 crores worth of project. The execution in terms of number of sites is 10,000 sites as against 100,000 sites, about 90% yet to be executed. And from a lead time procurement -- we have done some advanced procurement to be able to ship these products in time. Now purely from that perspective, if you see the order size versus the inventory, we have inventory for the next few months of delivery. We've not fully yet procured all the inventory for the project, but a significant part of it is in place, and it helps us have better assurance with respect to being able to deliver. On an overall basis, the operating cycle is less than 12 months from a working capital standpoint. But that's a -- that would essentially as we go along, it could ease off.

So Hiren, I think the inventory is basically, the time cycle between the time we fulfill the components and we actually manufacture them and ship them out. So it's really not connected to TCS, it's connected to the cycle of manufacturers and shipments to the warehouse, to TCS and their warehouses.

No, I understand. I mean I'm assuming the context that payment from TCS will be fairly predictable in that context.

But payment wouldn't depend on -- I mean, the inventory levels wouldn't depend on the payments. That is something that we have essentially that we procured from our vendors. And against that, we would have favors in the books. And as we go along, as we ship and deliver the sites to TCS then the payment cycle starts.

Yes, you just mentioned that we have built inventory for a few months. Can you quantify few months?

See, when I say few months, I was referring in context of the BSNL project execution.

Yes, That's what my question is.

Over the next 2 to 3 quarters is what we're looking to execute this project. And -- and the inventory that we have is a proportion of what we really need to execute that. There are some advanced actions that we've taken. So this inventory would -- that they have peak up a little bit from here. And thereafter, as the execution progresses, we would progressively see it coming down.

Okay. In that case, are you in a position to specify okay, not exact, but some ballpark number as to at what level will it peak?

It's difficult to give any guidance on what level would it peak, maybe next 3 to 4 months is where you would see this peaking up and then possibly coming down. But as I said, it depends on the pace of execution for the project.

Thank you. We will take our last question from the line of Sohan Joshi from ASC Consultants.

Just want to understand, when will be the PO of the 5G sites will be out? Will it be out by this year only or first, the entire executions completed then the PO will be out for the 5G sites?

Yes. So the PO. It's not -- we don't wait for the entire project to get over. We will be doing a POC for this 5G upgrade shortly in the next few months and once that POC is completed, I think we expect to get the 5G upgrade business out there.

Okay. Sir, that will be for the 40% sites of the existing 1,00,000 sites, right?

That's correct.

Okay. So the current order book doesn't contain that 40% of the upgradation, right?

That's correct. It does not contain.

Okay. And then the maintenance will be -- PO will be out, which is for the next 7 years post 3 years?

That's correct. Yes.

Thank you. Ladies and gentlemen, we would take that as a last question for today. I would now like to hand the conference over to Mr. Anand Athreya sir, for closing comments.

Thank you. So as the FY '24 closes, first I would like to thank our employees, customers, Board members, investors and stockholders for your continued support. This has been a record year for us. And we will continue to stay focused and execute month-over-month and quarter-over-quarter to put Tejas on a world map. Again, I wish you all the best, and thank you very much.

Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.